timely article on CDC just out on Minesite
http://www.minesite.com/nc/minews/s...id-tier-copper-producer-with-assets-in/1.html
February 17, 2011
Copper Development Corporation Sets Its Sights On Becoming A Mid-Tier Producer With Assets In The Philippines
By Charles Wyatt
It is fairly obvious now that when Copper Development Corporation (CDC) listed on Aim just before Christmas, raising £40 million at 35p per share, its second acquisition was already well underway. The company has just announced that it has acquired a 70 per cent interest in the Basay porphyry copper project on Negros Island in the Philippines. This new property lies about 25 kilometres away from Honiba-An, the porphyry copper project that company already own. The deal is a slightly complicated one, as might be expected of some of the bright people behind CDC. It involved a loan of US$1.9 million, made just a week after listing, to a company called Solfotara Mining Corporation. A stipulation was made that this sum, in the form of a convertible, was to be used solely to acquire a 100 per cent interest in Basay from a couple of companies, one of which held the exploration permit. No details have been forthcoming on Solfotara, but chief executive Mitch Alland explains that it is a private Canadian company, the directors of which helped to set up CDC.
More information would be useful at some stage, though, as CDC proposes to enter into a joint venture with Solfotara on the development and operation of the Basay project. Under the proposed terms of this joint venture, CDC would have to hand over its entire 70 per cent interest in the project to Solfotara for nil payment, if it fails to spend US$5 million within two years on the project. Also, if it satisfies the US$5 million expenditure requirement, but then fails to complete a pre-feasibility study on the project within four years, it will have to hand back a 45 per cent interest for nil consideration, leaving it with 25 per cent. And again, if a pre-feasibility study is completed, but a feasibility is not completed within six years, CDC will have to hand back a 20 per cent interest to Solfotara for nothing. Agreed, it will still have a 50 per cent interest, but one gets the impression that it was Solfotara which held the whip hand in these negotiations
The Basay mine is currently dormant, having been operated in the late 1970s and 1980s, when it produced 45,500 tonnes of copper between from open pit and underground operations. It was then closed due to low copper prices. A total of 189 diamond drill holes were completed a previous operator, and the data from this drilling was used to compile a historic reserve of 129 million tonnes at 0.48% copper, and a resource of 230 million tonnes at 0.44% copper. However, these figures did not conform either to JORC or to National Instrument 43-101 requirements.
Nevertheless, Neil Motton, an independent consultant engaged by Solfotara, has estimated that 99 million tonnes at 0.42% copper do qualify as a post-mining 43-101-compliant inferred resource. There remains a further 44 million tonnes present in two deposits that has been categorised historically as a resource, but for which there is insufficient drill data to support verification. Mr Motton also indicated that the Basay project had significant, but unquantified, gold, silver, rhenium and molybdenum credits.
CDC’s Mitch Alland commented: “we are excited by the opportunity to evaluate and potentially acquire an interest in the neighbouring Basay Project, and exploring the possible competitive advantages of development with the Hinoba-an Project. We feel the Basay property could potentially contain a major resource that could be developed substantially in tandem with Hinoba-an, and transform CDC into the category of a much larger copper producer.”
As far as Hinoba-an is concerned, the development work continues apace. The project contains two well known porphyry copper deposits – Don Jose and A1, both of which have been the subject of a fair amount of exploration work in the past. In 2007, Snowden put together a JORC-compliant mineral resource covering the whole project, amounting to 173 million tonnes grading 0.42% for 726,442 tonnes of contained copper. Don Jose accounted for 96 million tonnes at 0.44% copper in the measured and indicated category, as well as 74 million tonnes at 0.39% inferred. At A1 the resource was a modest 2.7 million tonnes inferred, grading 0.36% copper. These are fairly low grades, but a scoping study carried out on Hinoba-an last summer gave the project a post-tax net present value of US$485 million, and reckoned the internal rate of return at 38.5 per cent, based on a copper price of only US$6,614 per tonne and an annual throughput rate of 15 million tonnes.
With Basay coming along behind, that’s a pretty good foundation to build any company around. Based on historic resource estimates, the acquisition of Basay will double CDC’s copper resources, and the plan now is to put the two projects together, with a view to creating a major world class copper project, well located to serve the Chinese market. CDC now intends to start a drilling programme to confirm the historic resource estimates at Basay. The price of copper is strong, and does not look like retreating, so the quicker CDC gets on with the work, the better.
So, in very short order since listing, Copper Development Corporation is now within sight, albeit in the distance, of becoming a mid-tier copper producer with some very useful credits from other metals. It has sufficient cash in the till to take both these projects through pre-feasibility. The management is experienced in exploration and development, and those in the background should be able to ensure the availability of funds in the future. Not a bad combination and little wonder that the shares are already at a healthy premium to the listing price. And, according to Mitch, the story of CDC has also made a favourable impact in New York on his recent visit. It’ll be an exciting year.
... all will be revealed tonight or tomorrow.
