The KGL Resources Ltd (ASX: KGL) share price could soon retest its 2020 high after it issued a resource upgrade for the Jervois Copper Project. Shares in the explorer surged 35.3% to 23 cents in morning trade when the All Ordinaries (Index:^AORD) (ASX:XAO) and the S&P/ASX 200 Index (Index:^AXJO) struggled to stay in the black.
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Shares in the explorer surged 35.3% to 23 cents in morning trade when the All Ordinaries (Index:^AORD) (ASX:XAO) and the S&P/ASX 200 Index (Index:^AXJO) struggled to stay in the black.
The overnight jump in the copper price is helping the sector outperform the broader market. The OZ Minerals Limited (ASX: OZL) share price and BHP Group Ltd (ASX: BHP) share price gaining 0.5% each, but its KGL that’s being celebrated today.
KGL share price jumps on copper upgrade
Management significantly increased its copper estimates for its wholly-owned project in Northern Australia.
The copper grade doubled to 2.03% from 1.07%. KGL also reported a 30%increase in contained copper to 426,200 tonnes associated with a 31%reduction in the resource tonnage.
The project is also deemed to hold 21.4 million ounces of silver and 175,700 ounces of gold. Given the high prices of both metals, they will go a long way in lowering the costs of extracting the copper.
KGL also noted an increased confidence in the Jervois resource with 68% now in the Indicated Resource category.
Jervois looking better than thought
“We committed to a new strategy of concentrating on understanding the geological structures. State of the art technologies were employed to plan efficient drilling that would confirm the structures,” said KGL chair Denis Wood.
“Ultimately, this resource outcome – 30% more copper, a near doubling of grade and greater confidence levels – should have a positive impact on the mining and processing cost.
“A pre-feasibility study, including an Ore Reserve based on this Resource Estimate, and other project planning work is now being completed and is expected to be ready for release during the fourth quarter of 2020.”
The resource update includes the three main deposits considered for development –Reward, Rockface and Bellbird. Resources at Reward South will be re-assessed in the future.
Copper benefiting from multiple tailwinds
The outlook for copper looks positive for 2021 as output from the world’s largest copper producing mine, Escondida, is hampered by the COVID-19 outbreak in Chile.
Other significant copper projects have also suffered setbacks and supply of the red metal could tighten. The imbalance is happening at a time demand is rebounding.
Global factory output is recovering strongly after the sudden hit from the pandemic. Copper demand is closely linked to industrial activity.
What’s more, the trend towards electrification of vehicles will put even greater pressure on supplies. Electric vehicles use three times more copper than a conventional vehicle.
Despite today’s big rally, the KGL share price lost around 18% of its value over the past year.
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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and OZ Minerals Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.