As global copper prices rise and inventories can’t keep up with consumption, Colombia has moved into the spotlight as a potentially major copper mining destination.
One small cap eager to benefit from the Latin American nation’s untapped potential is ASX hopeful Andean Mining, with its advanced El Dovio copper-gold project in central west Colombia.
The company has announced an initial public offering (IPO) to raise up to $7 million, which will fund a drilling campaign aimed at establishing a maiden JORC resource at El Dovio.
In addition, an ASX listing will bring benefits including increased access to liquidity and an improved profile to compete with other explorers in Colombia’s upcoming tenement auctions.
Low copper stocks drive prices up
As the world transitions to greener economies, copper has become increasingly important as a critical metal that will continue to be required in the production of renewable energy.
In 2020, global copper consumption reached 25 million tonnes, surpassing the world’s total annual production of 20.5Mt.
The problem lies therein the supply, with inventories currently estimated to be equivalent to only about two days’ worth of global consumption.
Weekly consumption is approximately 480,000t, but current LME and Nymex warehouse stocks total 141,000t.
“Historically, stocks should be up at around six weeks’ consumption to keep the market stable, so this is a major problem and it’s the main factor driving the price up,” Andean chief executive officer and managing director William Howe told Small Caps.
Colombia’s untapped potential for large porphyry copper deposits
Of the 20.5Mt of copper produced in 2020, Latin America accounted for 8.5Mt or 41%. This predominantly came from Chile and Peru, and some was produced in Brazil and Argentina.
Colombia only produced 10,000t, a mere 0.05% of this global figure, despite the nation containing the same features associated with the large copper deposits of Chile and Peru. This means there is substantial potential for further major discoveries in Colombia and the time is right for companies to start exploring the region.
“All of the copper in Chile and Peru is associated with subduction of the Nasca Plate under the South American Plate resulting in the development of porphyry copper deposits.”
“But these deposits are not restricted to these countries as they are a feature of the Andes mountains – which means they can also occur in Ecuador and Colombia,” Mr Howe said.
Several majors have recently started developing copper and gold mines with neighbouring projects to Andean’s El Dovio, including Canada-listed Atico Mining’s El Roble copper-gold mine, Chinese-owned Zijin Mining’s Buritica gold mine and AngloGold Ashanti’s (ASX: AGG) large Quebredona deposit.
“One of the reasons why we are in Colombia is because it’s underexplored and the opportunity at this point in time is enormous,” Mr Howe said.
“You need to be a big company to afford to develop porphyry copper systems, but around those type of deposits there are smaller, high-grade deposits such as El Dovio, which is a VMS system but has substantially higher grades than what you find in porphyry systems.
“They may be smaller but are generally a lower capital cost, which make them a lot more attractive for companies like Andean to develop because you’re only talking about tens of millions of dollars of capital, rather than billions of dollars of capital to develop a porphyry mine,” Mr Howe said.
Mining concession auctions
Earlier this year, the Colombian Government ran an auction for four copper and polymetallic-prospective areas in La Guajira and Cesar in the country’s north.
The government has since revealed it intends to auction gold mining assets next year, in which Mr Howe said Andean would be interested in participating.
“Colombia doesn’t produce anywhere near the amount of gold it should be producing, so being on the ground here in this point in time is exciting because it’s as if you’re opening up a whole new mineral province.”
“It allows us to operate at a level that we can’t in many other countries because they’ve been explored to a larger extent or the landholdings are already held by big companies and no one else can get in,” Mr Howe added.
He said the company would also be interested in further copper concessions that become available in the future, relying on its upcoming public listing to boost its profile.
Officials overseeing the auction process are expected to assess bidders not only by their offers but their liquidity, participation in exploration programs and indebtedness, as well as environment, social and governance (ESG) considerations.
“We’ll only participate in the auctions once we’re listed because we’ll then be able to demonstrate that we have the ability to fund the work,” Mr Howe said.
Andean’s IPO is due to close on 9 December with the company’s ASX debut under ticked code ‘ADM’ slated for around 22 December.