Interview with Christian Ervin Easterday, Managing Director & CEO of Hot Chili Ltd.

Our previous interview: https://www.cruxinvestor.com/posts/hot-chili-asxhch-copper-supply-crunch-meets-surging-demand-5505

Recording date: 3rd October 2024

Hot Chili Limited is emerging as a compelling investment opportunity in the copper mining sector, strategically positioned to capitalize on the growing global demand for copper. The company's flagship Costa Fuego copper-gold project on the Chilean coastline stands out as a large-scale, low-cost development with significant potential to become a major player in the copper market.

Costa Fuego boasts impressive production projections of approximately 95,000 tons of copper and 50,000 ounces of gold annually, with a current estimated mine life of 16 years. This output places Hot Chili among the top five large-scale copper developers globally, outside of major mining companies. The project's coastal location provides a crucial competitive advantage, significantly reducing capital and operational costs compared to high-altitude Andean projects.

CEO Christian Easterday emphasizes the project's unique position: "There are only five projects that are scaled at 100,000 tons per annum of fine copper production globally outside of the control of majors." This scarcity of large-scale, independent copper projects enhances Costa Fuego's strategic value in a market facing potential supply shortages.

Hot Chili's development timeline is well-advanced, with the company preparing to submit its environmental impact assessment in mid-2024. This progress puts Hot Chili ahead of many peers in the permitting process, targeting potential production by late 2028.

A key strength of Hot Chili's strategy is its strategic partnership with Glencore, which includes an offtake agreement for 60% of Costa Fuego's production for the first eight years. Importantly, the company has retained 40% of its offtake uncommitted, providing flexibility and potential upside as copper market dynamics evolve.

In addition to its core copper project, Hot Chili has developed Huasco Water, a potentially valuable water supply business. This subsidiary could not only reduce the project's water infrastructure costs but also represent a significant monetization opportunity to help fund the main copper project development.

Financially, Hot Chili is well-positioned with A$30 million in hand to advance its prefeasibility studies and environmental assessments. The company is developing a multi-faceted funding strategy for the estimated $1 billion capital cost, potentially including monetization of Huasco Water, streaming agreements, additional offtake deals, and traditional project finance.

The company's development timeline aligns well with projected supply-demand dynamics in the copper market. Many analysts anticipate a significant supply deficit in coming years, driven by growing demand from electrification and renewable energy sectors, coupled with a lack of new large-scale projects coming online. For investors, Hot Chili offers exposure to a large-scale copper development project with several key advantages: low capital intensity, advanced permitting status, strategic partnerships, and innovative approaches to infrastructure development. The company's progress on permitting, partnerships, and funding strategies demonstrates a clear path towards project development.

As the global demand for copper continues to grow, driven by the green energy transition and infrastructure development, well-positioned projects like Costa Fuego are likely to attract significant interest. Hot Chili's combination of scale, advanced development status, and potential for value creation merits serious consideration for investors seeking exposure to the copper market.

View Hot Chili's company profile: https://www.cruxinvestor.com/companies/hot-chili-limited

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