The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
New copper company to be led by Full Metal CEO will start with Southwest Alaska property, a more advanced project in Nevada
Full Metal Minerals Ltd., a familiar name in the Alaska mineral exploration sector for the past decade, is being reborn as CopperBank Resources Corp.
The formation of CopperBank will result from a three-way arrangement in which Full Metal offers up its Pyramid copper project in Alaska, International Enexco Ltd. delivers its Contact copper project in Nevada, and Choice Gold Corp. will serve as the vehicle for the emergent company.
"Not only will shareholders be a part of a new, aggressive consolidation platform with funding in place, but they will also gain exposure to the advanced stage Contact heap leach project in Nevada, bringing balance to the exploration-oriented Pyramid deposit. I look forward to working with our incoming partners to build a strong and dynamic new copper company," Full Metal CEO Rob McLeod said upon originally announcing the deal in March.
McLeod is expected to be appointed CEO of CopperBank and Bill Willoughby, the former chief operating officer of Enexco, will be president of the copper exploration and development company.
Building Pyramid
Pyramid, Full Metal's contribution to CopperBank, is an exploration stage copper-gold-molybdenum porphyry project situated on the Alaska Peninsula of Southwest Alaska.
From 2010 through 2012, Brazil copper miner Antofagasta Minerals S.A. completed roughly 7,486 meters of drilling in 30 holes at Pyramid. This effort confirmed and expanded upon 19 shallow historical holes completed by Quintana-Duval during the 1970s and resulted in an inferred resource of 1.338 billion pounds of copper, 74 million pounds of molybdenum and 488,000 ounces of gold.
Both near-surface supergene enriched mineralization and hypogene copper mineralization were modeled and included in this 2013 resource estimate.
Hypogene mineralization represents the primary sulfide mineralization; a supergene enrichment occurs when weathering leaches minerals from near surface layers which then react with the hypogene sulfides at the base of the oxidized portion.
Under a leach cap that ranges from surface to 90 meters, the Pyramid deposit hosts a supergene enrichment blanket with 93.7 million metric tons averaging 0.4 percent (823 million pounds) copper, 0.019 percent (40 million pounds) molybdenum and 0.092 grams per metric ton (277,000 ounces) gold.
Underlying most areas of the supergene zone, the hypogene zone hosts 79.1 million metric tons averaging 0.26 percent (514 million pounds) copper, 0.020 percent (35 million pounds) molybdenum and 0.083 g/t (212,000 ounces) gold.
With only two holes drilled to a depth of 500 meters, Full Metal reports that Pyramid's hypogene zone is open for expansion to depth in most areas.
The Pyramid deposit currently has a footprint measuring some 1,050 by 1,800 meters and is open for lateral expansion.
As a result of its three-year tenure at Pyramid, Antofagasta earned a 51 percent joint venture stake in Pyramid, an interest Full Metal has cut a deal to re-acquire.
To regain 100 percent interest in Pyramid, Full Metal agreed to pay Antofagasta US$5.5 million - an initial US$3 million payment is due by the fifth anniversary of the assignment date; and a US$2.5 million is payable upon the completion of a positive, bankable feasibility study.
"Consolidating a 100 percent interest in Pyramid will allow Full Metal to step-out from near-surface higher grade copper mineralization identified to date at Pyramid, test new targets, as well as explore the large, adjacent 60-square-kilomter (23 square miles) San Diego Bay zone of alteration and anomalous polymetallic mineralization," McLeod said upon the March announcement of the buy-back agreement. "Antofagasta, through its affiliate company Antofagasta Investment Company Limited, a wholly-owned subsidiary of Antofagasta Plc., will be exposed to exploration upside on the property through their 15 percent shareholding in the company."
Pyramid - situated less than eight kilometers (five miles) from deep tidewater - is located on lands under option from the Aleut Corp., an Alaska Native regional corporation.
First Contact
In early June, International Enexco, along with its Saskatchewan uranium assets, was absorbed by Denison Mines Corp. Prior to this buyout by the uranium exploration and development company, Enexco shifted its Contact copper project into Enexco International Inc., which is being offered to CopperBank.
Contact is an advanced stage Nevada copper deposit with 141.09 million metric tons of proven and probable reserves averaging 0.22 percent (611.75 million pounds) copper.
A pre-feasibility study completed in October of last year envisions an open-pit mine at Contact with a heap leach recovery circuit. Ore production to the heap leach pad is projected at an initial rate of 30,000 tons per day, increasing to 57,000 tons per day by the sixth year of operation.
Highlights of the PFS include:
Average annual production of 49.2 million pounds per year of copper cathode;
462 million pounds of copper cathode over the 9.4-year mine life;
Estimated cash cost of US$1.73 per pound of copper, which includes mining, processing, property taxes and royalties;
Pre-tax net present value (8 percent discount) of US$136 million and internal rate of return of 30.4 percent;
After-tax NPV (8 percent discount) of US$107 million and IRR of 25.9 percent; and,
Post-tax payback of 3.4 years.
"While the results are positive, we believe we still can enhance the project further, including the potential to define additional resources and extend the mine life. We will continue to focus on these aspects as we work towards a feasibility study and permitting," former Enexco President and CEO Arnold Armstrong said when results of the PFS were released.
Extending the life of the heap leach operation by defining additional copper oxide resources is a primary the enhancements suggested in the PFS. The yet to be drilled Copper Ridge and the New York prospects are exploration targets that could help CopperBank meet this objective.
Choice vehicle
Choice Gold, the vessel set to become the recipient of Pyramid and Contact, is a Vancouver, British Columbia-based junior trading for roughly C2 cents per share on the Canadian Securities Exchange (June 19, 2014). The company currently has roughly 37 million shares issued and outstanding.
In exchange for Pyramid, each Full Metal shareholder is to receive two common shares and one warrant of Choice Gold. Enexco shareholders will receive 8.8 common shares and 4.4 warrants of Choice Gold in exchange for the Enexco subsidiary that holds the Contact copper project. All of the warrants will be exercisable into common shares for five years at C10 cents each.
Before finalizing the deal, Choice is to complete private placement to raise at least C$2 million to fund CopperBank. This financing is anticipated to consist of roughly 100 million subscription receipts at C2 cents each.
Upon the completion of the arrangement, Choice will be rechristened CopperBank Resources and complete a five-for-one share consolidation. Any outstanding warrants and options of International Enexco as of completion of the arrangement will be exchanged for options and warrants of CopperBank, adjusted by the exchange ratio of 8.8-1.
"By creating this business model we aim to satisfy a consolidation demand from our global pool of natural resource investors and at the same time offer investors an efficient and well managed vehicle leveraged to higher copper prices," said Choice Chairman Gianni Kovacevic. "Furthermore, with our focused team we will work hard to create additional shareholder value by aggressively assessing various other projects available at this time. We see projects both inside and outside the public markets valued at less than the dollars put in the ground to delineate them, let alone their underlying net asset values. This is a great opportunity."
The three-way deal requires two-thirds approval from shareholders of each Full Metal, Enexco and Choice. All three companies are expected to hold shareholder meeting in August and, if the requisite votes of approval are cast, the formation of CopperBank is expected to occur by Aug. 31.
Upon shareholder approval, the board of directors of CopperBank is anticipated to be comprised of Armstrong; McLeod and Kovacevic; as well as Dan Frederiksen and Todd Hilditch from Enexco.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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