Wednesday, 25 July 2012

Curis Resources set for fast pace development of Florence copper project, expects improved recoveries

Curis Resources (TSE:CUV) has a number of significant milestones to look forward to for its Florence copper project in Arizona over the next year, with the miner almost done wrapping up the permitting process for phase 1 operations at the site.
The company's CEO, Michael McPhie, says two primary operating permits are required for phase 1.  BHP Copper, the previous owner, secured full commercial operating permits for the project back in the late 1990s, and since that time Curis has been working with state and federal agencies to amend and update these for current operations.
The junior miner has already secured critical air, land and water permits for the project and the remaining state and federal permits for phase 1 are expected in the near term.
"It's really quite an exciting time for us," says McPhie. "We're trying to keep our heads down and get the final steps completed so we can begin construction in the weeks ahead."
The project, which is located in Central Arizona, hosts a measured and indicated oxide copper resource of 429 million tonnes grading 0.33 percent copper at a cut-off of 0.05 percent. It was previously owned by BHP Copper, who received all major operating permits necessary for commercial production of copper by in-situ recovery methods in 1998.
Once the updated state Aquifer Protection Permit (APP) and the federal Underground Injection Control (UIC)   permits are approved in the coming weeks, Curis can develop a 24 well injection and copper recovery system and a "state of the art solvent extraction electro-winning plant" - otherwise known as phase 1 operations - with this production test facility (PTF) phase expected to last 18 months.
McPhie says that Curis had a public open house two weeks ago with regards to the state permit approval, which went "very, very well", with "lots of support shown from the community".
Construction of the in-situ copper recovery (ISR) well field and plant is anticipated to start in the third quarter, following the expected permit approval sometime this summer, with initial copper cathode production slated for early 2013.
McPhie notes that none of the permits needed are environmental assessments, with air and water approvals already in place. Curis holds sufficient water rights  for its flagship copper property, which allows the company to utilize groundwater for in-situ copper recovery.  As the majority of water used at Florence will be recycled, actual use of water is low in comparison to surrounding agricultural and related activities.
There are two key factors that limit the water used in the deposit-area.  The first is a 20-40 foot thick impermeable clay layer within the overburden about 60 to 100 feet above the top of bedrock that contains the copper.  This layer acts as an aquitard, preventing groundwater in aquifers above and below the layer from mixing, and helps protect the groundwater that is used for other purposes.  Secondly, the copper extraction method involves pumping a mildly acidic solution through highly engineered wells hundreds of feet below surface into rocks that are naturally fractured.  The copper-bearing solution is then recovered through a series of recovery wells and an inward  hydraulic gradient is created that controls solution flow.
This process requires no movement of rock or overburden. There is therefore a substantially smaller footprint, with much less of an environmental impact on the surrounding area than with more traditional open pit mining operations. The technique also requires substantially less mechanical energy in the form of trucks and explosives, and therefore generates significantly lower operating and capital costs.
The company is already in the mode of hiring people for the phase 1 development program, and has made purchases relating to long lead-time items for copper processing facilities.
Construction for this phase is due to start in early September.
Though several million pounds of copper is expected over the life of the phase 1 program, McPhie says the 24 wells are relatively small in context of a full commercial operation, and the primary focus of the first phase is the "optimization and refinement of the development plan."
"Our aim is to further prove up all the engineering and environmental safeguards through the phase 1 program, with the intent to begin development of the commercial plant facility and well field, referred to as phase 2, by the end of 2013."
According to the latest timeline, the company could begin full commercial production by early 2015, after which it expects to produce between 55 and 84 million pounds of copper per year.
Curis anticipates having phase 2 commercial scale operating permit approvals well before it is ready to begin construction in late 2013, as the phase 2 permits will "really just be an extension of permits already in place."
With regards to financing its plans, the company recently secured a $40 million loan for its ISR copper project in Pinal County with the Red Kite Group, an international finance group based in New York.
This funding is sufficient to finance phase 1 development and operations, with McPhie anticipating Curis will be looking to secure full project financing for commercial scale development in mid 2013.
The feasibility study for the property is targeted for the first quarter of 2013, well ahead of the requirement in time for the start of phase 2 operations later next year.
"This gives us more than a year to publish the study and secure financing. We're in a strong cash position for development over the next year and a half," asserts McPhie.
So far, the company has received interest from "quite a large number of banks from Europe, Asia, US and Canada" that have come to tour the site.
"We're going to take our time in selecting our consortium of banks - it's about finding the optimal mix of partners that will be with us for the long term.
"Based on a 2010 preliminary economic assessment¹, Florence has one of the lowest cost copper projects in the markets today with cash costs of well under one dollar a pound, and capital costs in the $200 million range.
"This is quite attractive at a time when capital costs in the mining sector are skyrocketing and we are seeing a lot of interest because of this."
The banking route is just one option for Curis, as McPhie says the company is also considering opportunities for partnerships with businesses looking to use copper, as well as equity financing.
In addition to enhancing capital costs, a new high voltage power line put in by the state of Arizona a couple of years ago that traverses the west side of the property could assist the project’s operating costs.
The asset is also close to a railway, has an "abundance" of water, and is referred to as a well-understood deposit with more than 500,000 feet of drilling. The project rests just 70 miles north-northwest of Tucson, and 65 miles southeast of Phoenix.
"When compared to other projects in more remote areas of North and South America everything is here within 500 metres of our doorstep," says McPhie, adding that the presence of the extensive infrastructure lowers capital costs and makes the project a "significant opportunity".
The company's CEO is focused on optimizing the development plan and at the same time, being "respectful of its neighbours", with a big part of the planning aimed at minimizing its footprint on the ground and building an efficient operation.
Rather than focusing on expanding the size of the resource, which is already quite large, Curis is taking the approach of focusing on metallurgy and getting more copper from what is already there.
McPhie says there is room for improvement in the commercial scale production forecast, with copper recovery for its Florence project in the PEA assumed at 49 per cent, which is "very conservative" compared to the previous work done by BHP that predicted this would be the minimum recovery possible.
If recoveries can be improved, the same amount of effort will be put in, but the miner will be able to get more copper out of the ground at a quicker pace.
"There is slightly less than 3 billion pounds of copper in the measured and indicated category, and we're only taking advantage of less than half of the deposit as it currently stands in our economics," says McPhie.
"There is more than enough resource at Florence for a 20 year mine," he concludes, adding that his focus remains "thoughtful and sustainable development."
Indeed, for every percentage increase of copper recovery, higher revenues will be generated from the project, which has an estimated after-tax net present value of $360 million at a 7.5 per cent discount rate and a $2.50 per pound copper price.
The completion of the permitting process is something McPhie hopes will please investors, creating a "tremendous value creation opportunity" for the months ahead. Shares of the company are currently changing hands at 46 cents on the Toronto Stock Exchange.
[1] See Curis news release dated November 25, 2010

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