Vancouver-based Foran Mining’s (TSXV: FOM) executive chairman and CEO Dan Myerson doesn’t want to build just one mine. He has designs on creating Canada’s next copper mining camp in the Prairies.
Foran has had a busy year as it advances the McIlvenna Bay copper-zinc-gold project in Saskatchewan, which it says will be the world’s first zero-carbon operation. It released a positive feasibility study for the project in February that outlined a long-life underground mine producing 38.8 million lb. copper, 63.6 million lb. zinc, 20,000 oz. of gold and 486,000 oz. of silver annually for its first 15 years. It received its permits for an advanced exploration decline to do bulk sampling for metallurgical testing, which Myerson told The Northern Miner has so far confirmed the company’s assumed mineralogy and metallurgy for the project.
In July, the company inked a deal with Sandvik to supply it with an electric battery underground vehicle fleet. A month later it announced an investment from a major Canadian pension fund.
The camp at Foran Mining’s McIlvenna Bay polymetallic project in Saskatchewan. Credit: Foran Mining
It has also put out a flurry of positive drill results over the course of the year. In June the company reported a near-mine discovery at its Tesla zone, where it encountered 200 metres of continuous massive and disseminated sulphides with 12.4 metres at 1.8% copper equivalent, including 1.2 metres at 8.3% copper equivalent and 5.4 metres at 3.3% copper equivalent among its initial assay results. Also in June, it reported positive assay results from its Bigstone and Marconi sites, including an intercept of 21 metres at 3.6 % copper.
Myerson said the company has chosen to be aggressive with continued exploration to build its long-term project pipeline. “We’re trying to create the next copper mining camp in Canada. So to do that you have to start exploration now, and we’ve ramped that up,” he said.
Meanwhile, Foran is targeting its flagship McIlvenna Bay, located along the Flin Flon Greenstone Belt, for production in late 2024. The project has probable reserves of 25.7 million tonnes at 2.51% copper equivalent.
According to the feasibility study, McIlvenna Bay has an after-tax net present value of close to $1.1 billion (at a 7% discount rate), an internal rate of return of 22% and a 4.5-year after-tax payback period at base case prices of US$3.50 per lb. copper, US$1.20 per lb. lead and US$1,600 per oz. gold. The initial capital investment was pegged at $368 million with life-of-mine sustaining capital at $481 million.
Zero-carbon mine
The company’s ambitious goal of developing a zero-carbon mine has been made easier thanks to access to renewable hydropower through the provincial grid and a deposit amenable to underground mining — even though Myerson noted the company had the option to mine it as an open pit for the first few years. Foran, which has a market capitalization of $540 million, has since 2011 planned to offset its exploration emissions by purchasing carbon credits.
The Sandvik equipment order includes electric battery underground drills, trucks and loaders for development and production, which Myerson said would allow the company to save on ventilation costs.
“The reason we’re doing this is safety and to hit the goal of being carbon neutral by design, not buying [carbon] credits,” he said. “By doing this we also want to show that doing the right thing can generate superior investment returns, we will make more money at a lower cost than normal underground operations.”
That zero-carbon focus has attracted major investor dollars, including from Fairfax Financial Holdings last year and an oversubscribed private placement earlier this year. In August, Foran announced a non-binding, exclusive term sheet with the Ontario Teachers’ Pension Plan (OTPP) Board that would see the pension fund invest $200 million toward advancing McIlvenna Bay. If the transaction goes through, it will consist of a $180-million convertible secured instrument and a $20-million investment contingent on the mine hitting a certain production threshold for 60 days in a row.
Foran said it expects they will finalize the deal in the third quarter, pending due diligence from the pension fund and Foran securing a secured credit facility. Foran said the credit facility talks are “well advanced.”
After meeting those conditions and achieving commercial production and permitting thresholds, the OTPP’s investment will convert into a 19.99% equity interest in a subsidiary of Foran that holds McIlvenna Bay and its other properties.
Myerson said the agreement with the OTPP will allow it to execute its long-term strategy, even in the face of potential rough commodity markets.
“We wanted a partner with us… rather than just going to the equity markets and doing a massive raise, that’s not the way we want to run. We want to create a different type of mining company,” said Myerson.
“The challenge generalists have found with mining is the volatility of it. … It’s very important we have a strong shareholder base, and we have that with the likes of Fairfax and we have that with Ontario Teachers’. They’re all long-term focused investors that understand the potential here, and that these things just take time.”
The OTPP’s proposed investment in Foran is part of a growing cycle of investment deals and mergers and acquisitions in the copper space as investors and miners alike position themselves to take advantage of a future low-carbon economy.
Copper assets in demand
Over the last few months, Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO) has moved to acquire Canadian copper miner Turquoise Hill Resources (TSX: TRQ; NYSE: TRQ), giving it control of the mega Oyu Tolgoi copper and gold project in Mongolia. The company also inked a US$18-million deal with McEwen Mining (TSX: MUX; NYSE: MUX) subsidiary McEwen Copper that gives Rio the ability to become a 60% joint-venture partner in the Elder Creek copper property in Nevada.
Exploration and development company Magna Mining (TSXV: NICU) scooped up Lonmin Canada, the owner of the Denison nickel-copper-platinum-group metals project and Crean Hill, a past-producing nickel-copper-PGM mine in Ontario, for $16 million. Mining giant BHP (NYSE: BHP; LSE: BHP; ASX: BHP) attempted a takeover of Oz Minerals (ASX: OZL), an Australian copper producer, for US$5.8 billion, in an attempt to get control of the West Musgrave copper-nickel project in Western Australia, but has so far been rebuffed.
Scotia Capital analyst Orest Wowkodaw and three other analysts wrote in an early September note to clients that they “are not surprised” by Rio and BHP’s recent unsolicited bids, and expect the mining sector is on the precipice of a new copper-focused M&A cycle.
“Cashed up miners, limited internal growth opportunities, shareholder pressure to re-balance asset portfolios toward ESG friendly commodities, a relatively unattractive risk-reward profile for constructing large scale projects… combined with discounted market valuations for producing assets appears to have set the stage for the next mining M&A cycle to get underway,” they wrote.
The Scotia Capital analysts noted that the western world’s 10 largest publicly traded non-precious metals companies generated $169 billion in cumulative free cash flow during the pandemic thanks to disciplined growth spending and higher commodity prices. Larger miners have also signalled a “new openness” to investing in higher-risk jurisdictions given the dearth of opportunities in more stable mining regions, while the “marathon”-like time frames and major capital costs associated with bringing a major greenfield project from discovery to execution are less palatable.
They wrote that Foran and Arizona Metals (TSXV: AMC) along with producers First Quantum Minerals (TSX: FM), Freeport-McMoRan (NYSE: FCX), Ivanhoe Mines (TSX: IVN), Copper Mountain Mining (TSX: CMMC), are among potentially “attractive targets” for M&A activity. Hudbay Minerals (TSX: HBM; NYSE: HBM), Lundin Mining (TSX: LUN), Capstone Copper (TSX: CS), Altius Minerals (TSX: ALS) and Anglo Pacific Group (TSX: APY) were named as potential buyers and sellers. The analysts expect Antofagasta (LSE: ANTO), Vale (NYSE: VALE), Grupo Mexico, Southern Copper (NYSE: SCCO) and Nexa Resources (NYSE: NEXA) to become asset or company acquirers, and wrote that Teck Resources (TSX: TECK.A/TECK.B; NYSE: TECK) could be an acquirer or sell some assets.
Myerson said the company has seen interest from other miners who hoped to take a strategic interest. “We didn’t want to do that,” he said, adding that doing so could risk slowing down McIlvenna Bay’s development during bad markets. “There are times when the commodity markets are going to be bad, and that’s when you should be building.”
—Kelsey Rolfe is a Toronto-based freelancer who specializes in mining.
Taking into account that banks around the world ,along with private investment firms are looking for companies that are trying to take progressive action by reducing there carbon foot print, while still trying to produce a profit is one of the reasons my immediate family members and myself have actively been buying the stock.
All investments are prone to possible losses and it is not always easy to apply a “buy and hold” strategy if you are not a mutual fund, I have over the last few months considered selling my own position into the market it is human nature to question ! But I owned the stock before the announcement of the investment by the Ontario Teachers Pension Board .The Ontario Teachers is one of Canada’s biggest. And I was pleased to see them climb on board with their support. I think it was a positive financial investment that showed the world they want to invest in companies that are taking positive immediate action when dealing with the issues of climate change by making an investment for 19% of Foran.
All my sell orders are off the table The dip back down to $2.18 was a buying opportunity for some, as it came back up really quite quickly.