Canada’s Capstone Copper taps into Australia’s mining nation with ASX secondary listing

Wed 26 June 2024
5 MIN READ

Alexandra Cain

Freelance Finance Journalist

A secondary ASX-listing is just the start of a year of successes for the global mining leader.

Newly-ASX-listed Capstone Copper (ASX:CSC) is set to benefit as the switch to renewable energy gathers pace. The company has one of the world’s most significant copper assets. It’s poised to commission its flagship Mantoverde Development Project in Chile, with first saleable copper concentrate production forecasted in the second quarter of this year.

“We expect to get up to full run-rate capacity in the second half of this year,” says CEO John MacKenzie.

Born from an acquisition of its low-cost, underground Cozamin copper mine in Mexico in 2004, Capstone’s next notable milestone was the 2011 acquisition of Far West Mining, which gave it ownership of the Santo Domingo copper project in Chile. Another major catalyst occurred in 2013 when Capstone acquired its long-life Pinto Valley open-pit copper mine in a prolific mining district in Arizona, USA from BHP Billiton.

In 2022, Capstone Mining merged with Mantos Copper to form Capstone Copper Corp, cementing its position as a mid-tier copper producer with a diversified asset base. One of the driving factors for the merger was the creation of a world-class mining district by combining the operating Mantoverde mine with the Santo Domingo project, separated by only 35km in the Atacama region of Chile. The company’s long-term aim is to become a leading copper producer by focusing on safe and efficient operations, community engagement and sustainability.

Today, Capstone Copper has a growing team of more 7,900 employees and contractors and operations in Arizona, Mexico and Chile, with headquarters in Canada. Its Mantoverde project increases Capstone’s annual production by more than 50 per cent from 164,000 tonnes of copper to around 260,000 tonnes of copper, on an annualised run rate.

Why entering the Australian market makes sense

While Capstone Copper doesn’t have an asset in Australia and is already listed on the Toronto Stock Exchange (TSX:CS), an ASX secondary listing makes sense given Australia’s pedigree as a mining nation and pool of investors familiar with resources businesses.

“We have always considered Australia to be a premium market, with a long track record of providing fantastic support to mining companies, and a very liquid pool of investors for mining companies. Listing on ASX further facilitates our ability to grow that investor base,” says MacKenzie.

“We're very fortunate one of our major shareholders was a private equity firm looking to sell down its position. We convinced them to place those shares into Australia and that's given us a pathway through to inclusion in the ASX 300 index hopefully by September,” he adds.

“We have always considered Australia to be a premium market, with a long track record of providing fantastic support to mining companies, and a very liquid pool of investors for mining companies. Listing on ASX further facilitates our ability to grow that investor base.”

John MacKenzie, CEO, and Jerrold Annett, Senior VP, Strategy & Capital Markets, ringing the opening bell

Towards net zero

MacKenzie notes copper’s supply and demand dynamic is especially interesting as the world decarbonises.

“We are going to need an enormous amount more copper. It takes eight times as much copper to produce one megawatt of offshore wind energy as it would to produce one megawatt of coal- or gas-fired energy. Expansion of the energy grid and distribution networks will also require vast amounts more copper,” he says.

Yet, supply is constrained, and the pipeline of copper projects is smaller than it's been any time in the past 25 years. After taking the decision to build up its copper production back in 2015, today, Capstone Copper has the most significant growth potential of any global copper business.

“We took a conscious decision nine years ago to grow our production and invest in our projects. Now, we're on the cusp of bringing those new projects on. We have more growth coming up over the next five to 10 years than any of our peers do,” he says.

The key to success is a great team

MacKenzie attributes the business’s success to quality underlying ingredients.

“Two things make for great mining companies. The first is the resources and reserves to build a world class mining business, which we have. The second element is great people. We put a huge amount of effort and focus into attracting, developing and retaining a fantastic team of people. It's fair to say we have one of the best teams in the copper industry today,” he says.

Capstone Copper maintains a decentralised model, with hubs located in Vancouver, Toronto, Phoenix and Santiago.

“Two things make for great mining companies. The first is the resources and reserves to build a world class mining business, which we have. The second element is great people."

“We’ve been developing our corporate technical capability, and we have a 15-strong handpicked team of people who are the best in their fields. That gives us the ability to provide the best governance over our projects and operations and share best practices,” says MacKenzie, who explains the business is always looking at ways to maximise returns and achieve the best possible capital efficiency.

Project Mantoverde Optimised

“We already have a lot of infrastructure around our Mantoverde and Santo Domingo resources, which allows us to look at these mines as districts. At Mantoverde, we’ve over-designed some equipment to us allow to do our next project, such as the crushers and the mills,” says MacKenzie.

Once the first phase of the Mantoverde project is online, the focus will shift to an expansion of the Mantoverde project, called Mantoverde Optimised. This will increase processing capability from 32,000 tonnes of copper a day up to 45,000 tonnes a day. This project has a payback period of just over a year and will increase coper production by approximately 20,000 tonnes for around a US$150 million investment. A feasibility study for this project is anticipated by mid-year.

“That represents capital efficiency of about US$7,500 an annualised tonne, which compares to other projects in the industry with capital efficiency of US$25,000 to US$35,000 an annualised tonne. That's why we get these tremendous returns,” says MacKenzie.

Capstone’s fully-permitted Santo Domingo project is larger than Mantoverde and the intention is to use the experience gained at Mantoverde and apply it to the Santo Domingo project, whose six-year-old feasibility study is being updated.

“There are a lot of synergies with Mantoverde next door. We have a far more experienced technical team now working on the study. So, we've been able to identify a lot of improvements to the project,” says MacKenzie.

“Just by replicating the layout we have at our Mantoverde concentrator, we were able to reduce its footprint by about 40 per cent, which makes for a far more efficient layout. We expect to have the updated feasibility study complete by the middle of this year.”

In terms of financing for Santo Domingo, the first aim is to bring in a partner for the project, similar to what was done at Mantoverde, where Mitsubishi Materials Corporation owns a 30% stake in the project.

“That process should be complete by the end of the year. Then, we'll look to raise project financing, which should take the first six to eight months of next year. So, we'll be looking to take a full investment decision towards the back end of next year on Santo Domingo,” says MacKenzie.

When Capstone Copper’s near-term ambitions are realised, the business will produce up to 400,000 tonnes of copper a year from its major assets.

“We believe our Chilean operations will be competing for capital at that stage with our plans to expand our operations at Pinto Valley in Arizona. We're busy working on a project there that could move us up to somewhere between 90,000 tonnes and 150,000 tonnes of processing per day. That will give us our second world-class district in Arizona,” says MacKenzie.

“We’re spoilt for choice in our options for future growth. It's the culmination of many years of work expanding existing operations, doing studies, exploration and drilling,” he says.