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Peako expands East Kimberley footprint targeting looming copper supply gap

Peako Ltd. has applied to expand its tenement package to 1,200 square kilometers in Western Australia's Halls Creek Province, which it believes to be the last of Australia's copper provinces that is neither tightly held nor too mature.

The company announced May 30 it had applied for new exploration ground where it is developing a volcanic hosted massive sulfide, or VHMS, exploration pipeline in the East Kimberley to leverage from what analysts believe to be an impending global copper supply shortfall.

The past year has seen a frenzy of juniors picking up ground around where Rio Tinto was rumored to have made a discovery in Western Australia's Paterson Province, which was eventually confirmed in February, and around the mineralized system BHP Group discovered near South Australia's Olympic Dam in November 2018.

Yet Peako pointed out in a map, reproduced below, that exploration in the Halls Creek Province has "lagged behind" others in Australia like the Stuart Shelf which hosts Olympic Dam, Queensland's Mount Isa Inlier which hosts Ernest Henry and the Northern Territory's McArthur Basin.

The map also included the area where the Bryah, Yerrida and Eariaheedy basins lie, where DeGrussa lies, and the Paterson.

SNL Image

Exploration geologist Darryl Clark, who joined Peako as a director in March, said the company has two VHMS targets that have proven copper mineralization that need more modern exploration techniques applied.

He said that while BHP and others explored the Kimberley for copper in the past, the historic geological reports from that work revealed potential but their focus invariably shifted elsewhere when discoveries were made in other jurisdictions.

Clark said one of the reasons the company was drawn to VHMS-style mineralization was the example set by Sandfire Resources NL, which brought its DeGrussa mine into production within three years of discovery, unlike many of the world's bigger porphyries that often take a decade or more.

"The lesson Sandfire taught us is that, in a very short about of time, you can prove up VHMS-style mineralization and with a low CapEx can get them into production quite quickly," Clark told S&P Global Market Intelligence. This would allow the company to time the project to an expected spike in copper prices.

Morgan Stanley has listed copper as its top pick among metals in March, expecting the red metal to be in deficit to the tune of 406,000 tonne this year and 187,000 tonnes in 2020.

The bank cited supply issues from Glencore PLC slashing production at its Mutanda plant in the Democratic Republic of the Congo, a two-month road blockade at MMG Ltd.’s Las Bambas mine in Peru and rains in northern Chile at the start of this year.

Morgan Stanley sees copper prices rising above US$3 per pound by the end of this year or the start of 2020, while financial services firm Bell Potter believes it will cross that mark by mid-2020.