Redhawk Resources Firms Up The Numbers On The Copper Creek Project In Arizona, And Offers It Up For Sale To A Willing Buyer
By Alastair Ford
minesite.com
Copper-moly project for sale, one or two previous owners, up-to-the-minute scoping study available, situated in mining-friendly Arizona, with a permit for digging a decline pending. It’s not actually out there, but a newspaper ad for the Copper Creek property owned by Redhawk Resources might run something like that, and willing buyers should note that an outright bid need not purely be in the form of cash. Joe Sandberg, president of Redhawk is a long term believer in the mining sector and would be prepared to take equity on the basis that recovery will see a general lifting of all boats. He’s also willing to consider a partial sale, in which Redhawk would retain a minority interest in Copper Creek.
It’s a simple enough story to tell, and one that will only be too familiar across the mining sector right now. When Redhawk commissioned a scoping study at Copper Creek back in May last year, there was little doubt that at the metals prices prevailing back then, the project would come in looking fairly robust. Copper was soaring, and moly was soaring too. “We knew it would look pretty good at those prices”, says Joe. As the year went on and the shadows darkened, it became clear that the company might not quite get the result from Copper Creek that it had originally hoped for. But it pressed on with the study in any case, because, says Joe, “we’d promised a lot of people we’d do it”. The results were finally released to market at the end of February 2009, and although they made reasonable reading in terms of grade, mineralization, and recoveries, what immediately jumped out of the page were the economics, which were less good, now that there’s been a drop off in the copper price to less than US$2.00 per pound, and molybdenum’s down at under US$10.00.
Actually, Redhawk produces quite a startling range of NPVs for Copper Creek, running from US$545.2 million on no discount whatsoever, right the way down to just US$18.3 million on a far more standard 10 per cent discount. But crucially, without applying any discount at all, the breakeven copper price for Copper Creek would be US$1.80. On a more standard 7.5 per cent discount rate, the breakeven copper price for the project is US$2.09. So there’s precious little room for manoeuvre, and even that’s putting it a little generously. But at the same time, it’s hard to find fault with the optimism on a slightly longer view of Joe Sandberg when he says, “our view is that it’s a very good project and obviously needs a better copper price to get it into the spotlight”. He also notes, as you do, that 43-101 reporting requirements and the company’s own prudent approach mean that the numbers presented in the scoping study are “conservative”, and that there might well be room for manoeuvre, particularly as regards some of the royalties that are held on the property, and as regards some precious metals credits. Fair enough, let’s see what happens to Copper Creek when copper does bounce back, as some analysts are already beginning to predict.
But Redhawk is unlikely to wait around that long. The company isn’t exactly a distressed seller, as it seems likely that private placements from loyal supporters will keep it going for many a year yet. But on the other hand, in these markets getting hold of the requisite US$400 million that would be required to develop Copper Creek looks a big ask. Joe cautions, “we aren’t going to give it away”, but he would like to do a deal of some sort. “Our position is either to find a JV partner with deep pockets or sell the project outright. We’ve been talking to a number of companies including majors”. The likely structure of any deal has yet to be decided, though if Joe did take shares in payment for a sale of Copper Creek, he’d be happy to redistribute them to Redhawk’s own shareholders, which must be reassuring for hard-pressed investors in times like these. Then he’d turn his attention back to the company’s two early stage gold properties, Alien and Ramona. Not much has been done on those lately, as all the attention’s been on Copper Creek, but with gold still going strong as the best of the metals, that could be about to change. |
