Marimaca Copper (MARI) - Chile Votes Against Constitutional Change

Marimaca Copper Corp. is a Canadian copper company, focused on the advancement of its Marimaca copper oxide project located in the Antofagasta region of Chile. The project is an open-pit, low capital and low-risk operation, boasting as the only major copper discovery globally in the last five years. The company, like various other Chilean mining companies, experienced relief as the country voted against a suggested new constitution. The now rejected constitution would have seen the nationalisation of mines in the country amongst other radical changes.

Marimaca Copper Corp. in August 2022 announced that Leonardo Hermosilla joined the company as the Vice President of Projects. Hermosilla has more than 30 years of experience in the international mining sector including mine development, construction and operational experience.

The company also announced that it had concluded with its Infill and MAMIX drilling campaigns on the 18th of August. The drill campaigns consisted of a total of 38,570 m of drilling through 177 drill holes, with the final assay results of the campaigns outstanding. Marimaca Copper Corp. also concluded its 2022 geotechnical drilling campaign which was executed parallel to the Infill and MAMIX drilling campaigns. The geotechnical drilling campaign consisted of 3,000 m of drilling and 13 diamond drill holes.

The company plans to publish an updated mineral resource estimate of the project at the end of Q34 2022. The mineral resource estimate will consist of all drilling data up to the end of June 2022, with drilling conducted thereafter planned to be incorporated in an MRE update scheduled for early 2023.

The company is currently underway completing a proof of concept study led by 5Q Technologies, which is aimed at evaluating the potential for improving and optimising the recovery of the deeper transitional material of the project’s MAMIX zone. The company has also completed its 2022 geotechnical diamond drilling campaign, which will be implemented towards its planned 2023 feasibility study.

Investing in Chile

The Chilean population on the 4th of September 2022, voted against the country’s proposed new constitution which would have seen the nationalisation of mines in the country amongst various other radical changes including stringent environmental regulations. The failure to outline any guarantees for mining property as well as the uncertainty regarding the implementation of the environmental legislation caused uncertainty in the investor markets.

The country on the 12th of September launched a plan to promote investment in the country and ease investor uncertainty through various tax breaks for copper producers aimed at facilitating a five percentage point increase in investment in 2023.

The plan includes public investment, better access to financing and the promotion of private investment through tax benefits. The Tax benefits include a USD$ 500 million tax credit fund for green businesses as well as reduced tax rates for smaller copper companies. New copper companies will also be exempt from a tax ad-valorem component for their first five years. The tax ad-valorem component will impose a 1% to 2% rate on mining companies with annual production rates of between 50,000 tons and 200,000 tons, with the rate increasing to between 1% to 7% for companies producing more than 200,000 tons. Locke believes that the new fiscal arrangement shows the country’s commitment to the mining industry as well as to its artisanal mining roots, he states:

“…the new proposal for the fiscal arrangement, which suggests absolutely they do consider the smaller producers to be slightly different and I think that's really a functionality. You have to remember that in Chile, there are still a lot of artisanal miners pirquineros, mining small scale projects and the government does not want to stop them from doing that, taking away their livelihood by overly taxing them.”

The investor concern regarding environmental legislation and the uncertainty regarding its implementation was amplified when the Chilean government rejected the environmental permit application of Anglo American’s Los Bronces copper mine due to a public outcry over its proximity to a glacier.

Locke however explains that Chile is not more focused on ESG than any other country, but rather that ESG factors are very location specific, he states:

“I think the focus on ESG and responsible development is fundamental to moving a project forward. If you're going to get financed, and you're going to deliver whether you agree with it or not, if you want to get financed to build a project, you have to be focused on these things. Because Chile is not any more or less onerous or focused than any other jurisdiction I've worked in, they all have their nuances that are different.”

Locke however states that the Marimaca Copper project is not severely affected by ESG legislation due to its location and little impact on ESG factors, he explains:

“We have no flora and fauna. We've done multiple baseline studies, we're not using groundwater, we're not using fresh water in development, we're using seawater. There is no livelihood, that we're resettling. There are no people, there's no farmland, there's nobody that we're going to have to up sticks and move and ruin their livelihood by building this mine. We don't impact any local populations. There are no towns near us other than Mejillones, which is 25 km away. There's no tourism to speak of in the area. There are no major tourist sites. We've done full archaeological surveys, there are no archaeological sites of any significance. All of that is factored into and I say, you know, the location is the advantage that we have, and it's nothing more than dumb luck as to the location being positive for us.”

Surviving in the mining environment

The last few years have seen the mining environment burdened with low commodity prices, a high inflationary environment and increases in ESG requirements and costs. The combination of these factors has led to various projects not being economically viable and as a result not entering production or being advanced. Locke explains that the mining environment has always been challenging but that as with previous cycles the environment will shift to a more positive environment. The onus is on an investor according to Locke to find a project which shows a return on investment at any commodity price, he states:

“…either commodity price catches up or the cost pressures fall and you come back to some sort of equilibrium that allows you to make a reasonable return on your investment capital. We know mining has always been a difficult business to make money in hugely capital-intensive long-lived assets. You're exposed to geopolitical risk, you're exposed to commodity price risk, and it's always been a challenging business to make money in. And I think therein lies the requirement to go out and find the best possible assets that you can invest in.”

The Marimaca project stands out amongst its peers according to Locke, due to its return on investment, low capital requirements and low operating costs enabling the project to withstand the fluctuation and low price of copper. Locke sums up the economic  resilience of the Marimaca copper project as follows:

“I mean, we are exceptional, we're a stand out in terms of return on invested capital. It doesn't matter what Copper price you use, our return on invested capital is significantly better than the vast majority of our development stage peers and that puts us in a really enviable position, a hugely defensive asset to weather the storms and actually get into production. Our location and our ability to get into production and circumvent or circumnavigate all of these permitting issues that everybody is facing are significantly better because of our location.”

Recent Activities

Marimaca Copper Corp. on the 22nd of August 2022 announced that Leonardo Hermosilla had joined the company as the new Vice President of Projects. Hermosilla has more than 30 years of experience in the international mining sector including the development, construction and operation of various mining projects. His previous experience includes serving as the director of projects and growth for Barrick Gold Corp. as well as his tenure as the Vice President of Projects for Kingsgate Consolidated Ltd. Hermosilla will be based in Chile and will provide senior technical leadership to the company as it advances the Marimaca Copper project.  

The company also announced in August that it had completed its 2022 infill and MAMIX drilling campaigns. The campaigns, which are aimed at expanding the project’s mineral resources, totalled 38,570 m and consisted of 177 drill holes. Marimaca Copper Corp. is underway with Geological interpretation and resource modelling for the project which will culminate in the release of an updated mineral resource estimate by late Q3 2022. The updated mineral resource estimate will consist of drilling data up to the 30th of June 2022.

The company is also underway with the negotiation of seawater supply to the project with various potential suppliers. The company plans to complete negotiations that will guarantee seawater supply to the project by the end of 2022.

Marimaca Copper Corp. is also completing a copper extraction concept study in collaboration with 5Q Technologies, a specialist mineral processing company based in Santiago, Chile. The study is aimed at improving and optimising the recovery of the deeper transitional material located in the MAMIX zone. The initial laboratory results are expected in the near term, which will allow the company to decide on a way forward which may include a larger sample size and further studies.

The company also concluded its 2022 geotechnical drilling campaign which was executed parallel to the Infill and MAMIX drilling campaigns. The geotechnical drilling campaign consisted of 3,000 m of drilling and 13 diamond drill holes. The data from the geotechnical drilling campaign will be used in the creation of the planned 2023 feasibility study of the project as well as in permitting submissions.

Future

Marimaca Copper Corp. envisioned the completion of 30,000 m of drilling in total at the project in 2022. The completion of geotechnical, Infill and MAMIX drilling campaigns resulted in the total amount of drilling completed being approximately 42,000 m. Locke explains that as the company encountered promising mineralisation results from its drilling campaigns it expanded its drilling programs:

“..we've expanded our drill programme twice on the basis of good results that we were getting around the peripheral of the pit and at depth. So, really, the expansion of the Marimaca Oxide project is now done.”

The company aims to release an updated Ni 43-101 compliant mineral resource by late Q3 2022, which will enable it to show to the market the project’s size and its growth since its base case 2020 preliminary economic assessment (PEA).

Locke explains that upon the release of the updated mineral resource, the company will decide upon its future strategy. He explains that Marimaca Copper Corp. must decide between continuing regional exploration or advancing the project to production. The regional exploration of the project will enable the company to grow the project’s mineral resources and may include the further raising of funds. The initiation of production at the Marimaca Copper project would enable the company to fund the regional exploration initiatives through the cash flow generated by the project, Locke explains:  

“…the discussion internally will be, as we always talk about the trade-off, do we want to spend more money exploring all of these regional targets or do we put our pedal to the metal and get the oxide project into production and then use cash flow to go out and explore? I think there's a happy medium there. We'll probably spend some money on it, depending on the sources of financing that we look at in the next 12 to 18 months.”

The culmination of the company’s exploration and metallurgical testing initiatives, the rejection of the new Chilean constitution by the country’s population and the project’s location results in Marimaca Copper Corp. possessing the potential to be a prominent mid-tier copper producer.

To find out more, go to the Marimaca Copper website