Arizona Sonoran Copper (TSX: ASCU) has published a maiden resource estimate for Arizona’s Parks-Salyer (P/S) porphyry copper deposit, immediately southwest of the flagship Cactus project.
The P/S resource is on contiguous private land and includes oxide, enriched and stockpile material considered amenable to a heap leaching operation. The inferred resource now stands at 143.6 million tonnes grading 1.015% copper for 2.92 billion lb. copper metal.
This brings the company’s total leachable inferred resource inventory – comprising the Cactus open pit and the P/S underground – to 449.9 million tonnes at 0.544% copper for 4.89 billion lb. of copper. The total indicated resource, which only applies to Cactus, remains at 151.8 million tonnes at 0.531% copper for 1.61 billion lb. of the red metal.
Due to the increase in its global mineral resource base, Arizona Sonoran says it will consider the inclusion of oxide and enriched material at P/S in a future pre-feasibility study incorporating both deposits. President and CEO George Ogilvie said in a call with analysts that future studies would be based on the expanded leachable inventory, heap leaching and SX/EW process methodology. An integrated technical study is expected to be completed in the next 12 to 18 months.
“The significant increase to our global resource base is a key inflection point in the low-risk development of our existing Cactus project,” said Ogilvie.
“We have increased our global leachable inventory base by over 100%. As a result, the company has determined that a full revised study will be considered to produce an integrated business case for Cactus and Parks/Salyer. The high-grade nature of Parks-Salyer’s mineral resource inventory offers significant potential to increase scale within an integrated operation at conservative copper price estimates,” said Ogilvie.
Ogilvie added the company would continue advancing its work programs, specifically metallurgical and geotechnical test work, hydrology, permitting, infill drilling and associated projects, to advance the combined Cactus and P/S project through the technical study phases, and the company toward a value re-rating.
Ogilvie noted the company was not yet attracting the substantial valuations its peers were getting in the market. He pointed out Arizona Sonoran was valued at about US1¢ for every pound of copper in the ground. In contrast, others, such as Ivanhoe Electric (NYSE American: IE), are trading closer to the US$800 million level, which translates to a valuation of about US5¢ per pound of copper in the ground.
“Over time, obviously, the markets will turn, and the focus will come back to copper, and there’s going to be a hell of a lot of upside for the shareholders or potential investors of this company on a go-forward basis,” said Ogilvie.
Investors in the company have recognized a return on their investment through the exploration success. Arizona Sonoran is confident that, over time, it will realize some significant returns when the asset starts production.
“I’m happy to report now that it’s 6.5 billion lb. in our resource statement, Cactus now ranks number four globally as far as scale and size is concerned with only Ivanhoe Electric’s Santa Cruz project directly south of us, at 10 billion lb., and Hudbay’s Rosemont, and PolyMet’s NorthMet projects being larger,” said Ogilvie.
“The beauty of this resource we put out this morning is that P/S will be an underground mine. That, therefore, means that the amount of capital development and waste rock we must move will be much less than the open pit, and at the same token, the grades are significantly higher than our other assets on the site. The good news is that our current land package will accommodate the mining of mineralization from P/S, including the leaching pads and the ultimate rock storage areas, so we’re really in control of our destiny,” underlined Ogilvie.
The company has three drills running a 32,000-metre program at the P/S deposit to reduce the spacing between holes to 76 metres. This infill drilling program will improve the resource category to an indicated status to define future probable reserves. Results will support mine planning.
Further, the company expects to resume drilling at Cactus later this year to continue to infill drill to 38-metre centres at Cactus East and West. Drill spacing is being infilled to produce measured resources in the upcoming pre-feasibility study.
Besides significant exploration upside on the property, Arizona Sonoran has another trump card. In April, the company signed into a partnership with Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO) focused on the latter’s Nuton venture and a non-brokered private placement for total gross proceeds of up to $30.5 million.
Nuton technologies offer a portfolio of proprietary copper leach-related technologies and capability developed by Rio Tinto to deliver increased copper recovery from mined ore and access new sources of copper such as low-grade sulphide resources and reprocessing of stockpiles and mineralized waste. The technologies also can lead to more efficient water usage, lower carbon emissions and the ability to reclaim mine sites by reprocessing waste.
The Cactus primary sulphides are currently being tested for leachability using the Nuton technology and may form the basis of further project upside.
Located near the city of Casa Grande, the Cactus project is underpinned by a multi-billion-pound copper resource that would produce 56 million lb. of the metal annually over an estimated 18-year mine life. A preliminary economic assessment for the project outlined an after-tax net present value of US$312 million (at 8% discount) and an internal rate of return of 33%.
The P/S deposit is located 2 km southwest of the Cactus open pit along the mine trend and demonstrates the same geological characteristics.
At US$1.52 per share, Arizona Sonoran’s New York-quoted equity is down just more than 30% over the 12-month frame, despite it closing 5% higher on the back of the resource update. It has a market capitalization of US$134.84 million.