Canada-based Freeport Resources Inc. (FRI:TSX.V) recently announced that it had successfully renewed its license for the Yandera project, an undeveloped copper deposit located approximately 95 kilometers southwest of the city of Madang in the Bismark Mountain Range in Papua New Guinea (PNG).
The Yandera Copper Project is located in the highly prolific PNG Orogenic Belt, the same geological arc as some of the world's largest gold and copper deposits, including Grasberg, Frieda River, Porgera, Lihir, Wafi-Golpu and Kainantu.
Yandera is a project of strategic national interest in PNG and has the potential to become one of the country's most significant copper mines. It is 95 kilometers southwest of the capital city of Madang Province and 235 kilometers to the northwest of Lae which is the largest port city in PNG and an important industrial center.
As one of the largest undeveloped copper resources in the world, the Yandera Project has the potential to support communities and create jobs along the Yandera Corridor. The Company anticipates the potential economic influence of the Yandera Copper Project could span five provinces and create wealth for generations including, but not limited to, strategic road and highway building, power generation, and related infrastructure.
Freeport’s reach is wide and also includes the Star Mountain property, as well as many subsidiaries, including Quidum Resources Inc., Highlands Pacific Resources Ltd., Carpo Resources Inc., Era Resources Inc., Marengo Mining (Australia) Pty Limited, Yandera Mining Company Limited and Yandera Mining Company (Holdings) Pty Limited.
The Catalyst: Yandera License Extension
On December 11, Freeport Resources announced that Papua New Guinea’s Minister for Mining, the Honorable Sir Ano Pala, had approved the renewal of the Yandera Copper Project’s Exploration License 1335 (“EL”) through November 19, 2023, following the regulatory processes prescribed by the Papua New Guinea Mining Act.
“We are pleased to have successfully completed the exploration license renewal process and would like to thank the Mining Advisory Council and the Government of PNG for their dedication to advancing large-scale resource projects such as Yandera Copper,” announced Dr. Nathan Chutas, Senior Vice-President of Operations for Freeport Resources.
“The renewal of Yandera Copper Project’s Exploration License demonstrates the commitment of the Government of PNG to build strong, working relationships with mineral exploration and development companies, such as Freeport Resources, to drive economic growth through the responsible development of Papua New Guinea’s vast natural resources,” Continued Chutas.
“This is a major milestone for the Company. More than US$200 million has been expended on the project since 2005, culminating in a comprehensive 2017 Pre-Feasibility Study delineating one of the world’s largest undeveloped copper resources. With the license renewal now in hand, we are anxious to commence work on the Definitive Feasibility Study and accelerate ongoing discussions with potential strategic partners for development of the mine.”
The license in question, EL 1335, covers the 245.5 square kilometer tenement comprising Freeport Resources’ wholly-owned Yandera Copper Project. Work completed and studies funded to date include approximately 154,600 meters of exploration drilling, the vast majority of which has focused on the Yandera Central deposit, as well as scoping studies, engineering studies, environmental studies, a Pre-Feasibility Study, and infrastructure-related studies.
The renewal of EL 1335 allows Freeport Resources to commence work on a Definitive Feasibility Study to advance the Yandera Copper Project toward a Final Investment Decision. Concurrent with the Definitive Feasibility Study program, Freeport Resources will accelerate ongoing discussions with international strategic investors and prospective development partners.
Freeport Resources’ Definitive Feasibility Study will build on earlier work undertaken with local and regional communities to determine opportunities to achieve mutually beneficial partnerships and sustainable long-term social benefits related to job creation, indigenous advancement, health and wellness, environment, education, and community development.
The company is also planning a wider exploration program of porphyry copper targets within the largely underexplored 245.5 square kilometer land package.
Why This Industry? Copper Demand Continues
Demand for copper is forecast to undergo unprecedented structural change driven by the global energy transition, with mined copper supply forecast to enter a deficit position starting as early as 2025.
An article by Cecilia Jamasmie, Senior Editor of Mining.com, lays out the coming crunch in copper supply. “Chile’s state-owned mining company Codelco, the world’s biggest copper producer, warned … that global shortages of the metal may reach eight million tonnes by 2032, as soaring demand continues to offset new projects numbers,” she writes.
“Maximo Pacheco, chairman of the board of Codelco, said at an industry conference that while a surplus is expected in the short term due to new projects in Chile, Peru, the DRC, and China’s Tibet region, medium to long-term demand will eclipse supply further down the line.”
Jamasme quotes Pacheco as saying that since “some copper deposits are in the process of stopping production and that other projects are in the process of starting operations, it is estimated that the deficit will be almost eight million tonnes in 10 years.”
Furthermore, a recent Goldman Sachs Equities Report projects a similar shortfall. “Global copper supply disruptions are expected to finish the year at 1.6mt, a historically high level and 500kt above GS initial forecast,” the report explains.
“This is mainly explained by a series of mining issues in two key producing regions in LatAm, Chile and Peru. In addition to operational challenges and community protests, production has been impacted by declining grade quality, water disruption-related issues, and slow project ramp-up.”
“GS anticipates unexpected disruptions to trend toward more normalized levels in 2023, but we also now project a lower supply growth rate at 3.6% (vs. 6% before). This reflects a number of downgrades across copper operations over the past quarter, as producers increasingly signal the factors that have generated underperformance this year are set to remain as headwinds into next year.”
“On the demand side, GS Global Commodities team highlights that marginal reduction in non-green demand (both in China and DMs) is offset by ongoing renewables demand strengthened by an expected 2.7% global refined demand growth for 2023.”
“Investors have been concerned about both copper supply growth and demand weakness into 2023 before a structural deficit materializes into the end of the decade. But the GS global commodities team believes the combination of weaker than expected supply, resilient demand and record low inventories is likely to result in a 178kt deficit already in 2023.”
The transition to clean energy requires massive increases in copper supply. Higher copper prices will be required to incentivize the production of more copper from existing and new mines.
Recent advances in copper catalyst technologies have opened an entirely new, low-cost processing route that could potentially be applied to Yandera and other large yet lower-grade sulfide copper deposits.
These technologies, which allow for the treatment of lower-grade sulfide ores as oxides via a standard SX/EW circuit, are currently employed and being tested at various copper projects in both North and South America by Jetti Resources and Rio Tinto’s Nuton Venture.
The technology is a potential game-changer for lower-grade copper sulfide deposits, so Frontier Resources is currently evaluating it for use at the Yandera project. If such methods prove to be viable, this could greatly enhance the feasibility of Yandera by significantly reducing the capital and operational expenditures required to transition the project to production.
Why This Company? Large Claim, Proximity to the Asian Market
Yandera Copper Project’s proximity to Asia marks it as an attractive new source of long-term copper supply for the content, where many countries are rapidly transitioning to green energy solutions (and developing the appetite for copper that industry stokes.)
Freeport’s Yandera copper project was previously held by the Sentient Private Equity Fund, a US$2.7 billion specialist mining PE fund. Sentient spent approximately USD $200+ million in engineering and feasibility studies but was forced to sell the site when its portfolio had to be liquidated.
The project is held under a 2-year renewable exploration license, which has recently been renewed, as it was held eight consecutive times previously.
Why Now? Exploration License Paves the Way to Profit
Before license renewal, the Company had a market capitalization of only CA$7 million. Now that further licensing is assured, shares will likely undergo a significant re-rating.
Additionally, if the new catalyst technologies currently being examined are found suitable for deployment at the Yandera project, they could smooth and expedite its transition to production.
Analyst Clive Maund published an opinion on March 1 that “Freeport Resources is looking like an attractive speculative play here not just because it has dropped from a peak approaching CA$0.95 in 2020 to the current very low price of just under 5 cents, but also because it has completed a large downsloping Pan & Handle base that has been accompanied, in its latter stages, by a very positive volume pattern that reveals persistent accumulation.”
“The strong break clear above the falling 200-day moving average early last month certainly looks like the 1st impulse wave of a new bull market. So the positive news that came out after the market closed last night that the company has successfully completed the 2nd tranche of financing means that there is now little to restrain it, and it could take off higher at any time, especially, of course, if the metals sector takes a turn for the better, as looks likely.”
Ownership and Share Structure
Freeport Resources has a market cap of CA$7 million. After its most recent financing round, the company has 147 million shares outstanding, as well as 63 million warrants and 7.2 million options. The warrants are all at much higher strike prices (CA$0.10 to CA$0.40) than the current market price of CA$0.05.
Management, Directors, and Advisors own some 20% of the outstanding shares, with institutional investors Canaccord, Haywood, and Echelon owning another 20-30%. There are not currently any strategic investors, although management is in discussion with potential strategic partners.
The firm has CA$2.5 million in the bank, with a monthly burn rate of CA$50,000 and no incipient drilling costs, as the Yandera deposit has already been extensively explored and drilled.
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