We’ve seen Gerardo Del Real and John Carl tease a little “Blue Water” junior copper miner a few times over the past year and a half, and I haven’t gotten around to covering the story… but we’ll correct that omission today. We’ve seen very similar promos and teases for this general idea since the Spring of 2023, and the general pitch (and most of the images) have been the same in all the different versions of the ad they’ve tried, but I’ll mostly pull quotes from the pitches we’ve seen most recently.

And I don’t want to spoil the surprise… but don’t worry, if you didn’t buy in 2023, when this ad started rolling, you haven’t really missed anything yet… the stock has had its ups and downs, but is within 10% or so of where it was when it was first touted by the Digest Publishing folks.

Ready to dig in?

Here’s how it’s teased on the order form:

“This Junior Miner’s “Blue Water” Tech Is Unlocking Billions in Copper

“America’s top companies are spending BIG to buy enough copper to support AI…

“If you’re holding shares of this All-American ‘Blue Water’ junior miner, you could make 730% or more.”

Gerardo Del Real is pulled in as the mining expert in the presentation, but the ad is signed by John Carl and Chris Curl these days, editors of the Digital Dispatch ($199/yr) newsletter they’re selling with this tease.

There are basically two parts of the pitch: First, that copper is going to be in huge demand thanks to global electrification, EVs, fixing the electric grid, AI demand, and just industrialization and development in general; and Second, that there aren’t any new big mines to find, so we need a technology to make mining more efficient, extracting copper from low-grade sources, like old tailings piles.

And, of course, that there’s “one tiny company” that’s doing the latter.

Here’s a little taste of the spiel, starting with the big picture prospects for copper:

“Nick Snowdon, Goldman Sachs Head of Metals, put it this way to Bloomberg:

‘The thing about the copper market is that we’ve never been in such an extreme set of fundamental circumstances. We’ve never had to go to end demand destruction pricing to achieve a rebalancing. The bull market of the 2000’s was nearly entirely solved by supply responses. And a very rapid increase in mine investment. That’s clearly not going to be the majority solver this time… So we don’t rule out that copper could be a [$25 or even $50 a pound.]’ ….

“You see, all of the low-hanging fruit has been picked.

“After 10,000 years of mining, all the easy-to-access high-grade copper has been dug up.

“As one industry insider put it to S&P Global:

“‘In the copper industry, you’ve got declining grades. So, there’s less copper per ton of ore that’s getting mined at operations these days. That’s not going to get better. Grades are going to continue to decline. Mining companies aren’t finding super deposits like they used to in the 20th century and even at the beginning of this one.'”

And then starting to talk up the “blue water” extraction technology…

“Almost every single human on the planet uses copper every single day.

“And for thousands of years miners could only get more of this metal by digging bigger and bigger holes in the ground.

“Blue water is that long-awaited breakthrough.

“Its powerful chemical formula can pull copper drip-by-drip out of the rock.

“And this is just the beginning of what it can do.

“It’s so effective at extraction that new versions of this blue water formula can now pull copper out from low-grade rock that was impossible to mine before.

“As one industry head put it:

‘It’s the equivalent of bringing on a new mine without having all the capital cost.’
— Freeport McMoRan President Kathleen Quirk”

Big promise, no? Don’t worry, it gets bigger…

“Blue water is easily the most important advancement in the history of copper mining.

“And as I’ll explain in detail over the next few minutes…

“One small junior resource company controls the recipe for this all-new blue water formula….

“More than 80% of the world’s copper is trapped in billions upon billions of tons of low-grade waste rock.

“So that means up ‘til now the overwhelming majority of the world’s copper couldn’t be reached.

“It’s what miners call a “stranded resource.”

“For hundreds of years it’s been piled into useless heaps, with all that copper stuck in rock that’s far too low-grade to justify sending to the smelter.

“Until now.

“This junior resource company’s cutting-edge chemical formula can seep through the waste rock and pull out the valuable copper.

“It’s a complete game changer for copper mining.”

And then we get into some specifics:

“This ‘Blue Water’ is so powerful that it can even pull copper out of low-grade rock that was once thought “impossible” to mine.

“And the junior mining company that owns this testing lab is working in a close, exclusive partnership with Rio Tinto, one of the biggest names in the mining space….

“And yet, big as they are, they’ve chosen this junior miner to spearhead this next-generation “Blue Water” copper program….

“This opportunity also includes several top-secret chemical solutions that Rio Tinto has been developing for over a decade — but hasn’t used commercially until this moment.”

More clues about the company and the project:

“I flew out to Phoenix, Arizona…

“And drove an hour south into the Sonoran Desert…

“Then donned a hard hat and vest.

“I had to sign my life away at the security building — they even have rules that require drinking only bottled water and backing into parking spaces.”

And the size of the project…

“When you consider that the blue water project I’m visiting is set to produce at least 1.27 billion pounds of copper over its operational life, that’s a lot of dollars coming through the door.

“At current prices, that’s already $5.8 billion.

“But if prices climb as high as Goldman Sachs predicts they could, that translates to at least ten times that… to $58 billion.

“What’s already a great investment becomes an outrageous, millionaire-making investment.”

And how easy it is to get started:

“This junior miner doesn’t have to go dig any new chalcopyrite out of the ground in order to turn a profit….

“Because mining companies have been pulling chalcopyrite out of the ground for over a century and putting it into useless piles.

“And this junior miner has carefully planned their debut of this next-generation copper leaching…

“By securing access to a unique stockpile in Arizona.

“223 million pounds of mining tailings….

“This place was shuttered in the 1970s, and they left behind millions and millions of pounds of waste rock… the mining tailings that at the time were thought to be ‘useless.’

“There are millions upon millions of dollars of copper in this pile.

“And that’s at current prices… it could easily be worth 2x, 3x, or even 4x that just a short time from now.”

And more detail:

“72% of the copper inside the rock can be recovered from this leaching process.

“There’s no need for a smelter, and no need for costly or expensive refinements.

“The blue water solution can be turned directly into sheets of copper using an electrical process that takes no time at all.”

The big argument is…

“What Fracking Did for Oil… Blue Water Will Do for Copper (And Without Any of the Nasty Side Effects!)”

And they show a bunch of video and photos of them around the site, demonstrating the size of the giant tailings dumps as well as the setup in their testing building, with tubes for trying different leaching chemicals with different ore.

But wait, there’s more!

“Rio Tinto has put millions of dollars into this company — they’re not going to let it fail.

“And there’s expansion capacity, beyond those piles of mining waste…

“This junior miner is finding NEW deposits of copper in the ground beneath our feet that will continue to expand the size of this opportunity….

“Pretty much every square inch around us has the potential to expand this opportunity.

“We’re seeing 1%, up to 2%. And even 3% high-grade copper in many places….

“And this part is also news: mining giant Ivanhoe Electric has just secured a property right across the street.

“The advanced Rio Tinto-owned formula they’re using can turn a pile of rocks into 99.99% pure copper in a matter of hours…

“They’re turning trash into treasure by squeezing copper out of waste rock that was once considered “impossible” to mine…

“And the higher the price of copper goes, the more money they’ll make.

“We can’t predict the future.

“But we CAN predict that the world’s largest tech companies need more copper if they’re going to achieve their goals.”

So what’s the stock, and what’s the story?

What they’re teasing here is a smallish company called Arizona Sonoran Copper Co (ASCU.TO in Canada, ASCUF OTC in the US), which has a market cap a bit above $100 million and is trying to redevelop and extend the Cactus Mine, about 50 miles outside of Phoenix (Cactus was a open pit mine that produced about 400 million pounds of copper from the early 1970s until the mid-1980s). Here’s how they describe that project:

“ASCU’s re-development plan targeting 86 ktpa over 31 years at the Cactus Mine Project is underpinned by a multi-billion-pound copper mineral resource base. The robust Preliminary Economic Assessment outlines an NPV8 of US$2,032, an IRR of 24% and payback period of 4.9 years with a copper price of $3.90/lb. Geologically, the project is situated at the convergence of three major porphyry copper belts and benefits from excellent onsite and nearby access to local infrastructure (including water, labour, power, highways and rail networks).”

The Rio Tinto connection is that Rio’s Nuton subsidiary has a joint venture option on that Cactus mine, and is presumably supplying the material for the “biological leach process” — here’s how Nuton describes that:

“At Nuton’s core is a biological leach process that transforms copper-bearing rock or mine waste into 99% pure copper cathode.

“Our leaching process starts by creating a heap – a very large pile of crushed rock. Depending on the site, that could be newly mined ore or previously mined rock that has been discarded as waste.

“Added to the heap is a carefully cultivated culture of micro-organisms – the natural catalyst of our technology. Once added, they multiply, harnessing energy from the minerals in the rock to grow and concentrate the copper.

“To support the microorganisms, we aerate the heap and add acidified water and, in some cases, naturally occurring minerals extracted from tailings waste. By creating favourable conditions for microorganism activity, we accelerate the copper leached from chalcopyrite in the heap material, enabling unparalleled copper recovery.”

The somewhat misleading part of the tease is that I don’t see any indication that Arizona Sonoran Copper has any particularly rights to that “blue water” leaching material or technology, beyond their partnership with Rio. Maybe they’re developing something proprietary on top of that, or will gain in some way from helping to prove the technology works in an active mine (assuming it does), but there’s no obvious indication that Arizona Sonoran “owns” the technology or has rights to it beyond whatever this particular project becomes. Which might be fine, this is a tiny company and their copper mine has the potential to be very large, but it does mean we should avoid taking a leap to “they own this blue water tech.”

And yes, this is the same company they’ve been similarly talking up for at least 18 months. And it is indeed a joint venture with Rio Tinto’s Nuton business, with Nuton providing some upfront funding and having the option to acquire up to 40% interest in the project… with some potential catalyst ahead, since the joint venture agreement specifies the release of a pre-feasibility study incorporating Nuton’s bioleaching technology by December 31 of this year, and the option for Rio Tinto/Nuton will be based on the net present value (NPV) of the project estimated in that prefeasibility study (PFS).

But that has now been pushed back a bit, it appears, with the latest press release about their current Preliminary Economic Analysis (PEA) including the update that the metallurgy and drilling work to support the new PFS will be completed in the first half of 2025. Partly for good reasons, because they’re now assessing the potential for a much larger mine than initially envisioned.

So if Rio Tinto decides to exercise that option, maybe by the end of next year, then presumably the project will be a bit more likely to be built, since they’ll have clear access to the leaching technology and some help from Rio Tinto with debt guarantees or other financing arrangements. The timeline is a prefeasibility study update in the first half of next year, permitting, a definitive feasibility study by the end of 2025, a construction decision in 2026, with financing agreements and 18-24 months of construction leading to first production in “late 2027/28” — as with all mining startups, I would go into your analysis assuming that the company is being pathologically optimistic with that timeline… but they are at least working on stuff right now, and raising enough money to get through to those important decisions over the next year or two.

Will it work out? Well, like many potential mining projects it sounds good on paper — the PEA indicates solid profitability as long as copper stays well above $2/lb, and a 31-year mine life which should easily support the initial $500 million or so of capex required to get started. The calculation of net present value from that PEA is now up to about $2 billion, much higher than the PFS earlier this year which estimated a NPV of about $500 million (partly because the project has grown to include another deposit area), so if that $2 billion range holds true with the PFS that they do in conjunction with Nuton, then Rio Tinto could end up paying hundreds of millions of dollars for their option. And importantly, they say they expect no challenges with permitting — it’s on private land, centered around an old open pit mine, with plenty of infrastructure around, and they have the water rights they need… and there’s some meaningful leverage to copper prices, their PEA estimates that the NPV of $2 billion at $3.90/lb copper could grow to more than $5 billion if copper goes to $6/lb.

The preliminary economic analysis doesn’t seem to focus much on those historical tailings and waste dumps, what they call the “Stockpile” is only about 2% of the ore going into that analysis… so it looks like the actual mining operations, of higher-grade ore, are more compelling… but the ore will presumably also use those leach pads and the solutions from Nuton.

So with the potential for a long-life mine, in an area where copper has been mined for generations, and with the potential for a strong partner whose technology improves the efficiency of production, there are clearly some optimistic scenarios if you start out with a market cap of only about $120 million, which is where Arizona Sonoran Copper sits these days. Well, maybe a bit more than that after their latest financing goes through (last week they agreed to sell another C$30 million worth of shares into the public markets, in an upsized offering at C$1.45 each, so that will increase the share count by about 18%). The price has remained close to that placement price so farr (ASCU was trading around C$1.50 when the financing was announced last week), so that’s a decent sign that there were investors willing to buy in at close to market prices, and that current investors are not upset about the dilution.

And yes, Nuton does believe that their bio-based leaching technology will improve the production, which presumably is that what “blue water” is — but this isn’t a technology that’s limited to the Arizona Sonoran mine, or to just one joint venture partner. They’re also testing similar material with another copper miner in Arizona, Excelsior (MIN.TO, EXMGF), with an option agreement/joint venture at their Johnson Camp, which uses an In Situ Recovery process (injecting that “blue water” into the earth, and pumping out the copper-rich fluid to be processed above ground). The other Rio/Nuton projects that they disclose are in Nevada (Lion Copper & Gold (LE.V, LCGMF)), Mexico (Frontera Copper at Cobre del Mayo), Chile (they’re being tested as one of the potential leaching technologies at Escondida), Peru (Regulus Resources’ (REG.V, RGLSF) AntaKori), and Argentina (Mcewen Copper’s Los Azules and Aldebaran Resources’ (ALDE.V, ADBRF) Altar).

Next year could change things up, with the release of their joint PFS with Nuton and perhaps Nuton’s decision about whether or not to exercise their option to buy in as a ~40% owner of the project, partly because we don’t know if incorporating Nuton’s tech more fully in the estimates will change the assumptions… but if you go into this assuming that the current preliminary economic analysis is rational, and that a joint venture option taken by a large partner like Rio could only help, then there’s clearly some potential for gain over the next couple years. I try to avoid investing in individual mining stocks, since I have little of the expertise needed and the capital requirements for these projects are so massive, but this one at least looks pretty reasonably compelling on paper — big, long-lived project, with reasonable operating costs, in a mining-friendly area without permitting hassles, and with a potentially strong joint venture partner. It might not work out — but it looks to me like you don’t need “blue water” to be magical for the project to make sense.

Ready to speculate on this junior copper miner? Let us know with a comment below… thanks for reading!