Southeast Arizona - Getting Set to Experience a Copper Revival

I recently had the good fortune to make a trip to S.E. Arizona. My journey took me from Tuscon in an easterly direction towards Wilcox. This part of Arizona is a geologists dream thanks to its location on the slopes of the Eastern Dragoon Mountains and it consists of granites and schists that have been overlain by younger limestone sediments.

This sequence of rocks has then been intruded by porphyry action. Hydrothermal fluids circulating under immense heat and pressure under the ground eventually brought Copper mineralization up into contact with the limestone areas. Also over time, the entire area has been faulted and folded and tilted to an angle of about 34 degrees.

Right beside I-10 and some 15 miles from Wilcox, I discovered a small company, currently trading on the Pink Sheets, that is mere months away from Copper production and cash flow.

Nord Resources (NRDS.Pink Sheets) has 1604 acres of land at its Johnson Camp project. Adding in the surrounding land brings the total up to 3092 acres. The first bulk mineable deposit in this area was undertaken by Cyprus Mines back in the 1960’s at what was named the Burro deposit. In 1975 Cyprus officially commenced mining the Burro but by 1986 was forced to shut down as Copper prices were dismal. In all, Cyprus mined about 15 million tons of ore with a run of mine grade near 0.6% total Copper.

The team at Nord has determined that there is enough mineable material left in the Burro deposit to support a mining operation for near 11 years. Nord has also identified the Copper Chief deposit located about 1500 feet along strike to the north of Burro. Copper Chief, once developed, will most certainly add many more years to the overall life of mine. In fact, Nord estimates the addition of Copper Chief will bring the life of mine to near 16 years, Also on site is the old Peabody Mine site. Nord has yet to do any definition drilling, but when they do I suspect they will be pleasantly surprised.

As I toured about the site, I learned in very basic terms that Nord will be crushing mined rock to about 1 inch in size and then piling it on a series of heap leach pads. Sulfuric acid will be added to these heap leach pads and the acid will percolate down through the rock dissolving Copper in the process. Leach solution will flow into a series of settling tanks and stripper tanks before being directed to the SX-EW facility where the Copper will be electroplated out of solution onto large sheets. The barren leach solution will then be pumped back up to the leach pads for a repeat journey. And so it will go, cycle after cycle, with Nord producing 25 million pounds of electroplated Copper a year.

At present, Nord has 66.4 million shares outstanding. At this time of writing Nord was trading at about $1.15 a share for a market cap of about $76 million. The following brief table has been extracted directly from a recent prospectus offering document filed on www.sedar.com.

Table 1: NPV and IRR at Various Copper Prices

Copper Price/lb $2.13 $2.45 $2.82 $3.19 $3.55
NPV @ 8%(2) $118 $176 $243 $310 $377
IRR 60% 77% 93% 108% 122%

At this time of writing, Copper Futures are just over $3 a pound. Taking a Copper price of $2.82 from the above table, we see the NPV of the Burro deposit and Copper Chief deposit to be $243 million. With 66.4 million shares outstanding, this implies that Nord should be trading nearer to $3.50 a share.

I suspect there are two reasons for Nord trading where it is. Let’s face it – these are tough markets right now and some very good projects out there are not being taken seriously. Also, I suspect that Nord’s listing on the Pink Sheets is not helping matters any. To this end, Nord has announced it is seeking a listing on the Toronto Stock Exchange.

Trading on a larger recognized exchange should open the stock up to a whole new class of investor both retail and institutional alike. If you believe, like I do, that Copper is still in a long term bull market then Nord Resources is definitely a story worth looking at.