Wednesday 28th September 2016

Resource Clips

Everything In Position

Curis Resources Will Begin in-situ Arizona Copper Production by 2012

By Kevin Michael Grace

What do the collapse in the price of copper in 1999 and the collapse of the US housing market a decade later have in common? These are the circumstances that led to Curis Resources Ltd going from start-up in November 2010 to major copper producer by 2013.

The potential of copper mining in Florence, Pinal County, south-central Arizona, was recognized a half-century ago. After extensive geological work by Conoco, the property was bought by Magma in 1992 and then BHP in 1996. Three years and $60 million later, the Florence Copper Project was fully permitted and at the pre-production phase. Then, in 1999, copper reached a 60-year low of 60 cents.

Curis President Michael McPhie takes up the tale. “Our understanding is that a corporate decision was made by BHP at that time to sell many of their base-metal assets in North America that did not meet their continued investment criteria at a time of historically-low commodity prices. The Florence property, which was part of a 10,000-acre land package within an hour-and-half drive of Phoenix, was one of those. In 2001, it was sold to a large real estate developer in Arizona.”

Curis Resources Will Begin in-situ Arizona Copper Production by 2012

At that time, the Arizona real estate market was among the hottest in America. By 2006, however, prices had stalled, and a year later they were in freefall. Arizona was now Ground Zero of the housing crisis. And so the developer who planned to turn the BHP lands around Florence into subdivisions wanted out. “It took us three to four years to come to a reasonable deal for the Florence Copper Project lands,” McPhie says. “We acquired it at the end of 2009 for approximately $24 million.”

According to a 2010 NI 43-101 resource estimate, Florence contains, at a 0.05% total copper cut-off, 296 million tonnes copper measured, 133 million tonnes indicated (429 million tonnes measured and indicated at 0.331% total copper) and 93 million tonnes inferred. This works out to 2.84 billion pounds of copper measured and indicated, 496 million pounds inferred.

A 2010 preliminary economic assessment indicates, based on a $2.50 copper price, an after-tax US$360 million Net Present Value at a 7.5% discount rate, with an Internal Rate of Return of 30%. At $3.00 copper, the NPV escalates to $550 million with a 39% IRR. The mine has a projected 19-year life and an annual average production rate of 76.5 million pounds of LME grade copper cathode. The project’s initial capital costs are estimated to be US$237.8 million. McPhie comments, “An equivalent open-pit operation would be two or three times higher in terms of capital costs. We are bringing a very significant project online in the near term at a relatively modest cost with one of the lowest operating cost profiles of any mining project in the world.”

Florence will be minimally invasive of the land, because the copper will be extracted using a process called in-situ copper recovery. McPhie admits, “Although in-situ recovery technology has been around a long time and is used frequently in the extraction of other metals, it remains something that maybe isn’t as well known in the marketplace as more traditional open pit or underground mining methods.” In-situ (Latin for “in position”), is increasingly common in uranium mining. And Curis is an acronym for Copper (Cu)-Recovery-In-Situ. The process involves holes being drilled in the ore, which is then flooded with a leaching solution (in this case, a vinegar strength solution of less than 1% sulphuric acid in water). The copper is dissolved into solution and then pumped and collected at ground level. “It is done in a way that’s consistent with what people are looking for in terms of land use and fully protective of water quality,” McPhie declares. “This is a proven technology, and we are serious about being good environmental stewards.”

We’ll be one of the lowest cost producers in the world – Michael McPhie

Given that the in-situ method was planned and permitted by BHP, one would be forgiven in ascribing the rapid success of the Florence Copper Project under Curis management to nothing more than good luck. But this would ignore the fact that Curis is an HDI company (a controlling interest of 23%) and that it demonstrates all the competence associated with that organization. Russell Hallbauer, its Chairman, is CEO of Taseko Mines, a billion-dollar company with extensive expertise in copper. McPhie adds, “The linkage to Hunter Dickinson is of course important, but if you look at our management in Vancouver and our operating team on the ground in Arizona, what you find is decades of experience in financing and operating public companies and mining operations around the world.”

The permits acquired by BHP remain in place, but they need to be amended and updated by the Arizona government and the federal Environmental Protection Agency. This should be done in nine to 12 months. As for infrastructure, McPhie claims, “Of all the projects I’ve ever looked at, this one is probably the best served. There are two major power lines traversing the property and an active railway that travels within a few hundred feet at our front door, a major highway nearby, and we have all our required water rights in place.” Curis is debt free and has $18.5 million in cash, sufficient for the next 16 months. A feasibility study should be completed by the beginning of 4Q 2011. Phase 1 of development is set for early 2012, with full commercial production by the end of 2013/early 2014.

Florence is, McPhie concludes, a low-cost, high-profit venture. “We can produce a pound of copper for 68 cents, all taxes and royalties included. All in, with payback of capital and everything associated with it, we’re still producing copper for under $1 a pound. We’ll be one of the lowest-cost producers in the world. So we’re quite resilient to low market prices, which hopefully won’t come for a long time. Our net present value is based on copper at $2.50. So, obviously, at the higher prices we see today, it is an extraordinarily profitable opportunity.”

Straight out of the gate, Curis traded over $2 a share. Impressive, considering the company’s legal name was, until this week, PCI-1 Capital Corp, and the stock was trading under the symbol ICC. “We often joke,” McPhie relates, “that even my Dad wanted to buy stock in Curis, and he couldn’t find it.” Curis will begin trading on the TSXV under the symbol CUV on Wednesday, February 2. And then, “We are planning to graduate on to the main board of the TSX and later the NYSE Amex in the near future. We think we have a lot of growth and opportunity ahead of us.”

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