Copper demand is all over the news recently, particularly regarding China’s heightened requirements. Maike Futures Company stated recently that tumbling inventories and stronger than anticipated demand from China may drive copper prices to a record $12,000 a metric ton in the first quarter.
According to Bloomberg, the head of Maike’s research department, Ren Gang, gave his guidance referencing that destocking is nearly done and China could face a serious shortage if they don’t boost imports in the second half of the year.
This could clearly provide a catalyst for increases in demand for exports from Chile, already the world’s leading copper producer, who boasts more copper reserves than any other country on the planet. In turn, Chile is also the world’s leader in copper exports with estimates for 2011 pushing the amount of copper leaving the country near six million tonnes; a greater than 6% increase over 2010. The impact of an influx of requirements stemming from China has the potential to further raise those figures.
Of course, miners always want to hear about increased demand as it drives prices -- and profits -- higher. Copper has already been on an upward tear, reaching a three-month high this week with September copper nearing $4.50 a pound on the Comex in New York. A bit of profit taking as, technically speaking, the copper charts are reaching overbought levels appears to be only a temporary set-back for the hot metal.
Producers in Chile are probably already cranking-up the machinery to both extract and discover more copper. As if Chile didn’t already have enough proven copper reserves, news hit the wire today that even more copper is contained in Chilean soil. BHP Billiton Ltd, (NYSE:BHP), the world’s largest miner with worldwide operations including copper workings in Chile, released a report which disclosed an increase in mineral resources at its Escondida copper mine in Chile by 40% after a four-year, $381-million U.S. exploration program.
Production for BHP from its Escondida mine actually slipped by eight percent in fiscal 2011 according to its latest report, but is expected to improve beyond this fiscal year due to mining of higher grade copper. The Escondida mine is located in the northern part of Chile in the Atacama Desert and ranks as the number one copper producer in the world.
Another miner that will be looking to kick it in gear with its Chilean project is Red Metal Resources Ltd. (OTCBB:RMES). Red Metal is completely focused currently on an aggressive growth strategy through acquisitions and exploration on copper-gold assets in Chile. This "get-while-the-getting-is-good" mentality could prove very fruitful for the Company given the status of future predictions for copper demand, not to mention the ever-increasing value of silver and gold.
Red Metal already controls four copper-gold projects in the prolific Candelaria Iron Oxide Copper-Gold (IOCG) belt in Chile’s III Region. The IOCG belt is no stranger to production or large miners as companies such as Freeport-McMoRan (Candelaria Mine), Anglo American (Mantoverde Mine), Teck Resources (Relincho Project and Andacollo Mine) and Far West (Santo Domingo deposit) have set up shop in the prolific region.
Speaking only of copper, those five projects are reported to hold a whopping 2.5 billion ounces in copper and copper equivalent. In a strategic move to gain an enviable position, Red Metal has acquired properties that leave them surrounded by all that copper; a fact that greatly increases the potential of significant reserves on their property.
For instance, Red Metal’s 100% owned Mateo property is a past producer. From 1994 through 1997, approximately 16,144 tonnes of rock were mined with an average grade of 3.2% copper, 43.7 grams per tonne silver and 0.72 grams per tonne gold.
Moreover, Red Metal has a 100% ownership in its Farellon copper-gold property. The 1,096-hectare project is in advanced stages of exploration which began in the late 1990’s with 22 reverse circulation holes totaling 3,900 metres along a 1.7-kilometre strike length and 150 metres in depth. Drilling in 2009 was showcased by the magnitude of potential of Farellon with an intercept of 2.57% copper and 4.16 g/t gold over five metres.
A third project of Red Metal is its 100% owned Perth project that sports similar geology as the Farellon project. The large property hosts 12 veins that have been identified on the surface with fault-related copper and gold bearing quartz veins zig-zagging throughout the property. A Joint Venture Earn-In Agreement with U.K.-based Revonergy, Inc. is part of the ownership which grants Red Metal the rights to sell up to 50% ownership in exchange for the completion of exploration programs costing at least $1.415 million U.S. and a preliminary feasibility study by 2015.
The Red Metal portfolio is rounded out with the copper-gold asset called the Veta Negra Property. Located just down the road from the Mateo project, the Veta Negra property consists of the Exxon and Veta Negra mining concessions and 16 exploration concessions totaling 5,264 hectares (roughly 13,000 acres) in the Cerillos mining district located approximately 24 kilometres northeast of Vallenar city.
Additionally, Red Metal has signed an option agreement to purchase 100% of two mining claims totaling 44 hectares (108 acres) underlying the exploration claims. Both the Exxon and Veta Negra have been the subject of artisanal mining with grades as high as 2.36% copper being produced as recently as the last five years.
Today, the Company provided an update on the Veta Negra property. The announcement reported on reconnaissance sampling. While performing their due diligence on the property, Red Metal geologists identified three mineralized mantos (stratabound irregular to rod shaped ore occurrences usually horizontal or near horizontal in attitude that are an important source of copper, forming one of the world major copper resources in Chile).
Samples were taken along a two-kilometre strike from the West Manto, a one-kilometre strike from the East Manto and a 500-metre strike length from the Far West Manto. All told, 65 rock samples were taken from the mantos and from artisanal mining excavations.
Results proved impressive from the samples. Highlights included grades as high as 0.33 g/t gold and 4.48% copper from sample #200908 (undefined manto); 0.20 g/t gold and 3.56% copper from sample #200904 (East Manto); and a strong gold occurrence from sample #200905 which returned a grading of 0.93 g/t gold as well as 2.69% copper.
This quiet, well-managed company is sliding under the radar of the investment community, but certainly possesses the portfolio to qualify it as a value proposition. With a stock price caught in a channel between 40 and 50 cents and news of copper and gold such as that mentioned above, a catalyst just may be lying in the wings to give the push -- and recognition -- that it is awaiting.
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