The newest kid on the copper block

Even the falling price of copper didn’t deter investors, analysts and the simply curious from filling a conference room in downtown Toronto for Constellation Copper‘s (CCU-T) presentation on May 16.

The visit to Toronto by the Lakewoood, Colorado-based company comes just one month after initiating production of cathode copper at its Lisbon Valley project in Nevada.

“Lisbon Valley is the first copper producing mine in the U.S. in the last 10 years,” Constellations president and chief executive Greg Hahn told the crowd. “We’re the new kid on the block.”

The company expects to be at full capacity by the third quarter of this year when it will put out 54 million tonnes of cathode copper annually. The mine life for the project is expected to be 10 years.

Copper from Lisbon Valley is being sold at COMEX pricing plus the current premium for cathode which is roughly US6-8 per lb.

Beyond the benefits of the premium, Hahn says producing its own cathode copper frees the company from being “held hostage” by refineries.

Costs at Lisbon are between US65-85 a lb, depending on diesel and sulphuric acid prices.

While satisified with Constellations ability to put Lisbon Valley into production, Hahn became more animated when talking about the company’s prospective property south of Nevada — in Mexico.

While primarily a zinc mine the Terrazas project in northern Mexico, will produce almost as much copper as a zinc byproduct as Lisbon Valley is producing with copper as its main mineral.

In the measured and indicated category, the company estimates 85.6 million tonnes of ore, with an average zinc grade of 1.2% and copper of 0.32%.

Constellation says it will have its feasibility study done for the project by the third quarter of 2006.

The site will be an open pit mine and the company plans to use heap leaching and SX-EW methods to recover copper, followed by solution purification and standard SX-EW methods to recover the zinc.

Constellation estimates the project will produce 40 million lbs. of cathode copper and 150 million lbs. of zinc, for 15 years.

Outside of the geology of Nevada and Mexico, Hahn said being in North America has both currency and political risk advantages.

He recalled a past project in Australia where a 40% gain in the copper price was offset by a 50% gain in the Australian dollar against the American greenback.

“We want to be linked to the U.S. dollar,” Hahn said, noting that he Mexican Peso is an exception as it is one of the few currencies that is actually weakening against the greenback.

Hahn also emphasized that unlike many of its competitors, Constellation’s assets are in countries that are politically stable.

“We don’t like the changes in Bolivia and Peru,” He said. “And we’re not fans of investing in central Africa and Asia. Look at what’s happening in Mongolia.”

Bolivia’s recently elected president Evo Morales has begun the nationalization of the oil and gas industry, raising fears over what may happen to the mining industry, and the Mongolian Parliament recently approved a 68% tax on gold and copper production.

With copper and zinc prices at their current high levels, some in the audience had questions regarding the company’s hedge book.

Hahn says hedging is in place on copper production for the next three years to cover 75-80% of the company’s operating costs. That entails the hedging of roughly one third of the company’s production.

Hedges in place for copper are at roughly US$1.05 per lb. for 2006, 2007 and 2008.

In Toronto on May 17, Constellation’s shares wereup 1 to $2.43 on roughly 2 million shares traded.