Ivanhoe Electric, SQM team up on copper exploration

Ivanhoe Electric (NYSE-A, TSX: IE) is teaming up with Chilean lithium miner Sociedad Química y Minera de Chile (NYSE: SQM) to explore for copper on parts of the Atacama Desert in the South American country.

The partnership calls for the companies to deploy Ivanhoe’s Typhoon geophysical surveying system as well as Computational Geosciences Inc.’s data inversion software to search for copper deposits on certain SQM mining concessions covering an area of about about 2,000 sq. km.

A vast part of the Atacama Desert is covered with caliche, a surface deposit of sediments cemented by salts that is mostly found in arid regions of the world. Caliche is highly electrically resistive, which makes it difficult for low-power geophysical transmitters to detect underlying sulfide mineralization.

Ivanhoe says its Typhoon technology can generate a powerful, clean electrical charge that can penetrate the highly resistive caliche cover to detect potential copper deposits at depth.

SQM’s caliche-covered concessions, from which it already produces potassium nitrate and iodine, are located on major porphyry copper and polymetallic manto belts in the Atacama. They sit near some of the largest copper mines in the world, Ivanhoe said.

“Chile has supplied the world with copper for generations, and as demand accelerates, we believe the next wave of world-class copper discoveries will be found hidden beneath these large areas of caliche,” Robert Friedland, Ivanhoe Electric’s executive chairman, said Tuesday in a statement.

Potential joint venture

SQM, in addition to providing access to its mining concessions, will support these exploration efforts by committing $9 million in funding over three years. The parties will form a joint technical committee to develop work programs and budgets.

During the exploration phase, Ivanhoe will operate mutually approved Typhoon surveying across the available mining concessions, with data inversions performed by CGI. SQM will operate the subsequent drill programs within a designated area.

If a deposit with a potential of more than 1 million tonnes of copper or copper equivalents is discovered, Ivanhoe would have the option to form a 50/50 joint venture with SQM over the designated exploration area. To exercise its option, Ivanhoe must pay twice the total exploration expenditures funded by SQM to date. Once formed, the JV will be funded on a pro-rata basis.

SQM will have the option to operate the JV after any future development decisions, provided it holds an equity stake of at least 50%.

Ivanhoe Electric  shares rose 3% to C$26.30 Tuesday afternoon in Toronto, valuing the company at about C$2.8 billion ($2.1 billion). SQM rose 0.7% to $84.65 in New York trading, giving the company a market capitalization of $23.7 billion.