Encounter (ASX:ENR) share price rockets 30% on BHP copper joint-project

BHP will run the new project with Encounter maintaining a 25% stake.

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Rising mining ASX share price represented by man in hard hat making excited fists

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The Encounter Resources Ltd (ASX: ENR) share price is surging today. At the time of writing, shares in the mineral exploration company are trading for 17.5 cents each – up 29.63%.

The massive price rise comes after the company announced BHP Group Ltd (ASX: BHP) agreed to enter into a joint-venture agreement to develop a copper project in the Northern Territory.

Let's take a closer look at today's news.

Why the Encounter share price is rising

In a statement to the ASX, Encounter Resources said BHP has exercised an option under a previous agreement to jointly develop the Elliot Copper Project in the NT. BHP will own three-quarters of the endeavour while Encounter will own the remaining portion. This is providing BHP spends $22 million over 10 years on the site. The mining giant will also manage the site.

Investors are clearly loving the prospects for this joint-venture copper project with BHP, judging by today's Encounter share price action.

Management commentary

Encounter managing director Will Robinson said:

Copper sourced from sedimentary-hosted deposits is one of the fastest growing sources of high-grade copper in the world.

The potential for this region to host large sedimentary-hosted copper deposits is rapidly emerging and we are delighted to be teaming up with BHP to apply leading edge technologies in the search for Tier 1 copper deposits at Elliott. The outcomes of the jointly designed validation program at Elliott have been illuminating and bolstered the potential for the discovery of large sedimentary-hosted copper deposits under shallow cover in the NT.

Copper commodity price

Copper is currently trading for US$4.54 per pound on the commodities market according to the website Trading Economics. While it's down 2.7% this week, the metal's value has increased 6.1% this month and 29.0% since the beginning of the year. It should be noted copper was at an all-time high price of US$4.90 per pound two weeks ago and a near-record US$4.79 last week.

The increasing copper price could also be positively affecting Encounter shares today.

As Motley Fool has previously reported, copper demand has been surging recently due to a rebounding global economy and increasing demand for green technologies. Copper is an essential metal in the production of renewable energy technologies.

As also reported, supply of the reddish-brown metal is also down due to a lack of investment in copper production by large mining corporations, as well as tax hikes in Chile. One-quarter of all copper is mined in the South American nation. A mix of increasing demand and decreasing supply will generally increase the price of a good or service.

Encounter share price snapshot

Over the past 12-months, the Encounter share price has increased by 45.83% – the majority of which occurred today. However, since hitting a 9-year high of 33.5 cents per share in October last year, the company's value has fallen by almost 48%. Encounter Resources has a market capitalisation of $51.7 million.

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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