ATEX Resources - A Call Option on the Future of Copper

• ATEX Resources is advancing the Valeriano copper project in Chile, one of the largest undeveloped copper projects globally with 1.4 billion lbs of copper resources at 0.67% grade.
• Recent drilling intersected a continuous zone of high-grade "early porphyry" mineralization, significantly expanding the potential size and improving the geometry of the deposit.
• The project benefits from close proximity to other major copper projects and mining infrastructure in the region. Eventual development would likely involve shared water pipeline and other synergies.
• ATEX is well-funded to complete the current 15,000-20,000m drill program and advance the project to a Preliminary Economic Assessment. Management is experienced in project development.
• With a rising copper price due to growing demand and projected supply shortages, Valeriano represents an attractive large-scale development opportunity. ATEX will likely seek a major partner to help fund and develop the project.

The Bullish Case for Copper: Electrification and Undersupply Drive Long-Term Opportunity

As the global economy accelerates its transition from fossil fuels to clean energy, copper has emerged as a critical metal required for electrification. With demand growth poised to surge over the coming decades and a lack of new mine supply on the horizon, the copper market appears to be entering a period of sustained undersupply, providing a compelling opportunity for investors.

ATEX Resources Inc. is a Toronto-based mining company focused on exploring the Valeriano Copper Gold Project in Chile. The project is situated within the emerging "Link Belt," connecting the El Indio High-Sulphidation Belt and the Maricunga Gold Porphyry Belt. Valeriano hosts a significant copper gold porphyry resource, with 1.41 billion tonnes at 0.67% CuEq, including a higher-grade core of 200 million tonnes at 0.84% CuEq, as reported in September 2023.

Interview with Senior Vice President of Exploration & Business Development, Ben Pullinger

Copper's Role in Electrification

Copper is essential for the generation, transmission and consumption of electricity. Its superior electrical conductivity, durability and efficiency make it a key component in renewable energy systems like wind and solar, as well as in the motors, batteries and charging infrastructure for electric vehicles (EVs).

As countries and corporations boost investments in decarbonization to meet aggressive emissions reduction targets, copper intensity in the economy is poised for significant growth. A recent study by S&P Global estimates that achieving global net-zero emissions by 2050 will require over 700 million EVs on the road and a 7x expansion in renewable energy capacity.

This electrification megatrend points to a doubling of global copper demand from 25Mt today to over 50Mt by 2035. According to Ben Pullinger, SVP of Exploration and Business Development at ATEX Resources, "We've all been expecting a move in the copper price like this for quite some time. So to actually see it starting to play out is pretty interesting."

Emerging Supply Gap

However, this demand surge comes at a time when the copper industry faces serious challenges growing supply. The average grade of operating copper mines globally has fallen by 30% over the past 15 years, while discoveries of new deposits have failed to keep pace with depletion.

Geologically, the low-hanging fruit in the copper space has already been picked. New projects are increasingly lower grade, smaller, deeper, and located in more challenging jurisdictions, requiring higher copper prices to incentivize development.

Obtaining environmental and social licenses is also a major obstacle, often delaying projects and adding costs. The time required to progress a new discovery to production has doubled from 10 to 20 years, disincentivizing investment and slowing the pipeline of new mines.

As a result, there are very few sizeable new copper projects in development globally that could be ready in time to meet the approaching demand wave from electrification later this decade. Industry experts are forecasting the emergence of a 8-10Mt supply gap by 2030, equivalent to nearly 40% of current mine supply.

Geopolitical Risks

This structural undersupply is further exacerbated by rising geopolitical risks around global copper production and trade flows. Over 60% of the world's copper resources are located in the increasingly unstable regions of Latin America, Africa and Southeast Asia.

In Chile and Peru, the top two producing countries accounting for 40% of global output, a shift towards resource nationalism has raised royalties and taxes on the mining sector. Chile is also facing its worst drought in decades, with water shortages forcing production curtailments.

At the same time, strained US-China relations threaten to disrupt copper concentrate and metal trade between the top supplying and consuming regions. Governments are increasingly viewing copper supply as a matter of national security and are looking to secure access through offtake agreements and direct investments.

Copper Price Outlook

This combination of robust demand growth, stagnant supply and elevated geopolitical risks points to a tight fundamental backdrop for the copper market over the next decade. Copper prices have already broken out to all-time highs above $5/lb in 2023, with Goldman Sachs forecasting average prices of $6.88/lb in 2024 and a long-term incentive price of $8.73/lb required to stimulate enough new mine supply.

"If you look at kind of in situ numbers, the initial value of a rock of a high grade core at Valeriano is around $80 per ton at $3.15. At $4, you're starting to get north of $90, and that's some pretty valuable rock," explains Pullinger. These expanding margins as well as the scarcity of investment opportunities in sizeable, long-life assets in attractive jurisdictions bodes well for valuations in the copper producer and developer space.

Conclusion

The global energy transition is rapidly approaching a potential choke point from a lack of copper supply. Current prices are likely still underestimating requirements longer-term. For investors, gaining exposure to competitively positioned producers and developers in stable jurisdictions offers significant upside participation to a structural bull market in a critical green metal. Active engagement in the sector is essential to identify attractive value propositions before the broader investment community recognizes the enormity of the task at hand to electrify the global economy.

The Investment Thesis for ATEX Resources

• Exposure to a rare, globally significant new copper development project with potential for over 1Bt of high-grade resources not currently reflected in the valuation
• Project substantially de-risked since 2022 through confirmation of key geological concepts; on track for major resource growth in 2023
• Straight-forward development path via block caving in a well-established mining district with clear permitting process and access to key infrastructure
• Strong management team with track record of value creation and strategic relationships to help develop and finance the project
• Well-funded for next phase of drilling and engineering to progress to a Preliminary Economic Assessment with ample news flow to re-rate the stock

Key Takeaways

• Copper demand is poised to surge over the next decade driven by electrification and the energy transition, with prices likely still underestimating requirements
• A lack of new mine development has set the stage for a major supply gap to emerge later this decade, signaling a structural bull market in copper
• Investing in well-positioned companies with world-class projects in attractive jurisdictions offers significant upside exposure to this megatrend
• ATEX Resources' Valeriano project in Chile is one of the only globally significant new copper discoveries in recent years not yet controlled by a major miner

Copper Market Analysis

The global energy transition is rapidly emerging as one of the most powerful macro forces reshaping the economy in the 21st century. Governments, corporations and investors have united in the mission to decarbonize and electrify to combat climate change, unleashing a wave of investment and technological innovation in clean energy not seen since the dawn of the oil age.

At the heart of this transition is a complete rebuilding of the world's energy infrastructure - from the way we generate, transmit, store and consume energy. Replacing fossil fuels with clean electricity in power grids, transportation, industries and buildings will require massive amounts of new metals and minerals to build wind and solar capacity, upgrade transmission networks, scale battery deployments and manufacture EVs.

Copper stands out as perhaps the most critical input to enable this transformation. As a key conduit for electricity, copper plays an essential role in renewable power systems, energy storage and consumption. As a result, Copper intensity and demand growth is poised to far outpace the overall economy in the coming decades. This has profound implications that are still underappreciated by policymakers and investors.

In the words of ATEX Resources' Ben Pullinger, "When you're exploring for copper and you see and listen to the rhetoric and hear all the news out there. I think we've all been expecting a move in the copper price like this for quite some time. So to actually see it starting to play out is pretty interesting..."