Marimaca Copper (TSX: MARI, ASX: MC2) is moving to protect its $587-million (C$810 million) capex namesake oxide project from a volatile sulphuric acid market in Chile.
As the explorer pivots into development it has signed a cooperation agreement around a second-hand acid plant just as Chinese exports to Chile have dried up in recent weeks and the Middle East war has driven up sulphur and acid prices.
China’s acid shipments to Chile fell to zero in March, according to a mid-April Reuters report. S&P Global said on May 7 that spot availability tightened across key markets and U.S. Gulf sulphuric acid rose to $400 per tonne on May 6 from $155 on Feb. 25.
“We were thinking about this more as business resiliency,” CEO Hayden Locke told The Northern Miner on Wednesday. “We don’t need it, but it certainly really strengthens our business case.”
Locking down acid supply looks less like an add-on than a way to de-risk one of the few near-term copper builds in the region. Copper majors are picking up the pace of development activity in Chile and Argentina, as work on the ground intensifies at BHP (ASX: BHP) and Lundin Mining’s (TSX: LUN) Vicuña joint venture, First Quantum Minerals (TSX: FM) advances La Granja and Taca Taca, and Chilean state-run copper miner Codelco works with Freeport-McMoRan (NYSE: FCX) to expand El Abra for $7.5-billion.
Just in time
Marimaca has signed a six-month non-binding memorandum with a large acid producer in the port city of Mejillones, about 25 km by road from the project site, to study refurbishing, relocating, integrating and operating the Dos Amigos acid plant.
The company bought the plant late last year at a distressed sale for $2.5 million. Locke estimates a new acid plant could cost as much as $35 million for the equipment alone and roughly $50-$70 million for a full installation.
A map showing the location of Marimaca Copper close to the port city of Mejillones. Credit: Marimaca Copper
The executive rejected the idea of a true global acid shortage, saying acid can still be sourced if buyers pay up. His concern is margin compression and supply volatility at a heap-leach mine that will need acid throughout its life.
Owning “just-in-time” acid supply down the road prevents unforeseen cost increases and also protects against Chinese and global acid supply volatility, Locke said.
Oxide starter
The acid strategy fits the oxide project’s economics and timeline. A feasibility study released by Marimaca in August outlined a 13-year cathode operation producing 50,000 tonnes copper a year, with a post-tax net present value of $709 million at $4.30 per lb. copper and a 31% internal rate of return.
The study also flagged scope to lower operating costs through an owner-run acid plant. The mine plan targets proven and probable reserves of 178.6 million tonnes grading 0.42% copper for 748,000 tonnes contained copper.
Marimaca keeps checking off pre-construction milestones at the oxide project. The company filed critical mine permits in April and expects approvals by year-end. Having won authorization earlier this month to connect to the 110-kV El Lince powerline 13 km away, it plans to start early road works in June and has secured provisional easements over the ground needed for the project.
Marimaca aims to start early site preparation late this year and target a final investment decision for the oxide project around mid-2027, Locke said.
Sulphide upside
About 28 km east of Marimaca is the Pampa Medina satellite deposit that also contains good oxide potential to feed into the future oxide circuit, but it’s the discovery of rich sulphide copper intercepts at depth that gives investors a glimpse of what will come after the Marimaca oxide project is in production.
Drilling so far this year has outlined a stacked oxide-sulphide copper-silver system over an initial 3-km-by-1.5-km area, the company said Monday.
The latest step-out drilling at Pampa Medina kept extending the copper-silver system, led by hole SPRD-06, which cut 424 metres grading 0.58% copper and 2.2 grams silver per tonne from 424 metres downhole. It included 32 metres at 1.02% copper from 432 metres.
Hole SPRD-02 returned 166 metres of 0.5% copper and 3.9 grams silver from 222 metres, including 10 metres of 2.47% copper and 27.4 grams silver from 228 metres, while SWRD-05 hit 68 metres of 0.73% copper and 5.1 grams silver from 532 metres, including 30 metres of 1% copper and 7.3 grams silver from 536 metres.
“If that’s the case, and there’s continuity of the grades and widths we’re seeing, this could be one of the most important new discoveries in Chile,” Locke said of Pampa Medina.
The Marimaca copper project is the Canadian company’s flagship project. (Image courtesy of Marimaca Copper.)
Canaccord Genuity mining analyst Dalton Baretto said key takeaways from the Monday announcements were the continuity between the earlier 300-metre scout holes, with meaningful widths and grades; confirmation of five separate sedimentary mineralized horizons; and the fact the deposit remains open to the west, especially the southwest.
“The Pampa Medina target continues to prove up at scale,” Baretto said in a Monday note to clients. “We look forward to ongoing exploration results from the second-stage campaign.”
People risk
Locke said separate development and exploration teams are now running the oxide build and the drill campaign. He is targeting releasing a first combined oxide-sulphide resource for Pampa Medina in the first half next year.
Locke said the bigger risk to execution is hiring the right people at a time when major copper groups are stepping up project work.
“Our view is we will attract people and incentivize them to be top performers by giving them equity in our company and having them aligned with us and hopefully build a Chilean company that creates life-changing value for all of our stakeholders,” Locke said.
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