Curis goes with the flow at Florence

It was a long summer for Vancouver-based developer Curis Resources (CUV-T) and its Florence in-situ copper project, 105 km southeast of Phoenix, Ariz. The company hit a 52-week low at 36¢ per share on Aug. 21, as lack of news and a public relations battle with regional opponents took a toll.

But according to president and CEO Michael McPhie, Curis is keeping its head down and sticking to an 18-month plan that would see construction begin on a pilot operation by year-end.

Curis reached a milestone on Sept. 28 when the Arizona’s Department of Environmental Quality awarded the company an operating permit that allows it to design, operate and eventually close a first phase of operations at Florence.

Getting the permit also unlocked remaining capital from a US$40-million loan facility Curis had signed with RK Mine Finance Trust in May — cash that will allow the company to build its US$32-million, first-phase test facility.

“The summer was a tough time for everybody,” McPhie says during an interview at Curis’ offices. “The permit is over fifty pages [long], and it took our guys hundreds of thousands of dollars and hundreds of hours to complete. A lot of hard work went into getting to the point where we received validation that the project is safe. In retrospect, it was a great buying opportunity for some investors. We’re just getting going here.”

Curis’ pilot phase will take place on Arizona state lands — half of the Florence copper deposit occupies private land where the company is in negotiations with the township over a land-use agreement — and will include a preliminary solvent-extraction and electrowinning plant (SX/EW), and roughly 24 injection and recovery wells.

Full commercial production would see significant plant expansion and 250 wells, at a cost of between US$200 million and US$250 million.

Curis intends to release a bankable feasibility study on the full project in the first half of 2013.

“I would refer to phase one as an optimization phase. So we’ll be answering a couple of key questions: one is optimizing the installation and design of the wells, and the second part is ensuring the quality of the copper cathode that we ultimately produce,” McPhie explains. “Typically you have that start-up phase in mines where it doesn’t always come out as clean as you’d like. What we’re trying to do here is help ourselves narrow that start-up phase, so when we hit commercial operation it is as clean and high-purity copper as possible.”

McPhie says the company can operate for seven years on Arizona state land before the private land agreement could restrict further expansion. A 2011 preliminary economic assessment indicates that the entire project would carry a US$238-million capital cost and produce 60 million to 84 million lb. copper cathode annually over a 19-year mine life, at cash costs totalling US74¢ per lb. Florence holds 157 million indicated tonnes with a total copper grade of 0.41%, for 866 million contained lb. copper.

Curis has ordered its long lead-time items for the project, and is completing on-site reviews with local contractors in anticipation of construction starting up by the end of 2012. The company is also upgrading much of its site infrastructure, including everything from roadwork to telephone systems. Curis is cashed up through phase one, which means it will likely not have to raise more money until the end of 2013.

“In our management and board’s view, the company can see significant value growth over the next eighteen months as we advance the project and start producing copper,” McPhie says. “There are so many advantages to it — we have the lowest quartile operating costs, and we have capital costs that are a fraction of most copper projects out there. I think that gives us the ability to finance and maintain our capital structure in a favourable way.”

Helping Curis over the short-term could be an improvement in recovery rates. The company used metallurgical work completed by BHP Billiton (BHP-N, BLT-L) in the late 1990s that established recoveries ranging from 49% to 79%. BHP relied on bottle-roll and column-leach testing, whereas Curis has developed its own lab methods that it believes may better simulate in-ground conditions.

The company still uses bottle-roll testing, but has added another layer through its collaboration with Tucson-based Metcon Research by forming an in-situ recovery test program. Curis achieved recoveries as high as 81% using its method, and expects full results from the year-long metallurgical program to be released in the coming weeks. The company has previously used a 49% recovery rate in all its economic studies.

“We lay fresh core into a series of boxes and subject it to atmospheric conditions we observed in the ground to both vertical and horizontal flow, which simulates to the greatest extent possible the in-situ conditions at site,” McPhie explains, adding that the procedure offers a superior alternative to column-leach tests. “We’re expecting the two-way flows across the fractures, so what we’ve done is come up with a series of tests that represent a realistic scenario.”

Curis’ final requirement prior to its phase-one development is an underground injection control (UIC) permit. Governed by the U.S. Environmental Protection Agency (EPA), the UIC permit pertains to the design and operation of Curis’ injection and recovery wells.

McPhie says a number of UIC permits have been granted in the past two years — mostly to in-situ uranium projects where the process is common — and that the EPA understands the system well.

“They are very skilled and knowledgeable about the issues in play, and we have a very positive working relationship with them,” McPhie says.

And markets have rewarded Curis for passing these milestones. Shares have jumped 100%, or 40¢, since hitting 52-week lows in August, and reached 80¢ per share at press time. Much still hinges on the approval of the UIC permit, though Curis management remains optimistic it will receive its final permit by year-end. The company maintains a tight equity structure with 56 million shares outstanding, and McPhie says final project financing will take advantage of equity funding, as well as debt facilities.

“As a company, we set out on a path just under two years ago,” McPhie says. “We were determined to take this thing to the start of construction and development by the end of 2012, and we’re meeting that objective.”