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Speaker: Steve Garwin, Hot Chili Chief Technical Advisor

Barry Fitzgerald | August 2023

Increasing supply challenges and soaring demand means copper price take-off must be close. And RareX eyes DSO fertiliser to help it grow.

BHP’s erudite vice president of market analysis and economics, Huw McKay, lobbed his commodity outlook report during the week alongside the company’s FY2023 profit report.

His report was interesting reading as always. The main findings from a short-term perspective were that there could be a balanced copper market emerging and that iron ore remains broadly balanced.

No surprise in the latter (price support is expected in a $US80-$US100t range) but the call on copper represents an upgrade from the call in February that the market was facing a short-term surplus with its price pressure implications.

The suggestion that the surplus which most were forecasting in the next couple of years could in fact be replaced by a balanced market does not carry the same importance for BHP in isolation as it does for the broader copper and equity markets, where negative sentiment reigns on all things copper and economic.

So it is a nice tonic for ASX-listed copper equities.

McKay made the point that better Chinese end-use demand, particularly for its green energy build-out, electric vehicles and housing completions (as distinct from housing starts where there is some real drama), and likely higher operational shortfalls at the world’s fleet of copper mines than most are forecasting, indicated the potential for a balanced copper market, or maybe just a small surplus.

As it is, the copper price is doing okay anyway at $US3.80/lb, even if it is below the June half year average of US$3.95/lb. But where things get really interesting for the metal is the medium term (FY2025-FY2026) to the long-term, (FY2027 and beyond).

McKay’s call on copper for the long-term remains super bullish, which is just as well as his bosses set out to spend as much $US20 billion expanding copper production in South Australia and Chile in coming years.

In short, McKay is forecasting “pronounced” (supply) deficits in the copper industry’s medium-term future. He did not say so, but that means a take-off in copper prices can’t be that far off, remembering that it is almost Christmas.

Actually, Mckay did reference a take-off from a demand perspective.

“These expected deficits are a joint function of historical under–investment in new primary supply and geological headwinds at existing operations intersecting with the ‘take–off’ of demand from copper–intensive energy transition spending that we expect will be a key feature of global industry dynamics as the final third of the 2020s arrives, if not earlier,” McKay said.

“Our confidence in medium term deficits is underpinned by both the demand and supply side, but if forced to elevate one over the other, supply headwinds would be the #1 motive force.

“Simply put, the supply response to supportive demand and price signals in the 2020s to date has been underwhelming, despite copper’s future-facing halo effect. And time is running very, very short to turn that story around.

“It is quite apparent that there is a very substantial disconnect between what needs to be done at the macro level to support both rising traditional demand and the exponential lift in metal needs implied by the energy transition and what is occurring at a micro level.”

McKay has previously estimated that in a “plausible upside” case for demand, the cumulative industry-wide growth capex bill out to 2030 (which will be here before we know it) could reach one–quarter of a trillion dollars.

Now he is saying that an updated analysis suggests that could be an under–estimate.

McKay added that the capex mountain presumes that there projects ready and waiting.

“The reality is that the industry’s collective set of development options is modest by comparison with prior decades, with the well–known lack of discoveries, the depth and complexity of what has been found, and the lengthening catalogue of above-ground risks and regulatory hurdles that confront project developers all adding to the challenges of bringing additional copper to end–users in a timely fashion,” he said.

“We reiterate our view that the price setting marginal tonne a decade hence will come from either a lower grade brownfield expansion in a mature jurisdiction, or a higher grade greenfield in a higher risk and/or emerging jurisdiction. None of these sources of metal are likely to come cheaply, easily – or, unfortunately, promptly.”


There is a message in all that for the junior copper explorers and would-developers out there – stick to your knitting and resist the temptation to go off on the lithium hunt, a sector BHP does not rate because of a lack of “rent” in coming years as supply grows hand over fist.

It is warming stuff for the copper juniors. They have being doing in tough in recent months as investors fret about the China slowdown.

But by BHP’s road map, their day in the sun will arrive around 2025 when the world wakes up to the profound supply deficits coming in the back third of the decade, something the market will front run by a couple of years by supporting both the copper producers and juniors.

Most of the likely candidates to benefit from that scenario have been mentioned here before and include names like Hot Chili (HCH), Coda (COD), Caravel (CVV) and Hammer (HMX). All have established copper resources with exploration upside.


A final message from McKay which is really a maths lesson. It has particular relevance to the current hysteria about China’s economy falling into a hole in the longer-term because of its ageing population, among other things.

While China has set a GDP growth target of 4.7% for this year, McKay reckons that come the 2030s, it will be a considerable stretch for anything in the 4s because of existing scale of the Chinese economy.

“Our mid case point estimates for growth in 2025, 2030, 2035 and 2050 are (rounded) 5%, 4¾%, 3½% and 1¾% respectively. But such is the underlying scale of the economy – in 2035 China will be roughly the same size as the US, India, Europe, and Japan put together today – 3½% growth in that year would be equivalent to $1¾ trillion of incremental new activity (PPP terms),” McKay said.

“That is roughly double the annual incremental change that China produced in the high–speed growth era of the mid–to–late 2000s.”

He said that it would also big enough to produce the equivalent of a new G20 member annually, being larger than the entire economies (in 2019) of Canada, Saudi Arabia, Australia, Thailand, Egypt, and Spain, just to name a few.

“Knowledge of that arithmetic is part of the reason why we are not perturbed that percentage rates of growth are bound to slow down. China is expected to remain the largest incremental volume contributor to global industrial value–added and fixed investment activity through the 2020s and many decades beyond: not just GDP,” McKay said.

That should mean something to long-term investors in the resources space. A confidence builder perhaps.


Talking about the big thematics out there, RareX (REE) has set out to ride two of the biggest – fertiliser to meet the need to feed the world and rare earths for global decarbonisation through electrification.

It has the underpinning phosphate-rare earths project to proceed down the dual carriageway – its large scale Cummins Range deposit some 135km from Halls Creek in Western Australia’s Kimberley region.

Phosphate – one of the three primary macronutrients for plant growth – is a relative late-comer to the Cummins Range story but is now emerging as a low capex/high returning “starter” project, with combined phosphate/rare earths to follow in later years.

Prices for rare earths (RE) have taken a beating in 2023, making it difficult for RE explorers/developers to gain traction in the market. Even so, broad agreement that demand/pricing for the magnet REs will take off in the second half of the decade remains.

RareX was a 3.8c stock on Thursday for a market cap of $26 million. So it is not as if it has the scale to stare down both the RE market and the equities market and get cracking on the RE component of the Cummins Range orebody in the here and now.

Think of a simple direct shipping (DSO) phosphate rock project as a bridge to becoming a RE producer of scale. As the company likes to put it, it is all about phosphate production enabling RE production. It is a neat bit of de-risking not available to most of the RE players on the ASX.

The plan began to take shape this week with the release of a scoping study into a rock phosphate direct shipping project with a 3-year life as the first stage of a three-stage development plan that moves into phosphate-RE concentrate in the second stage, and an upgraded third stage.

The second stage involves big bucks (an estimated $304m) but the strategic nature of RE and the north Australian location suggests grant funding is likely to be available. The forecast surge in RE demand/prices would also no doubt help.

But before then, a rock phosphate costing a doable $45m and producing 63,000t annually of contained phosphorus pentoxide annually could be chugging away earning a solid cashflow and establishing an operational base for the main event of large scale phosphate and RE production.

StockHead | August 2023

Hot Chili is looking to acquire the Cometa project to provide opportunities for more resource growth at Costa Fuego. Pic: Visoot Uthairam via Getty Images

Hot Chili is progressing its strategy of upscaling its already significant 2.8Mt copper, 2.6Moz gold Costa Fuego flagship project in Chile with a move to acquire the nearby Cometa asset. 

Hot Chili says Costa Fuego is already “one of the world’s lowest capital intensity major copper developments” and one of only a handful of projects outside of the control of major miners capable of delivering meaningful new copper supply this decade.

Its indicated resource of 725Mt grading 0.47% copper equivalent powers a punchy Preliminary Economic Assessment (PEA) – essentially a Scoping Study – which showcases attractive returns.

The PEA envisages a US$1.05bn project capable of producing 112,000t of copper equivalent (95,000t of copper and 49,000oz of gold) per annum over 14-years of a 16-year mine life.

Ove this time it would deliver revenue and free cash flow of US$13.52bn and US$3.28bn, respectively.

Post-tax net present value and internal rate of return – both measures of a project’s profitability – are estimated at US$1.1bn and 24% respectively.

Exploration, acquisitions to support production boost to 150,000tpa

Hot Chili (ASX:HCH) is now focused on upscaling Costa Fuego’s resource base to support an increase in the copper production profile to 150,000tpa ahead of its Pre-Feasibility Study, which is expected to be delivered in the first half of 2024.

Its planned acquisition of Bastion Minerals’ (ASX:BMO) Cometa project, 15km from Costa Fuego’s planned operating centre, is aimed at furthering this strategy via the discovery of further mineral deposits which could add supplemental feed or extend mine life.

Hot Chili ASX HCH
Location of the Cometa project. Pic: Supplied (HCH).

Acquisition terms

Under the letter of intent, the company has secured a 60-day exclusivity period to carry out due diligence with the intention to enter into a definitive option agreement for the acquisition of Cometa.

Hot Chili will pay Bastion US$100,000 in cash on the grant of the option and will pay a further US$200,000 within 12 months of its grant to keep the option in good standing.

Should the company exercise the option within 18 months of it being granted, it will have to pay Bastion US$2.4m in cash or an equal mix of cash and HCH shares.

This increases to US$3m if the decision is made after the initial 18 months and before the option expires 30 months from its grant.

An emerging copper monster

Hot Chili’s acquisition of the Cortadera project in early 2019 delivered multiple, very thick copper-gold porphyry hits that drastically changed the scale of what became the Costa Fuego project.

Not only does Cortadera account for the majority of resources at Costa Fuego – at 451Mt at 0.46% copper equivalent – but drilling also outside of the resource envelope continues to deliver more thick, copper-gold porphyry hits that strongly indicate there’s plenty of growth to come.

Expansion drilling continuing

The company is continuing a 30,000m expansion drilling campaign at Cortadera with nine reverse circulation holes totalling 2,010m completed so far.

Four of these drillholes have been completed across the western extension of the Cortadera porphyry resource, including one pre-collar in preparation for a deep diamond hole beneath Cuerpo 4.

Once the RC pre-collars are drilling, the RC rig is expected to begin a hydrogeological program at Cortadera from mid-September.

Hot Chili also plans to have one diamond drilling rig starting double shift drilling in September with preparations underway to bring a second rig online as it ramps up drilling across multiple exploration targets.

By Paydirt Media

Hot Chili has entered a binding letter of intent for 100% of the Cometa project to the south-east of Costa Fuego

Hot Chili Ltd continues to enlarge its footprint at the Costa Fuego copper-gold project in Chile, acquiring the 56sq km Cometa project directly adjacent to its keystone asset in August.

Hot Chili entered a binding letter of intent with Bastion Minerals Ltd for 100% of the Cometa project – 600km north of Santiago – just 25 days after starting a 30,000m expansion drilling program at Costa Fuego.

“We’ve had a long consultation strategy over a decade to build the Costa Fuego project,” Hot Chili managing director Christian Easterday told Paydirt. “The Cometa project is a known large-scale target, more an IOCG target at this stage, akin to Productora-style, but something that sits well within range of our central processing hub strategy.”

Cometa will be incorporated into Hot Chili’s wider plans to upscale Costa Fuego’s resource base and boost proposed copper production towards a 150,000 tpa target, before an expected PFS in 2024.

“Cometa is a greenfield project, which will give us a further exploration pipeline within our reach,” Easterday said.

A first-pass RC drill programme of 16 holes for 4,116m along the western edge of the Cortadera resource earlier in the year confirmed the potential for resource expansion. Easterday said the company was confident the prospect could provide Hot Chili with even more to talk about.

“Some of our drilling programme is dedicated to the last extremes of the PFS, which is largely complete,” Easterday said.

“We’ll be drilling a number of regional targets on top of expansion targets around the Cortadera resource which, in our opinion, is not finished yet. That drilling is related to a large pit assessment that we’ll undertake to determine the optimal path for our final PFS – whether its open pit then underground, or whether we might consider a higher strip ratio and a larger [open pit] operation.”

The company’s investor base had shown a lot of faith in Hot Chili’s Costa Fuego assets and Easterday said the new acquisition reflected a strategy of expansion.

“[The shareholder reaction] was positive but we do have a positive reaction to a lot of news flow,” Easterday said.

“We’ve confirmed the only 100mt-plus copper production project on the ASX outside BHP [Ltd], so I think the company’s taking strong steps towards being one of the premiere names on the ASX in terms of scale in the copper sector.

“Cometa is part of that strategy, to expand the project through the drill bit and to expand the project through acquisitions.”

Hot Chili commenced trading on the TSX in January 2022 and the OTCQX three months later. Easterday said it had been slow going on the North American exchanges, but conservative planning had paid off as the company fielded interest from Canadian institutional investors.

“The limited amount of liquidity we put over there has been largely focused into institutional hands,” Easterday said.

“In the initial TSX placement, interest came largely from about eight or nine Canadian funds and institutions as well as some retail spread. But recently what we’ve been seeing is a real transition in our trading, particularly since the PEA and the transaction.

“The royalty that we put over the project for about 1.1% effectively secured our next 12-18 months of funding. Since that, we’ve seen a change in the investor type and their buying.”

The Costa Fuego roadmap takes in a planned mineral resource upgrade in H1 2025, with development studies and resource growth ongoing throughout the year. A DFS in H1 2026 will precede FID in the second half of the year. Easterday was comfortable with Hot Chili’s scheduled milestones and confident in the company’s timing, coinciding with predicted commodity values.

“Our roadmap outlines a pretty logical pathway for FID in 2026 which we see as a pretty good time to get into [production],” Easterday said.

“We are, of course, using conservative consensus numbers. If we were to run out numbers at the same as other PEAs in the market – at $US8/lb – we’d probably have a project nearly twice the value.

“We have a $US1 billion-plus NPV on the project now and a much larger NPV if we start to see copper prices moving. So, we are pretty focused on expanding Costa Fuego to a 150,000 tpa production base, which exposes us to revenue profiles in the region of $US1.5 billion over the life of mine. That’s very important if you are trying to get into the first quartile of cash costs.”

Chile’s recent change in administration would not prove problematic for Hot Chili’s arrangements, Easterday was full of praise for the country’s robust political framework.

“Chile has gone through a well-publicised, two-year long constitutional debate
on taxation change and has largely emerged with no constitutional change and
a very limited increase in taxation,” Easterday said.

“That’s been very pleasing to see and that’s been a process of initiation from the new president and his side of parliament.

“The people of Chile spoke, and the protection of a two-third majority on constitutional change was very good. It meant that nothing crazy is happening regardless of who is in the President’s seat.”

– Michael Cameron


Surfs up as Hot Chili signs options to acquire two previously producing copper mine areas near Costa Fuego. Pic: via Getty Images.

Special Report: Flush with the ongoing success of its Costa Fuego development in Chile, Hot Chili is now moving to acquire two nearby copper mine areas that have never been drill tested before, despite previously reaching production.

With an indicated resource of 725Mt grading 0.47% copper equivalent underpinned by an attractive preliminary economic assessment (PEA) (a rough equivalent to a scoping study), Costa Fuego is rapidly emerging as one of the few projects in the world capable of delivering meaningful new copper supply that isn’t controlled by a major.

Under the PEA, Hot Chili (ASX:HCH) estimated the US$1.05bn project would be capable of producing 112,000t of copper equivalent (95,000t of copper and 49,000oz of gold) per annum over 14-years of a 16-year mine life.

Over this time, it would deliver revenue and free cash flow of US$13.52bn and US$3.28bn, respectively.

Post-tax net present value and internal rate of return – both measures of a project’s profitability – are estimated at US$1.1bn and 24% respectively.

While certainly attractive, the company is looking to increase its resource base to support an increase in Costa Fuego’s copper production profile to 150,000tpa ahead of its pre-feasibility study, which is expected to be delivered in the first half of 2024.

One of the first steps to achieve this objective was signing a binding letter of intent to acquire Bastion Minerals’ (ASX:BMO) ~56km2 Cometa project about 15km from Costa Fuego’s planned operating centre.

Historical producers offer “pipeline of opportunities” 

The new project options near Costa Fuego. Pic via Hot Chili

HCH’s latest option agreements to acquire the Marsellesa and Cordillera copper mine areas about 10km from the planned central processing hub at Costa Fuego are part of the company’s strategy to increase resources.

Both mine areas have been privately held and historically exploited for shallow copper oxide and copper sulphide material, but have never previously been drill tested.

Marsellesa measures 400x200m with mine workings exposing multiple zones of shallow-dipping, strata-bound (manto-style) copper mineralisation.

The smaller Cordillera mine workings expose outcropping porphyry copper mineralisation with well-developed stockwork and sheeted A and B style porphyry veining.

Along with Cometa, the new project additions provide the company with a pipeline of opportunities and additional optionality for the discovery of new mineral resources.

HCH will pay Marsellesa vendor Hermanos Pefaur up to US$1.35m and a 1% net smelter royalty (NSR) to acquire the project while Mr Arnaldo Del Campo – the holder of the concessions comprising Cordillera – could receive up to US$4m and a 1% NSR from underground operations and 1.5% NSR from open pit work if the option is exercised.


The expansion of Costa Fuego’s indicated resource is timely for Hot Chili ahead of the upcoming PFS. Pic via Getty Images

Special Report: Hot Chili’s Costa Fuego copper-gold project in Chile has seen a 6% increase in copper equivalent contained metal and a 9% increase for the higher-grade component of the indicated resource.

Hot Chili’s (ASX:HCH) Costa Fuego project comprises the Cortadera, Productora (including Alice) and San Antonio deposits, all of which have updated resource estimates and lie proximal to one another, around 600km north of Santiago.

Over 85% of Costa Fuego’s resource estimate is now classified as indicated following 24 months of material investment and 24.5km of drilling across the project tenure.

This included a mix of development activities such as metallurgical, geotechnical, resource expansion and exploration drilling – all designed to progress the PFS on Costa Fuego towards completion in H2 2024.

Total indicated resources now sit at 798Mt @ 0.45% copper equivalent for 2.9Mt copper, 2.6Moz gold and 12.9Moz silver as well as 68,000t molybdenum, while inferred resources have now topped 203Mt @ 0.31% copper equivalent for 0.5Mt copper, 0.4Moz gold, 2.4Moz silver and 12,000t molybdenum.

Cortadera resource grows another 13%

At Cortadera, which has again delivered the majority of resource growth for Costa Fuego, Hot Chili completed 43 reverse circulation (RC) and diamond drillhole (DD) tails for 17,000m of additional exploration and resource extension drilling.

Cortadera’s indicated resource tonnage has grown by a further 13%, supporting the June 2023 preliminary economic assessment which outlined Costa Fuego as having the potential to be one of the world’s lowest capital intensity major copper developments.

It now contains an indicated resource of 531Mt @ 0.44% copper equivalent and an inferred resource of 149Mt @ 0.29% copper equivalent.

Meanwhile, the Productora resource has been re-estimated following an additional 16 RC and DD exploration drillholes for 5,000m with an additional 2.8Moz of silver metal at 0.35g/t, which has now been incorporated into the copper equivalent contained metal.

Indicated resources at San Antonio now total 3Mt @ 0.71% copper equivalent, while the inferred resource sits at 2Mt @ 0.41% copper equivalent.

Regional water supply opportunity

In other news, Hot Chili has completed a water supply concept study for the Huasco valley region of Chile, confirming the potential for a large, multi-user desalination water supply network.

While Costa Fuego’s mine development plan considers the use of raw seawater for future processing, the water supply concept study confirms potential to also develop a large, multi-user, desalination water supply business.

It outlines an opportunity to develop a potentially 100% renewable energy driven desalination water business to supply community, agricultural and new mining demand of up to 3,700 litres per second (L/s) over the long-term.

Staged development scenarios were assessed considering the initial development of a 300L/s desalination plant being supported by potential foundation off-take partners.

The company holds the only active granted maritime water concession and most of the necessary permits to provide critical water access to the Huasco valley region following over a decade of permitting for the Costa Fuego project.

‘The perfect marriage’

“One, single, desalination water supplier, with the potential to unlock several significant mining investments, is a blueprint for the future of responsible water supply in the Atacama,” HCH managing director Christian Easterday says.

“This is an exciting opportunity to surface value for Hot Chili, following over 10 years of investment to obtain the necessary water concession and permits.

“It brings together the perfect marriage of economic, environment and social benefits for a wide range of stakeholders.”

By Bulls N’ Bears

An aerial view over Hot Chili’s coastal site for its potential regional desalination water project. Credit: File

Hot Chili has unveiled a six per cent boost to the indicated copper-gold resource at its Costa Fuego project in Chile’s Atacama region, about 600km north of the Santiago capital, giving it an enhanced total of 3.62 million tonnes of copper-equivalent.

The company has also today confirmed that is has completed a concept study confirming the potential for a whopping long-term, regional multi-user desalination water supply network. Management believes such a move could trigger substantial mining investment in the area.

Hot Chili says 85 per cent of its mineral resource estimate now sits in the indicated category, with its proposed open pit development accounting for 93 per cent of the resource and seven per cent comprising the underground mining scenario.

The total Costa Fuego resource in the indicated category is 798 million tonnes grading 0.45 per cent copper-equivalent for 2.9 million tonnes copper, 2.6 million ounces gold, 12.9 million ounces silver and 68,000 tonnes of molybdenum. The total resource classified as inferred is 203 million tonnes at 0.31 per cent copper-equivalent for 500,000 tonnes copper, 400,000 ounces gold, 2.4 million ounces silver and 12,000 tonnes molybdenum.

The company says a high-grade component, classified as being more than 0.6 per cent copper-equivalent, has been increased by nine per cent and contains indicated resources of 173 million tonnes at 0.78 per cent copper-equivalent for 1.1 million tonnes copper, 1 million ounces of gold, 4.3 million ounces silver and 25,000 tonnes molybdenum.

High-grade inferred resources total 7 million tonnes grading 0.74 per cent copper-equivalent for 40,000 tonnes copper, 30,000 ounces gold, 100,000 ounces of silver and 1000 tonnes molybdenum.

The Costa Fuego project comprises the Cortadera, Productora, Alice and San Antonio deposits and management says all have updated mineral resource estimates. All deposits are in close proximity and sit at low altitude, about 800m to 1000m.

The company says most of the resource is within the Cortadera deposit, which contains about 64 per cent of total indicated resources and 69 per cent of total inferred estimates.

The Productera deposit has about 33 per cent of the indicated and 30 per cent of the inferred resources. The Alice and San Antonio deposits make up the remaining balance of the resource.

Management says the resources update follows 24,500m of drilling across the project, comprising a mix of resource expansion and exploration drilling, in addition to metallurgical and geotechnical work. Management says it has a strong platform to deliver a maiden mineral reserve in its upcoming prefeasibility study (PFS) that is expected to be completed in the second half of this year.

Meanwhile, the company’s now-completed concept study for a staged water network development is based on an initial 300 litres per second scale and is supported by a group of potential founding offtakers. The study is assessing a potential 100 per cent renewable energy-driven desalination water project with the potential to supply agricultural, community and new mining demand in the Huasco valley region, near the Costa Fuego project, of up to 3700 litres per second.

The opportunity to develop a regional water business for the southern Atacama is exciting. It brings together the perfect marriage of economic, environment and social benefits for a wide range of stakeholders.

Hot Chili managing director and chief executive officer Christian Easterday

Easterday said the company had spent more than 10 years of investment to obtain the necessary water concession and permits. The region contains six major undeveloped copper projects and two new, large-scale copper discoveries, with all projects requiring desalinated water supply.

The company says it holds the only granted maritime water concession and most of the necessary permits to provide much-needed critical water to the region. It says the Chilean Government is actively encouraging investment in multi-user water networks in the region, with water scarcity being one of the biggest obstacles facing new global copper supply.

Hot Chili is engaging with several potential infrastructure partners and reviewing the potential for direct government support to assist with driving the project forward.

With its copper resource growing bigger and with an expected high demand for the red metal due to the increased push for renewable energy in the future, Hot Chili could be poised to really heat up the mining sector.