Pumpkin Hollow comes to life

Some high-profile names driving the new project and strategic development focus at Nevada Copper have no doubt been a factor in the growing investor focus on the company.

Well-credentialed mine builder and operator Matt Gili, most recently executive general manager for Barrick Gold's flagship Nevada operations, former Rio Tinto CEO Tom Albanese, veteran North American mine-finance figure Ernie Nutter, and former BHP and WMC executive Phil Day, are just some of the big names drawn to what is set to become the next US copper production company.

But it is also clear that Nevada Copper's plum cornerstone asset is now being fundamentally reassessed as a corporate value driver.

A re-engineered project blueprint that removes the previous plus-US$1 billion capex roadblock that had stymied progress, leverages US$220 million of sunk investment in mine infrastructure, and drives maximum value from a staged production build-up, is central to the ambitions of a company re-casting itself as a profitable mid-tier producer, a potential sector consolidator and, before long perhaps, as a serious explorer in a sector that has generally been devoid of them.

Non-executive chairman Stephen Gill, a managing partner at major Nevada Copper shareholder Pala Investments, says the calibre of project manager and company builder now overseeing delivery of Pumpkin Hollow, and recalibrating NCU's corporate ambitions, "puts us in a different place to everyone else, certainly in the north American copper space".

"You won't find another junior mining company with the market cap of this company [currently circa US$308 million] that has anywhere near that depth of management," Gill says.

"That's definitely resonating with a lot of people [investors and other stakeholders].

"We have got a reengineered project that produces lots of free cash, at current prices, when it starts production late in 2019. The credentials and experience of the management team, though, is what really allows you to make the most of your advantages. And that is where we think Nevada Copper is uniquely positioned.

"I was involved in an investor roadshow earlier this year and I've just now got around and caught up with people again and it has surprised me how much excitement we're generating and how much people have got caught up in what we're doing."

The need for speed

A recent analyst tour of the Pumpkin Hollow property drove home the speed of activity that is set to continue NCU's transformation over the next 12 months.

Gill says underground contractor Cementation USA is fully mobilised and work is underway on extending the 1900-feet existing main production shaft about 250ft to completion. The surface head frame and hoist unit are already in place. Underground decline development to extend the 644ft of lateral tunnelling in place will open up positions for drilling on inferred resource zones that could significantly extend current mine reserves.

Pumpkin Hollow has measured and indicated resources of 23.9 million tonnes grading an average 1.74% copper-equivalent, supporting an initial 13.5-year life for the 5,000t/day underground project. Planned output of 60 million pounds of copper, 9,000oz gold and 173,000oz silver over the first five years gives an average copper-equivalent grade of 2.01%.

Around the planned mining zones, though, is a similar volume of inferred material that can soon be drilled more economically.

That includes extensive inferred resource in the E2 Deposit, which extends back towards the surface at Pumpkin Hollow and which will also be accessible via the lateral decline under construction.

"We think the underground mine life can be extended rapidly," Gill says.

"That would create opportunities to examine expanded production, as well, without additional capital because the underground infrastructure is in place and you always have scope to debottleneck a new plant."

Gill says long lead-time fixed plant, such as SAG and ball mills, and mobile equipment, has been ordered, some of it under lease agreements.

Generally the site has transitioned well out of its former care and maintenance phase, to "active status".

And that extends to the revamped surface-project focus, where NCU has had three drill rigs turning for several months now on ground that hosts resources, and extensions, targeted to support a 30,000-40,000t/day surface operation.

Core drilling on Pumpkin Hollow's North Pit - which has 40% higher average grades than the South Pit that underpinned earlier mine studies - aims to expand the deposit and convert previously untested areas, historically classified as waste, to ore. Results from the first two holes in an ongoing programme included intersections of multiple zones of copper mineralisation in the previously undrilled Northern Extension Zone of the North Pit, headlined by 42.7m of 2.05% copper.

NCU says the mineralisation is wider and higher grade than adjacent North Pit holes, and extends mineralisation into areas previously classified as waste.

Gill says the drilling is already demonstrating the validity of NCU's waste-to-ore conversion thesis.

Drilling on the North Pit is also closing up drill lines on current inferred resources, which is expected to feed revised indicated resource estimates in the next few months.

"New resource and waste-to-ore conversion has the potential to further enhance openpit economics by reducing stripping costs and extending the orebody," Gill says.

NCU has Golder Associates working on openpit project optimisation, which will add new data from the drilling in progress to previous work that suggested staged development focused initially on the higher grade North Pit, and a smaller plant that could be expanded incrementally thereafter, could halve the former $1 billion-plus surface project cost.

NCU projections have a phase-one openpit development adding significantly to Pumpkin Hollow's net present value, and returns, with the fully funded underground project generating US$75 million a year or more of free cash that will add to the company's capacity to fund the next expansion stage. That FCF, and the project value, is only going to be enhanced by the Trump administration's lower corporate tax rates.

"The important thing is we are talking about maybe two-thirds of the metal currently outlined in the ground being taken out by phase one of the openpit," Gill says.

"The next step would be to build in the South Pit expansion phase.

"The strategy is to reduce the capital down to phased chunks that we can internally fund.

"It's possible to see a sequence of development that potentially gets you to 100,00tpa, or 220Mlb a year of copper from undergound and openpit, internally funded all the way through.

"We're permitted up to 70,000tpa, so we already have the flexibility to do interesting things there."

And that may extend to regional and other opportunities.

Gill says Pumpkin Hollow is sitting in a 100-square-mile area he describes as "highly under-explored", that hosts a 33-billion-pound copper endowment, outside of the NCU property.

"We're the only ones permitted in the district and we're building significant production infrastructure now. The [deposits] on the other side of the highway don't really display the economics to justify new mills and even if they did there would be a decade of permitting to do.

"So we're the first mover in a really interesting district and we're building the infrastructure right now.

"The other part of that regional picture is the scale and intensity of the skarn mineralisation that we have on our property. Geologists will tell you that you don't normally get that without [there being a source] porphyry.

"So geologically there's some real grassroots work to do to see what feeds all of this very strong and high-grade skarn mineralisation.

"The exploration focus at Pumpkin Hollow has also obviously just been the main deposits. We've got old prospectors' workings out in the far east of the package that are 100 years old. There are 1.5-2% copper samples sitting there at surface in the same stratigraphy as the Pumpkin Hollow underground mine orebody, that have never been drilled."