Desert Riches in the Pilbara — ‘Winu’ and High-Grade Copper Discovery

Desert Riches in the Pilbara — ‘Winu’ and High-Grade Copper Discovery

[Editor’s note: Your usual editor Shae Russell is currently away on annual leave and will be back on deck next week. While she is away, we will continue to publish her most popular articles from 2020, this one is from 31 July.]

There was movement at the station, for the word had passed around…

That the colt from old Regret had got away…

Whenever I hear of something leaking in the press that wasn’t meant to, I hear my mum reciting The Man from Snowy River in my head.

I’ve probably used that opening line as a headline more than once.

However, the poem’s start dances in my head for a good reason.

Because it aptly describes what happens when a secret gets out. Word passes around.

Of course, how word spreads depends on what you read and who you talk to.

Over two years ago I caught wind of something up in the Pilbara.

But not because of its iron ore riches…

Whispers were abound that gold was being found in the area.

But that wasn’t the only secret in the desert.

Months earlier there was an enormous mining camp caught on satellite.

And word had gotten around that it was something big.

Nearology out in the Pilbara

The Pilbara was solely known for its iron ore riches.

In fact, it’s the discovery of the Hammersley Basin in the 1960s that ended Australia’s embargo on iron ore. (From the 1930s to the 1960s it was deemed a critical mineral because we thought it was in short supply — we’ll delve into the history lesson another time.)

And for decades almost everyone thought the Pilbara was only rich for iron ore and other bulk minerals.

The eastern fringe of the Pilbara is known as the Paterson Province. That’s where the enormous Newcrest-owned Telfer gold mine sits.

Since the discovery of Telfer there’s been many attempts at trying to find gold in these parts. The Pilbara’s got the sort of rocks as old as time itself.

In late 2017, a bunch of people set up a mining camp on the eastern fringes of the Pilbara. Some 120km north of Telfer, or 130km north. The exact distance depended on who you spoke to.

Of course, we didn’t find this out through an ASX update.

Satellite imagery showed there was what looked like a 70-person strong ‘mining exploration’ camp on the eastern fringes of the Pilbara.

Make no mistake, that’s a massive exploration team.

But who would set something up that big an eight-hour drive from Port Hedland?

Initially no one knew which mining company was behind the camp.

However, due to the sheer size of the team, it was clearly not a tiny explorer. Juniors just don’t have the funds or people power to set something up that big.

Much to their disdain I’m sure, Rio Tinto Ltd [ASX:RIO] were outed as the explorers of the area.

The importance of the camp was confirmed, when in early 2018 a gravel airstrip was confirmed in the area.

Mining watchers, analysts, and punters all agreed — it must be big.

A little over two years after the tents had been pitched, Rio confirmed that out of the 20 drillholes sunk, almost all of them showed mineralisation of copper, gold, and silver…

Biggest find in 25 years

This week, us mere mortals not in the mining boardrooms, got a look at what they’ve been working on.

Turns out, the site now known as ‘Winu’ could be Rio’s biggest discovery of the past 25 years.

Early data suggests it’ll have a relatively high-grade copper section and it’s shaping up to be a shallow open-pit mine.

Why does that matter?

Because it means it’ll be cheaper to run. To boot, it’s a ‘copper-gold-silver’ (Cu-Au-Ag) deposit. Meaning it’ll mine precious metals as a by-product of copper mining.

But more to the point, Rio were able to snaffle up several licences in the area. Meaning the Winu plot could turn out to be many small mines. And Rio insist that only 2% of the total tenements in the area have been explored.

But more imperatively, it’s finding a potentially large resource of copper that’s incredibly important. Not only that, there’s a chance that this discovery will be up and running by 2023.

That’s less than half the average 15 years that S&P Global reckons it takes to get a copper mine online.

The real question is, why should investors care what Rio is up to. After all, isn’t that the point of their business? Find the dirt. Dig up the dirt, sell the dirt…

That’s true. That’s what miners are meant to do.

Yet what’s happening with Winu is different to years gone by. And investors should pay attention to the clues from the discovery.

For starters, large mining giants in Australia traditionally don’t like spending up big on ‘greenfield’ exploration. That’s the phrase used to describe an area that’s never been explored before.

They prefer to stick to brownfield sites (either old or retired mines). They either like to revive them by digging deeper or wider. There’s an old saying, the best place to find gold is next to a gold mine. This can apply to minerals of all kinds.

In addition, shareholders of mining giants tend to not like the exploration risk that comes with exploring.

So, the first takeaway for investors here is that an ASX-listed mining giant broke ranks. Top brass decided that green field exploration was worth the risk for the potential reward.

But there’s a bigger picture here.

As investors grapple with how to look ahead in a COVID-ridden and central bank-manipulated investing backdrop, how to grow your wealth is becoming increasingly fraught.

Rio’s move tells us that exploration is going to become an important spend for mining companies going forward. Some companies are forward-looking as well. Spending up big on the minerals that will be in short supply in years to come.

They aren’t interested in what we need today, but about how we can ensure they have what we’ll need 10 years from now.

The final takeaway? Watch even more companies flock to this vastly unexplored part of Australia.

And that’s exactly what investors should take note of.


Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia

PS: Our publication The Daily Reckoning is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX.  Learn all about it here.