Automated transcript · Written by software from the replay's audio. It can mishear names and figures; the replay is the record.
21:49 Absolutely. Thank you for that. Bringing it back to an earlier point, and certainly very wrapped up in this topic, but maybe Brian, you could take this one. With the surge of demand for the commodity, as you've talked about, do you think there's going to be enough of a supply of copper or do you think that we'll find substitute commodities for it? Maybe you could just elaborate on that subject. Sure. Over the course of my career, and all of us here, we've seen the time from discovery to production is increasing all the time. There's stakeholders, there's different legislation, there's permitting, all of those things, environmental requirements and so on. So added to those years, The market moves very rapidly, wants change very rapidly, but the mines are taking longer and longer to build.
22:38 So the established copper producers, it used to be 1% copper. Now the Copper grades are coming down and the price had to come up in order for Copper mineralization around mines that was considered not to be economic becomes economic because it's going to be a lot faster to move that material through the mine than it is to build a brand new mine going forward. So that's the challenges that we're going to face. And I see supply being tight because the market wants the commodity faster than we can probably deliver it in the short term. That's going to mean the price is going to stay high so that those companies can put in the capital, spend enough time to actually develop the Copper that's readily available on their footprint.
23:30 It's going to be a case-by-case basis, which mines can go into lower-grade material. Some won't have it or be too far away, or it still won't be economic. We're going to have to try and build these mines faster. There's going to be tight supply, I think, over the next 10-years. I agree with Brian's comments. We often talk in our company's marketing material about the prevalence of porphyry copper deposits as a source or a supply of the metal. I think roughly 2 thirds of global production comes from these types of deposits and most of the major mining companies in the world operate at least one of them. And Brian quoted the sort of well-known staff that in Chile, for instance, where a third of global production comes from, there's a very discernible trend of average grades declining in many of those mines.
24:31 That seems like a train that's left the station and it's very hard to reverse with a lot of the demand dynamics that we're talking about. The net effect of that is really a sustained higher normal level of price going forward. Especially when you see what the grades don't say. In 2004, the overall Chilean production, and he's right, they produce just under 6 million tons a year of copper. Their average grade in 2004 is running around about 1%. And in 2019, I don't know the 2020 data, but in 2019, it dropped 0.67. But just the capital intensity required to bring new mines on as the grade drops, you can imagine, you know, it's huge.
25:21 And so I think what I also find interesting about Chile is that there's current legislative talks about raising the tax on copper in Chile from 3% to 2%, 10% sorry, for the copper producers. So not only do they have to overcome this whole thing about how much money in for a 0.67 deposit. And I doubt they're finding 0.67 to bring online. Those are already online. The ones they bring in on will be even lower as the next generation. And then to be faced with that tax, it means the copper price has to go up to bring those deposits on. And you know, that 2 thirds number that Leif says about the porphyry deposits, What's fortunate for copper is that we still know a large number of porphyries that have never been developed because they're down at 0.2% or whatever. We do know where they exist. It's just no economics could ever bring them on. But that link back to that substitution conversation we're having earlier.
26:20 It's not like cobalt or remember the platinum one before diesel gate hit. We never knew where the platinum was going to come from to take care of diesel emissions. It was impossible to find that much platinum in the world. And same when batteries first came on and the amount of cobalt was needed, there was not enough cobalt to do that. Now fortunately we found much better battery chemistries and they've managed the amount of cobalt in there. For copper we do know where it could come from, it becomes more a price issue. And so as long as the proportion of the copper in the projects doesn't kill the project for an offshore turbine construction or anything like that, you can afford a fair amount of copper price hike and still bring that technology online and save the planet.
27:06 So that for me is the biggest factor as to why copper won't need to be substituted for a start, but also why the solutions that we're working on can actually fulfill the needs for all these economies. Wonderful. Thank you, guys. Now, as most conversations these days seem to turn to, I'd like to ask what COVID's impact on copper has been. For instance, as we can see TransLink, Metro Vancouver's transportation system, has started piloting the use of copper in high touch surfaces inside their buses. What are your thoughts on that? Maybe Brian, you could take this one? Sure, well you know it's been known for a while that you know certain things can't live very long on copper surfaces so that's the experiment that's going into TransLink where everybody puts their hands on the rails and you know so that that minimizes contact between things that might infect people. So, the challenge there is it's a soft metal, but it's being adopted for that and it's an experiment that we'll see whether the applications and strengthen that so it has durability from that standpoint.
28:21 But from another point of view, during COVID, obviously there were supply fluctuations because mines were struggling with infections, slowdowns, lockdowns, et cetera. So, we saw that over the year, that mines were disrupted by those and had to put in protocols. And I think now the protocols are in place and they're still managing those. But that should be worked out towards the end of this year, I would hope as places get vaccinated. But of course the third world is very, very behind in vaccination. So it'll be longer than that to deal with that. But because mines are sort of isolated areas, you can sort of bubble eyes them to some degree versus the big cities where it's very difficult.
29:16 So That's where I see things happening in the next little while. I think the stuff you mentioned about the use of copper for sanitation is interesting. As Brian says, it's experimental. I don't see that being a panacea or a huge near-term driver of demand. I would be more focused on the supply disruption side. I mean, the pandemic is obviously not over. We have, we're in the early days of the global vaccination program and those sort of global numbers of infections and death are sadly reaching all time highs where we are today. It's obviously moving around to different parts of the world. But I think it will be, you know, the end is not quite crystal clear yet in terms of impacts on supply chain, supply chain disruptions and things like that. And then secondly, I made the comment earlier about urbanization. I mean, this is certainly one of the short-term impacts of COVID in where we live in Canada and certainly lots of other places in the world, I think has been a pause or a bit of a disruption to that trend of people moving closer and closer to downtown cores. There's been certainly a lot of disruption in real estate trends and that sort of thing.
30:41 There certainly might be near-term or short-term implications in terms of households, end markets for copper that derive from some of those perhaps secular changes relating to urbanization and things like that. Yeah. And on that technology piece, you know, maybe less about copper, because I think I agree with Leif. I don't think of any short term big boost for copper demand from that sector. But what I do find fascinating is what COVID has done that is changing the way we look, not only as Niamh said about, do I want to live downtown amongst 5 million people?
31:29 It also, you know, to keep the mines operating, the technology that's been adopted underground, I think, is this incredible one that has long-term potential productivity enhancements, particularly for underground mines. Because they've got this technology now where every person entering a mine, at the end of their shift, a report comes out about who were they in close contact with during their shift, and it just gets dumped and filed. And if one person reports symptoms of, in this case, COVID, they'll know who that person was in touch with. So you don't have to shut down this mind. You can say, oh, you were next to these 10 people either in the cage or in a lunchroom, or you did this job together with them. And those people immediately pulled out and tested.
32:23 And so they're able to control very rapidly any outbreak in a mine where it doesn't now just spread to everybody who happened to be in the warm room getting the lineup at the beginning of the day. So why long term is this an advantage? Because we lose a lot of productivity to the flu virus. You know, we have people with days off every year due to the flu virus And we've never really bothered about trying to control it in the past, because the impact is not at the level of COVID. And yet the impact is very significant. And so now we've developed these tools that says, you know what, I bet you we can control the flu virus and improve productivity. And I don't know if you saw the report for 2020, it's the lowest level of flu infection that the world's ever seen. Because we took all the COVID precautions.
33:11 And so now it's available to us if we want to make that choice, where we can actually make a lot more from our minds with the same workforce by putting COVID protocols in that makes sense anyways to protect us from any virus or viral transmission. So I'm very encouraged by how we're tackling COVID and the role on impacts. It's a bit like the space program. I now get a pen that I can write upside down on. It's, we're going to have those. It's going to be big. And we haven't even asked, we don't even know which questions to ask for some of the uses of copper yet, where technology can catch up for the demand 20 years from now, beyond us, but that's going to happen too. It's certainly going to be very interesting to see where the world turns after this defining couple of years.
34:05 But more to the previous conversation, due to the surge in price of copper, we will most likely see a lot of new arrivals in the copper mining space. So what sets your companies apart from newer entrants? Alistair, if you could take this one. Sure. I think what I particularly like about where Rockcliffe has ended up is that we've got the PEA behind us, which has given us those 2 key pointers to look at. So we have a lot of data, and we've advanced our permitting along significantly where from the minute we get a decision or the money to go, we need a few more studies, but to get the studies out the way, It's 2 years to production. So I think that's a very short time frame for us to put metal into the market.
34:53 And so depending on your time frame that you're looking out on, it's beginning to look like this isn't a 1 year high for copper. In fact, Goldman predicts something completely different now that they're the most aggressive of the lot, but maybe that's the right ones to refer to for this conversation. And so if you can say 2 years out, we're definitely still in a high copper price. We're not back in the 2 dollar range. It starts to make financing very different for us. So what I like about our differentiator is we've got a lot of facts out there now and so it's it's the ability to start having conversations with finance folk that says maybe you can finance shorter term projects, shorter life projects because they're on fast and they get depleted during the high price environment.
35:40 We don't even have to worry about a low price environment. And we'll talk maybe a bit more about the sustainability of Copper price a little later in the conversation today, but that's the key differentiator is that we got the data and we can go fast. Absolutely. Leif, what do you consider to be the set apart from you and potentially newer entrants? Yeah, I mean, for our project, I guess the key thing and the focus of the strategy is that we are positioned right next to one of the mines in British Columbia that, as I mentioned at the top, was placed on care and maintenance in 2016. At that time, it had a life of mine that was meant to take it to 2021. There's around 5-years of reserve life left and our deposits look to be the very logical extension of operating life with that infrastructure.
36:32 We published a PEA around that time that characterised some of the economics around that concept, so very high IRR and quite attractive economics around that. Where we sit today, we're focused on growing that concept and bolstering some of the longer-term value potential and value pieces around that. But more broadly, this is obviously a brownfields area of BC that we think will lend itself well to a pretty clear permitting path and then path to production. BC as a jurisdiction, broadly, I made a comment earlier on about Porphyry just being an unassailable, important part of the supply chain for Copper.
37:19 The majority of production comes from these types of deposits and most mining companies have at least 1 in their portfolio. If you look at where these types of deposits exist around the world in terms of the geological environments they exist in. A lot of the countries are either challenging jurisdictions to deal with from a social license permitting perspective, what have you, or there's really vexing and challenging environmental issues. So Chile is, I think, one example of that. It's obviously had a prolific history of production from their mines, but a lot of those mines sit in the driest region of the world. Water is a big hurdle that a lot of those projects need to get over. And they often solve that problem with desalination facilities down at the coast.
38:09 If we think that the long-term focus of Copper supply is going to have an additional layer of how can we ensure that the supply chain is decarbonized and has various other ESG factors working in its favor. I think BC as a province ranks extremely highly in the global landscape from that perspective and it'll continue to attract more and more attention from majors in that regard. Thank you. Brian, what sets you apart? Well, I think what sets us apart from the new companies that are coming in is that we have 2 advanced projects in Peru that are in great locations. I mean, one of the things that we always looked at when I worked for INCO was like, well, you know, the checkbox of, well, is it close to infrastructure?
39:00 You know, what's the capital expected going to be? Is it remote? Does it have social license? And in both of our cases, our projects are big porphyry footprints. We certainly have SXCW opportunities. And one of ours, which is a historic resource that was drilled off by Phelps Dodge in the 1990s when you needed 1%. We have historic resource at 0.67, which now puts it in the upper quartile of grade. And it's all above 200 metres from surface. And it's certainly a project that we can manage. It's not going to be billions of dollars to develop an SXCW. It's going to be a couple of hundred million perhaps when we get to that stage. So we're advancing our projects really quickly into engineering studies in the next year or so. Once we get drilling off the historic resource to modernize it into a 43-101, that's our Florida Cobre project, our Alita project, which is also low elevation, has water power readily available. It's only an hour's drive away from the coast on the way to Antimina.
40:08 Again, a great mining situation. The social licence 1 community have had an agreement for 5 years, just renewed it for another 5. So all of those components lead to a situation where you have a large potential project for Copper, but it is a buildable project and both of ours are that way, but we have the optionality to build it ourselves in one case and potentially the other case as well where it has potential for an SXCW opportunity. So I think that sets us aside. We're not a grassroots company. We're already starting with probably 15 million US dollars worth of work done. We're just gonna do the 2 resources this year and that's gonna be our starting point and then moving quickly to PEA on the Florida Colbury project next year.
40:57 Wonderful, thank you. I'd really like to move to the Q&A session but before we do that, I'd like to do 2 things first and foremost. For everyone in attendance, we will be moving to the questions and answers portion of this panel in just a moment, but for the panelists, I'd like to take just a couple of minutes if you'd like to talk about any upcoming catalysts this year that you'd like shareholders to leave knowing. Let's start with you, Leif. Sure. At Surge, we've actually recently completed a 20,000m drill program that ran from November to March of this year. It's the first drill program that's taken place at our main project in a number of years. There's been a period of under-activity in this corner of the market, of course, so I'm quite excited about the results that have come out of that. We've probably released about half of the results from that so far.
41:49 I definitely saw some excellent drill intervals come out of that. So expecting to see more of the same with the other half that will be coming out over the following weeks. We're also very excited to be launching the first Z-TEM geophysical survey across the entire Huckleberry district where we're based. It's a type of technique that works very well in porphyry cluster, in intrusive cluster type environments, especially where there's a bit of cover, which we have in the southern portion of our district. So, we hope to have a lot of exciting targets to chase up on the back of that. And then we did add a sizable project to our portfolio just before the holiday period last year.
42:35 This will be our first year as operator of that, so we'll be getting in there with some drill rigs later this summer and getting at that for the first time this year. Thank you. Brian, some catalysts upcoming, just quickly? This year we're well-funded. We just completed the IPO, so very shortly we anticipate getting ready with the drilling at our Alita project. This is a very large pore for you. There are already 18 holes with half of them over 500m intersections at very good grade Copper, Molybdenum and Silver. We'll be expanding and drilling additional holes in that and we'll come up with a maiden resource for that towards the end of the year. So there'll be a lot of news flow on drill results on that project. We're also going to be drilling our Florida Cobre project where we have that historic resource.
43:22 So we'll be modernizing that. So there'll be drill results in and around that throughout the next 6-months, culminating with another resource technical report. And then of course that will, you know, we'll start some metallurgy and start some engineering on that project towards the end of the year. So lots of news flow in the second half of the year. So it should be a great year. Thank you for that. Alistair, anything to add? Yeah, for us, as we said, the 2 key things that the PEA directed us to take a look at, 1 was the initial capital, and the second was the length of the project. We're doing a lot of work on how might we double the length of our project. So towards the third quarter of this year, we should have enough data in our belts to see if we can actually achieve that doubling. It looks feasible at the moment.
44:16 So once we double the length of the project, it certainly takes care of a lot of the financing issues, especially the debt capacity. So we're pretty excited by what's potentially available to us there. I think the other thing that we're particularly excited about are the external catalysts that will continue to drive or keep the price up and drive it up actually. If they start to land as foreseeable future type results that would fit in with the development and operation of our projects, you know just moving from a 315 copper in our PEA to $4 adds in excess of 100 million NPV to the short-life project, never mind the longer-life project that we're working on. It's a huge increase for us. So we think the combination of these next few months as we, and then as I said before, if the prices stay up, the alternative mining method where we can bring the company down as well, just says that the potential to improve upon those PEA results is a primary focus for us right now.
45:17 And towards the third and fourth quarters of this year, we'll have the data. And hopefully we'll support those intentions that we have right now. Great. Thank you. At this point, we'll move on to the live Q&A session. We have some questions banked. I'd like to remind everyone in the audience that you can of course submit questions on the Q&A panel on the right-hand side of your screen. First, to start things off, Steve Head asks, how have the various levels of governments in your respective mining jurisdictions been to deal with? We need the copper, but have to juxtapose that with ESG. Not all jurisdictions share the same ESG priorities. I think the question being specifically how have the various levels of governments in your respective mining jurisdictions been to deal with?
46:03 I can start. We've been dealing with the government on permitting in Peru, and I've been working there for 12 years. And there is a process to get that done, and it starts with the community stakeholders. We take that very seriously. We engage with them, their partners with us on the project. We've been successful in working well with them. The government wants to see that in Peru, that we're working well with the local stakeholders. That's important, and it should be important to every mining company, and I think it is today. Certainly, we take those seriously, and the government's been very receptive. And we have people locally in the country that provide us with advice in terms of understanding how you know how the government you know, bureaucracy works so that we can work with them to try and expedite things and do things in a proper way. The way we would do them anywhere else in in the Western world as well.
47:03 We certainly bring the same level of importance to ESG when we work in Peru as we would anywhere else. Just to speak to BC where we operate, it's obviously a tier 1 mining jurisdiction with a fairly well-established permitting regime. We're obviously at the exploration stage right now, so not in the process of moving a project concept through full permitting, but certainly have very smooth experience with dealing with the mines ministry in that regard. And echoing what Brian said, and obviously interactions and consultation with local indigenous communities is a key part of resource development in any jurisdiction in the world, and BC is no exception to that.
47:59 We, as I mentioned before, are based in a fairly brownfields area in BC and have very good and long-standing level consultation and engagement with our respective First Nations communities in our area. And I can echo the same. Manitoba at the government level have been extraordinary to us. They've actually granted us a concierge. We had one-stop shopping before you'd have to go off to the hydro folk and then off to the environment folk and then the labor folk. I think Manitoba's really tried to push themselves back up the Fraser Institute rankings, and I think they've made some really good steps along the way. The other piece of that is we've enjoyed extraordinarily good relations with the First Nations, particularly with Norway House, who have partnered with us in our major drill program at the Tower property. We were able to give them jobs. They provided services for us.
48:56 So I think we've enjoyed great relationships with all the governments that we've been involved with. Thank you. Christopher Maltin asks, at what price do you believe copper substitution occurs in various industries? Example, copper for aluminum. I would say it's sort of a question on what the use case is where substitution makes sense. I don't think it's simply a matter of price point and time factors and considerably there as well. I mean, I think if there's a spike in price where end users are really thinking through those substitution questions. It's really a use on how long those price differentials are going to be in place are brought into question. And we were obviously talking earlier about the Copper industry I think has a pretty good ability over the long term to respond to pricing signals, maybe not over the short term. So we'll see what sort of environments do evolve in the future there. But yeah, I think it's really a question of what usage applications are actually appropriate to look at substitution for, you know, for examples like aluminum, there certainly are situations probably with things like transformers or, you know, distribution in well kind of insulated environments where that could work. But I know there are a lot of engineering
50:27 complications and concerns around that example of substitution. I agree. I agree. I don't have any other. Fair enough. Fair enough. The next question comes from Jack Govan. How much copper was produced globally last year and how much is expected to be produced this year? And what is the present global demand? How does it look like a few years out? I did dig up some numbers on that, and I think the refined output, so obviously there's some recycle attached in the refined output number, was about 24.7 million tonnes last year. Your mine output was obviously somewhat lower than that without the recycle. And it was actually almost the same as the year before.
51:14 I find that extraordinary, given how a fair number of mines had to respond to COVID during the course of last year. I think that's the direct answer. It was about 24.7 million tonnes last year. This year they're expecting a slightly higher output and they're not seeing any major outages. Could be question marks I guess. If you look at the price today at $450,000, I think someone's forecasting perhaps we're not going to meet the forecast output this year. And I'm trying to think why, because I don't see any major stoppages at the moment. But Chile is having some interesting COVID implications currently that could be an issue.
52:00 Don't know, especially with Chile being the largest country, a producer of copper. In mid-April, 15th, 16th of April, they reported 38.9% COVID vaccination rate, the first jab, which was the third highest for any country in the world. And yet at the same time that they released that data, they reported the 2 highest days of new infections for COVID that they'd had since the beginning back in March of last year. So there's something going on in Chile and if it means a major shutdown, clearly we're not going to make that amount of Copper that is currently being forecast. And maybe that's a bit what we're seeing in price at the moment.
52:47 I would echo that. The challenges with COVID, we're not out of that yet. That's going to, it's more likely that it's going to create problems with supply over the course of the year versus years where we had no COVID disruptions. So We're gonna see how that plays out through the rest of the year with the new variants. And I think no 1 really knows how much it could disrupt supply as we go forward in the bigger producing countries. I view the market as roughly 30Mt per annum and there's a lot of very compelling demand forecasts that show that doubling in the next 30 years to getting to something like 60Mt by 2050, which on a CAGR basis doesn't sound that impressive.
53:34 It's like 22.3%, I think. But if you translate that into production output, it's like an additional million tonnes per annum, additional growth in that market. And if you compare that against declining production profiles at a lot of the major suppliers around the world, it implies the need for a large number of new mines to be brought online. Christian Carl Simard asks, isn't Aluminium a real substitution risk to copper? I think in certain limited applications, I think there's engineering issues with it from a corrosion and fire safety perspective. So in probably in transformer wire turning applications, limited ones where it's not exposed to the elements, you might see that, but wholesale substitution risk, I think is very, very low there. It's obviously used in main big applications for moving electricity and things like transmission lines are really a cost and more of the cost weight considerations in terms of the transmission towers themselves.
54:52 Anne Elk asks, China's important import dependence on copper is established, but does the panel expect its import to use ratio to increase in the new BEV age? Imports to use ratio. Well, I mean, I would expect their usage to continue to increase. And they're a huge target market for the for for BEV. They obviously would, I would expect their import requirements to scale with usage if not if not more so that ratio could be the same to higher in the future I would say. I would agree with that. You know I think that they will you know they have the ability to move fast, faster than other countries in terms of moving in the EV direction.
55:47 It's certainly, I think that there is only growth in their usage of copper as we go forward. Certainly everything that they've signaled that they want to do, you know, leads to increased need for copper supply. And you can certainly see that as they've moved out in the world, so that they can control supply into their own country. So they're very aggressive option where they're looking for copper. All right, fair enough. Well, folks, I know that we didn't get to all the Q&A, but that is all the time that we have for today. So I'd like to thank, first of all, everyone that asked questions and everyone that came and attended the event. But of course, I can't miss the fact that thank you to the panelists. Thank you, Alistair. Thank you, Leith. Thank you, Brian, for coming on. This has been an enlightening conversation of high value. So thank you.
56:43 You're welcome. Thank you, Cam. Thanks, Cam. You're a gracious host. Appreciate it. With that, I'll be ending things off. Of course, this will be recorded and will be available to watch after on six.com. And I hope that everyone has a safe day and Cheers. Have a good one. Thanks very much. Thank you. Have a nice weekend, everyone. Yeah. Take care. Bye-bye.
