As our readers will know we have been banging on about copper for some time now from a couple of different angles - firstly in the context of concerns over where exactly the next mines will come from and secondly putting considerable capital, human and cash, into the development of NextOre's game changing bulk ore sensing technology (See "Sorted" Comment, 7 June).

In our 2018 report "The Cupboard is Nearly Bare" we highlighted the point (now well-trodden) that the copper project pipeline looked very skinny given the likely ramp up of demand due to the energy transition and the dearth of quality projects available. Today the potential supply deficits loom ever larger.

The report reviewed global copper M&A activity, examined the issues facing development of new copper mines and took a look at copper exploration projects where future M&A activity could take place.

In a December 2021 update to the original report, we found there are currently 65 development and exploration projects with resources of more than 2 Mt of contained copper, notionally enough to sustain a ~100ktpa copper operation. i.e., projects with sufficient potential scale to make meaningful impact on the supply pipeline and to be of interest to large copper producers as M&A targets.

On our analysis only 23 of these have the potential to involve third party M&A activity. We ranked those according to various parameters of attractiveness - resources, grade, jurisdiction, permitting risks, opex, capex etc. and concluded that just five had a "high" possibility of third-party involvement.

RFC Ambrian view on most likely copper projects suitable for M&A from Dec 2021 Copper Project Review

Recently M&A in the copper space seems to have picked up a little with Rio Tinto striking a deal to take full ownership of Turquoise Hill, Lundin acquiring Josemaria and BHP's recent dalliances with OZ Minerals.

Looking at the project list today what strikes one is the number of projects that have already been subject to some kind of interest by a third party in the last year or two. Perhaps not full M&A but certainly copper producers putting their markers down to some degree. That leaves a very short list of projects still unencumbered. Arguably with copper prices some way off their highs and equity prices in retreat now would be a good time to find some bargains.

Extract from Table 4 (page 22) in the Dec 2021 update report with activity added

Despite the recent share price falls, if one had bought a simple (unweighted) basket of the stocks in the "High" and "Medium" categories from the RFC Ambrian reports, you would have done rather well, certainly in the mining world context - up 300% in absolute USD terms since 2018 and outperforming a basket of the largest copper focussed producers (Freeport, First Quantum, Southern etc) and relative to the MSCI Mining Index since 2018 and December 2021.

Relative performance charts of RFC Ambrian "High" and "Medium" probability copper developers vs Copper Producers and the MSCI Metals and Mining Index (Source S&P Global , RFC Ambrian)

We published company reports on two of the remaining independent "high probability" stocks - Oroco Resource Corp and Los Andes. Worth a look before they're gone.

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These historical resource estimate models are based upon historical resource estimates prepared by John Thornton in 2011. While, in the opinion of Dane A. Bridge, author of the revised NI 43-101 standard technical report, Geology, Mineralization and Exploration of the Santo Tomas Cu-(Mo-Au-Ag) Porphyry Deposit, Sinaloa, Mexico dated April 21, 2020 (the “Report”), reliable estimation practices were used, in order to upgrade or verify the historical estimations, resampling and assay of historical drill samples, twinning of historical drill holes, and a new program of regularly spaced drilling is required. No qualified person has undertaken sufficient work to classify the current mineral resources or mineral reserves upon which these models are based and the Company is not treating the estimates as current estimates of the mineral resources. The Company gives no assurance that either these models or the historical resource estimates upon which they are based are accurate, and does not undertake any obligation to update the models or to release publicly any update or revisions of the resource estimates except as required by applicable securities law. The reader is cautioned not to rely upon these models or the historical resource estimates upon which they are based.

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