The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Barclays, former Phelps Dodge execs form new company to bring exploration projects online ahead of anticipated copper shortage
Bankers, miners and scientists are predicting a shortage of copper in the coming decade as developing countries, particularly China and India, urbanize and industrialize.
This growing need has spurred Barclays Capital, the investment division of the London-based Barclays Bank plc, to back a team of top-level copper miners who are scouring the globe for large, undeveloped copper assets.
Barclays Natural Resource Investments and five former top executives from Phelps Dodge, Freeport-McMoRan and Newmont have joined forces to form Cupric Canyon Capital LLC.
Barclays Capital spokesman Marc Hazleton told Mining News in a recent interview that the exciting long-term outlook for copper is one reason for forming CCC (Cupric Canyon Capital). "The other is that we think there are excellent opportunities to advance copper projects and achieve good returns in today's market," he added.
Barclays said the Cupric Canyon team has a unique mixture of technical expertise ranging from exploration through mine resource evaluation, mine planning, mine operations, mineral processing, hydrometallurgy, and financial analysis.
Phelps Dodge reunion
The formation of Cupric Canyon's management team was a reunion of sorts. All five of the initial group worked as senior staff for Phelps Dodge Corp. prior to its merger with Freeport-McMoRan.
Cupric Canyon Chairman Timothy R. Snider has worked in the copper business his entire career. In 1970, at the age of 18, Snider went to work in Phelps Dodge's copper division. Working his way up the corporate ladder, Snider was appointed president and COO of the company in 2000, a position he held until the copper company merged with Freeport-McMoRan where he served in the same capacity.
Dennis M. Bartlett and CFO Lowell A. Shonk worked alongside Snider at Phelps Dodge. Bartlett was senior vice president of development for the company, and Shonk was vice president of financial and operational analysis for Phelps Dodge. Bartlett is Cupric Canyon's CEO, and Shonk is the new company's CFO.
M. Stephen Enders and David C. Naccarati will lend exploration and operation expertise to Cupric Canyon. Enders was the senior vice president of Phelps Dodge Exploration Corp. from 2001 to 2003, after which he joined Newmont Mining Corp. as senior vice president of worldwide exploration. Naccarati, as president of Phelps Dodge Mining Co., was responsible for all Phelps Dodge mining operations worldwide.
David Ellis, a director at Barclays Natural Resource Investments said, "We are proud to be able to partner with one of the world's leading copper management teams. With the financial expertise and the line of equity we provide, management can focus on doing what they do best - mining - and won't have to be distracted by the hassles of the capital markets."
The case for copper
Despite marginal production surpluses in 2009, copper prices have risen from around US$1.40 per pound at the beginning of the year to current levels nearing US$3.30 per pound.
According to the United States Geological Survey report, "Mineral Commodity Summaries 2010," global copper production slightly outpaced consumption in 2009; this trend is expected to remain in place in 2010.
"Double-digit declines of copper consumption for 2009 in the European Union, Japan, and the United States were mostly offset by China's apparent consumption growth of more than 25 percent for the year. China's year-on-year imports of refined copper rose by 1.1 million tons during the first 6 months of 2009, much of which was believed to have entered unreported government and industry inventories" the report read.
Teck Resources President and CEO Don Lindsay told investors at a January conference in Whistler British Columbia that miners will be challenged with meeting the world's growing copper demand.
The Teck leader projects that mine closures will outweigh expansions by a nominal amount, and if you add in all the copper projects that are "highly probable" to come online over the next 10 years, global annual production by 2020 will be less than 20 million tons. At 3 percent growth, he said, worldwide demand will be more than 25 million tons.
Lindsay contends that China consumption alone could drive 3 percent annual demand growth for the red metal.
Currently, China consumes about 30 percent of the world's copper, and the rapidly developing country's demand for the industrial metal has grown at 10 percent annually in recent years. At this rate, if the rest of the world's use stayed at 2009 levels, Lindsay's copper consumption projections would still be accurate.
The Teck leader said 44 new projects with production rates of 150,000 tons per day would need to be built to meet the projected demand shortage.
"Interestingly, today, in the whole world, there are only 28 projects of that size. So it is hard for us to see how there will be another 44 projects built over the next 10 years," he said.
The Pebble and Ambler projects in Alaska, the Casino project in the Yukon and the Galore Creek and Kerr-Sulfurets projects in northern British Columbia are among the projects on Lindsay's list that would need to come online in order to meet global demand.
Filling the deficit
Cupric Canyon is hoping to fill this anticipated copper supply deficit. The company said it will focus primarily on copper, a highly attractive base metal due to the size of the market and attractive demand fundamentals driven by Asian countries, particularly China.
Barclays Capital spokesman Marc Hazleton told Mining News in a recent interview, "The exciting long-term outlook for copper is one reason for forming CCC (Cupric Canyon Capital). The other is that we think there are excellent opportunities to advance copper projects and achieve good returns in today's market."
Utilizing the funds provided by Barclays and the experience of the assembled management team, Cupric Canyon plans to locate undeveloped assets where a resource has already been established and move them through the permitting and development process.
"This is a great opportunity to utilize the team's vast experience and expertise at a time when we already see great opportunities to make attractive returns. We have worked together in the past at Phelps Dodge as a very successful team and are anxious to do so again. BNRI is an established and successful participant in this industry and we look forward to the partnership," Snider said.
When asked if Cupric Canyon is looking at prospects in Alaska or northern Canada, Hazleton said: "To be in the copper business, you have to be willing to go where copper is found. CCC is looking at projects all across the globe, including Alaska and Canada."
While the company is reluctant to divulge information on specific projects on its short list, Hazleton said projects like Kiska Metal Corp.'s Whistler project in Alaska and Western Copper Corp.'s Casino project in the Yukon "are certainly the types of projects we would consider - copper with byproducts and the potential to be large tonnage."
Cupric Canyon said it may, in certain situations, acquire operating assets in distress if sufficient operational improvements can be achieved.
The new company is based in Arizona, a locale that is both home to most of the management and a strategic location to investigate many of the promising copper prospects.
"There are a number of copper opportunities for CCC to look at in the Americas and they are all accessible from Arizona (particularly those in the southwest U.S. and Mexico)," Hazleton explained.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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