Rex Minerals (RXM) - Copper Construction Looking at Financing Options

Rex Minerals is an ASX-listed mineral exploration and development company. The company has assets in South Australia and Nevada, USA. The Hillside Project is the company's flagship asset,-based in the Yorke Peninsula, South Australia. This project is planned as an open mine with a concentrator. It has a 13-year minimum mine life and over this time it will produce 468,000 metric tons of copper and 339,000 ozs of gold in concentrate form.

Matt Gordon caught up with Richard Laufmann, CEO and Managing Director, Rex Minerals. Richard is a founding member of the company. He previously served as the CEO of Indophil Resources. He also worked in the capacity of CEO at Ballarat Goldfields. He is a mining engineer with broad experience within the resources sector, specializing in copper, gold, and nickel. His educational credentials include a graduate degree from the WA School of Mines. Richard is a former Chairman of the State Council of the Minerals Council of Australia (Victorian division). Richard has invested $1M into Rex Minerals.

Company Overview

Rex Minerals is a gold and copper explorer with strategically placed gold prospects in mineral-rich Nevada and a copper-gold project in South Australia. The company was founded in 2007 and is headquartered in South Australia. Rex Hillside (Property) Pty Ltd, Rex Minerals (Sa) Pty Ltd, Hog Ranch Group Pty Ltd, Rex Minerals (Iron Ore) Pty Ltd, Hog Ranch USA Pty Ltd, and Hog Ranch Minerals Inc are the company's subsidiaries.

Rex Minerals started out as an exploration company and has been successful in making significant discoveries in both South Australia and Nevada.

A Newly-Appointed Board

The company repopulated its board in the past year. It now consists of members specializing in operations and construction. The board was reappointed to fund and build a larger project.

Rex Minerals appointed Ian Smith as its Chairman. Ian previously served as the CEO at Newcrest. He is credited with running Olympic Dam in South Australia. He previously worked with Rio Tinto and Western Mining.

The company appointed Greg Robinson as an Independent Non-executive Director. Greg previously served as a CFO and CEO at Newcrest and has also worked with BHP and Merrill Lynch.

Andrew Seaton joined Rex Minerals on 1st December 2021 as a Director. He is the CEO at Australian Naval Infrastructure and was a CFO at Santos for 9 years.

Ron Douglas is an Executive Director at Rex Minerals. He has been involved with the 5-6 main copper builds in the world including the Carrapateena project in South Australia.

Amber Rivamonte, the CFO of Rex Minerals was recently appointed as an Executive Director of Finance.

Cash Position

Rex Minerals was initially funded by the two co-founders. Following this, the company put together an asset base before launching an IPO.

The company strategically raised $50M mid-year. This capital raise was a part of the company's pre-development goals for an aggressive drill program on its Hillside Development project. The company was successful in moving its institutional investor base from 5% to 25% within a span of 18 months. The management holds 10% of the company's stake.

The company is looking for investors interested in the copper thematic. It managed the entirety of the investments within Australia through local support. It is working with Euroz Hartleys and Macquarie Capital (Australia). Rex Minerals has bank-backed funding along with venture capital opportunities, giving it multiple options when it comes to financing.

The Hillside Project

The Hillside Project is based out of the Yorke Peninsula in South Australia. The project was discovered back in 2008. By 2015, Rex Minerals had an ore reserve statement and a Feasibility Study for a 500,000Mt reserve on a 2Mt copper resource. This comes out to a 1.4Moz, 2Mt copper resource.

The company is currently planning for mining at 6Mt/year, producing 35,000t copper for the first 13 years of the mine, stage one of the operation.

Rex Minerals recently upgraded its reserves to 1Mt. It has a thickness of 50m-90m with grades ranging from 0.7% to 3%. The company anticipates that the 1Mt reserve could extend the mine life to 30 years, stage 2 of the operation.

The company has drilled up to a depth of 700m. For comparison, the high profile Olympic Dam and Carrapateena deposits in the same vicinity start 500m below the surface. The company is not required to cover extensive ground at its Hillside project, which is a huge advantage.

Additionally, the company has benefitted from ongoing infrastructure developments in the region including highways, power lines, and water lines. The company is extending these water and power lines to its Hillside site. The proximity to Port Adelaide further improves the logistics of the operation.

Rex Minerals plans to carry out coarse grinding to process the Hillside material. This provides the opportunity to increase the throughput from 6Mt to 8Mt. This component or treatment is planned for year 2 of the operations and will not require a significant investment.

The company plans to drill deeper than 700m to demonstrate that the resource is constrained at this time only due to a lack of depth-based drilling. This project has a significant upside even before further drilling within the license area. The Hillside project is wholly-owned, fully permitted, and ready to enter production, and is currently undergoing financing making it a rare project in the copper industry. The company's major focus is to enter production at the earliest.

Rex Minerals is currently seeking an APCM contractor along with EPS (Enhanced Production Scheduler) pricing in the market. The company is looking to build its capacity ahead of time through an engineering firm to meet the planned delivery capacity in the future.

The Hillside Project is ESG (Environmental, Social, and Governance) compliant. Copper was previously priced at AUD$3 providing a $16 IRR (Internal Rate of Return) for the company. Currently, copper is priced at US$4.50 and the company's IRR has crossed the $25 mark. The company has an all-in sustaining cost of $1.61, and once the company enters production, its all-in costs will drop to the bottom half of the cost curve.

The Hog Ranch Property

The Hog Ranch Property was previously mined by Western Mining Corporation, with 3-4 small pits, making it a 1Mt/year producer. It was owned by WMC for 4 years before the company ceased operations in North America. Rex Minerals acquired Hog Ranch in August 2019.

Rex Minerals analyzed the WMC drill hole database at the property, featuring 2,500 drill holes. This was followed by an in-depth analysis by the company's geologists, it was found that the property featured a broad footprint.

The company was able to grow this resource from 0 to 2.2Moz within a span of 18 months. It initially tested the site and was successful in achieving 60% metallurgical recoveries in 5 days and 84% recoveries in 22 days at a 1.5-inch crush site.

Following this, the company worked towards gaining a better understanding of the underlying geology of the deposit. It appointed the previous geologist who was responsible for running the pits for Western Mining's operations. The geologist had previously carried out a mapping survey along with an in-depth geological interpretation. Following this, the company carried out a magnetic survey along with a hyper-spectral survey. Next, the company redid the geochemical survey and analyzed the existing drill holes. After realizing the potential for the deposit, the company quadrupled its licensing area at the property.

Rex Minerals is looking to grow the resource to a 2Moz-4Moz supply. Additionally, it seeks to demonstrate the presence of a even larger field. The company has established a cut-off grades of 0.6g for 1Moz. It ran a study at 0.5g due to a low strip ratio of 0.5:1. At 0.5g, the company's all-in costs are under $10. Due to the higher power costs, the company anticipates that the pricing would be in the $50/oz range.

Drill Results

Rex Minerals crushed 1.5 inches of screen agglomerate stack at the deposit. Being a shallow oxide project, 80% of the historical drilling at this property was under 75m from the surface. The company drilled 4 holes based on the model and found 3 high prospect targets.

The 3 targets feature 111m at 0.8g copper grades. The company also has an additional intersection uncovered through geological targeting and geophysics featuring 56m at 22g and 114m at 0.63g. The copper grades average at 0.45g and have the potential to generate substantial revenue.

The company has also drilled multiple holes in the current operating area. Following the previous resource update, the company hit 90m at 1.3g, 50m at 1.35g, and 210m at 0.66g at a thickness of 0.25km.

The company plans to conclude the current phase of the drill program before the end of 2021. This program has up to 14 holes across 3 target areas. The completion of this program will enable the company to plan the next drill targets. The company will not carry out drill operations during the snow season due to significantly higher costs. Following this, analysts believe the company plans to either monetize the resource or bring in a JV (Joint Venture) partner to fund project development.

M&A Considerations

Rex Minerals is open to the possibility of a potential M&A (Mergers and Acquisitions). The company might either spin off the project into a separate entity through a North American listing. The company is open to either a partnership or an outright take-off for its asset, analysts believe.

ESG Component

The EU (European Union) recently published a report during COP26 (Glasgow Climate Change Conference) that copper will be responsible for 25% of the total CO2 reduction. Rex Minerals being a copper producer will directly benefit from this announcement.

As 60% of the power in South Australia originates from renewable sources, Rex Minerals construction at Hillside will feature up to 70% renewable energy from the start. Since the asset's region already has a well-built infrastructure, the company won't require additional construction, further bringing down its overall carbon footprint. This would also lead to significant carbon credits for the company.

Rex Minerals anticipates that each metric ton of copper produced will save around 107,000t CO2. It is dedicated to a strong ESG (Environmental, Social, and Governance) compliant operation. The company's Nevada asset is based on flat farmland with 30cm yearly rainfall. The area does not house any endangered species. This ensures that the surrounding environment won't be harmed by copper mining acid drainage. Additionally, the company is encapsulating the resultant acid through a proven 10:1 acid neutralizing material.

The ocean is located 1km from the Hillside project and is under planning for one of the biggest pumped hydro schemes on the East Coast of Australia. This would also serve as a part of the future battery network.

Since Rex Minerals is looking to use coarse grinding for material processing, the Hillside operation will use significantly less energy and water, further bringing down the carbon footprint. The company also has a strong reforestation program at parts of its mine. This enables the company to continue rehabilitating the area during construction.

The company is working closely with ESG specialists to further improve its carbon profile. The company is factoring in payment to the Australian government in Carbon Credit Offset Units, leading to a regulated project. These initiatives collectively demonstrate Rex Minerals' inclination towards developing an ESG-friendly and sustainable operation.

To find out more, go to the Rex Minerals Website