Copper prices have been surprisingly resilient in 2023 despite a China slowdown. This is partly because global copper grades are declining putting downward pressure on supply. It is also because there is a new demand from electric vehicles, charging infrastructure and renewable energy (solar and wind). In mining they say grade is “king” and it is very true. High-grade mines tend to have lower costs and hence greater margins making them priced possessions. Today’s company is shifting strategy to focus on high-grade copper sulphide mining with the potential to “increase profitability by orders of magnitude.”

One year Copper price chart showing copper prices remain resilient (higher than where they were a year ago despite a China slowdown)

Source: Trading Economics

Critical Metals PLC update

Critical Metals PLC (LSE: CRTM) owns 100% of Madini Occidental Limited, which holds an indirect 70% interest in the Molulu copper-cobalt Project in the Democratic Republic of Congo (“DRC”). The Project was previously mined by artisanal miners from 4 pits. The Project was forecast to produce an initial 120,000 tonnes pa of copper oxide ore after re-commencing production in January 2023. As of May 2023, Critical Metals has mined over 6,500 tonnes of oxide ore at an average grade of 3%; however the Company is now switching focus to much higher grade sulphide ore at their Molulu Project.

Sulphide ore in this region (Katanga DRC) is known to have some of the highest grades of copper and cobalt globally as seen with renowned Glencore PLC (LSE: GLEN | OTC: GLCNF) and CMOC Group Limited’s (HKSE: 3993 | SHE: 603993 | OTC: CMCLF) DRC Mines in the Katanga region.

The Molulu Project (Critical Metals owns an indirect 70% interest)

Source: Critical Metals company presentation

Critical Metals Molulu Project will continue mining copper oxide ore but will shift focus to finding higher grade copper sulphide ore

In May 2023 Critical Metals announced to the market their plan to focus on the ‘higher grade sulphide zones‘ at the Molulu Project. This is because these zones have grades as high as 8.36% copper. Most global copper miners are operating with grades below 1% copper. Critical Metals commented on the change of strategy stating:

“After surveying the Molulu copper grades and market, the technical team have decided to focus mining on the high-grade sulphide copper ore……Mining focus accelerating to the high-grade sulphide zones – high grade ore samples above 8.3% copper……..Due to the much higher-grade sulphide copper ore, mining the sulphide zones has the potential to increase profitability by orders of magnitude above the oxide only mining.“

Critical Metals will continue mining the oxide ore, but will drill the sulphide areas to create a JORC report (resource).

Mapping and geophysics programmes at Molulu has reconfirmed large copper and cobalt potential.

In the most recent May 2023 Company update, Critical Metals confirmed that they had identified two new anomalies by the geophysics analysis on the Molulu Project. Furthermore, road rehabilitation is complete, bridge building has begun, high-grade sulphide open pits are beginning to drain, and drilling was set to begin in mid-June. The Company also mentioned that first Molulu oxide ore sales are expected late June.

Fast forward to now (late August) and we should expect some drill results to be released soon. Hopefully with some very high grades.

In other news, Critical Metals successfully raised £600,000 at a small premium. The proceeds of which will be used for geological due diligence on potential acquisition opportunities, one of which has been identified outside of the DRC. Consulting geologists have already visited this potential opportunity and feedback is expected shortly.

Closing remarks

Critical Metals is making all the right moves in 2023 and a resilient copper price is also helping. First oxide ore sales and revenue from Molulu are encouraging as is the potential exploration upside as they drill for copper sulphide ore at Molulu. The prospect of a new acquisition outside of the DRC is also exciting. There are numerous catalysts in the year ahead with the potential to shift the stock price higher, especially given the current market cap is only GBP £14 million.

Stay tuned.

Now that COP26 has concluded perhaps some other items will begin to show up in the news cycle. However, unless you dig deep you may not be aware that on November 21^st Chileans go to the polls to elect a new president. You may be wondering why I picked an election in Chile as something to pay attention to given all the things going on in the world today. I have to admit that I’m a little concerned about the build-up of Russian troops on the Ukrainian border in response to complaints of increasing NATO activity in the region. And you just never know what’s going to happen when the Chinese and U.S. get together to discuss economic and military tensions. Yet despite all that I think the Chilean election could have greater global ramifications depending on the outcome…or it could be a non-event.

The reason for having a look under the hood at Chile’s election is two-fold. One is that the leading candidates in the polls are currently from the far left and the far right, neither are from Chile’s mainstream political parties. The second is Chile’s contribution to two very top-of-mind commodities at present: copper and lithium. Has this information started to pique your curiosity? If it hasn’t then it should and here’s why.

In today’s economic reality, as we move towards a cleaner, greener world with less carbon emissions, we are going to need a lot of copper to build out all the electrical infrastructure and of course lithium has been termed as the gasoline of the future. We’ve covered the macro necessity of both these commodities enough at InvestorIntel, so I won’t get into the weeds on everything regarding copper and lithium. However, I will say that Chile is the world’s largest miner of copper by a long shot. Mine production in Chile is approximately 28% of all copper mined in the world and the country  is estimated to contain 23% of global copper reserves. Those are the kind of numbers copper investors need to pay attention to.

As for lithium, it’s almost as impressive with Chile being part of the renowned Lithium Triangle. The Lithium Triangle is a lithium-rich region in the Andean southwest corner of South America, spanning the borders of Argentina, Bolivia, and Chile. Roughly 58% of the world’s lithium resources are found in these three countries, according to the 2021 USGS Mineral Commodity Summary. Although Chile only accounts for an estimated 11% of global lithium resources, they are currently the world’s second-largest producer with approximately 22% of the world’s lithium production. Again, this is enough material so that any sort of disruption to order or rule of law could have serious ramifications that ripple around the world.

As much as I like to brag about Canada being rich in commodities, Chile is knocking it out of the park when it comes to copper and lithium. Hence the reason I’m paying attention to this election given the importance to a nation’s commerce of an orderly transfer of power.

Now let’s take a closer look at the background heading into this election. This is the first election since widespread protests over inequality rocked Chile in 2019. Some of those protests turned violent, with riots, arson attacks, looting and violent clashes with police, all sparked after the government increased public transportation fares. Things were bubbling below the surface for a while and this was the ignition point. Needless to say Covid impacts to the economy and its people further exacerbated these issues. This led to Chileans voting in a referendum in October, 2020 to rewrite Chile’s constitution which appeared to be the writing on the wall for the center-right coalition government that is currently in power. Then in May of this year, Chileans voted again in an election for delegates who would rewrite the constitution. The ruling coalition failed to pick up the one-third of seats necessary to block radical changes to the constitution. Meanwhile, the center-left, which has dominated politics since the end of Augusto Pinochet’s 1973-1990 military dictatorship, garnered less support than leftists who have been pushing for wholesale change to the ‘Chilean model’ that has been credited with fomenting growth, but also with deep inequality.

That’s the macro reasoning but layered on top of that are a couple of micro issues that investors should also be aware of. The country is debating a controversial mining royalty bill which could sharply hike tariffs on the sector. The royalty bill, under discussion in Congress, could shut down the country’s private miners by slapping a 3% royalty on sales of copper with a sharp escalator as copper prices rise. As well, there is a new glacier protection law, which could impact some key mines.

The people of Chile want change and it looks like they will get it with the polls being led by far left hopeful Gabriel Boric and ultra conservative front-runner, Jose Antonio Kast. Thus far both candidates have kept their powder dry on mining during the campaign. Left-wing candidate Boric has discussed royalties while Kast has proposed vague changes to mining property law to rev up the sector, including opening up state miner Codelco to more private investment. At this point, it’s difficult to understand what either candidate could mean to Chile’s future as a mining powerhouse. Nevertheless, investors should be putting this election on their radar as there is potential for a lot more downside than upside, in my opinion. With that said, my hope is that this election is a non-event and results in an orderly transfer of power from one democratically elected party to another.

It should be noted that if no candidate gets a simple majority this coming Sunday, the top two will compete in a head-to-head ballot on Dec. 19. The polls suggest this is likely the next date you’ll have to mark in your calendar if you feel, as I do, that  it could be important to know who is the next President of Chile.