Nevada Copper steadily advancing Pumpkin Hollow

Nevada has long excited explorers with its gold potential, but Nevada Copper (NCU-T) continues to prove the state’s potential for the red metal, too.

The company is pushing its sizeable Pumpkin Hollow copper project towards production, having recently completed a feasibility study, initiated tunnel development and advanced an interesting land deal to make permitting easier. At the same time it continues exploration work to expand the mine’s potential.

A January feasibility study established an 18-year, open-pit mine life, processing 60,000 tons a day, along with a concurrent 13-year, 7,500-ton-per-day underground operation that together should produce 274 million lbs. copper a year for the first five years and 226 million lbs. copper a year for the life-of-mine. Over 18 years Pumpkin Hollow should produce 3.8 billion lbs. copper, 642,000 oz. gold and 15.4 million oz. silver.

At a base case per lb. copper, those production numbers translate to an estimated pre-tax net present value of US$1.26 billion using an 8% discount rate, and a 23.1% pre-tax internal rate of return.

The project value is affected by capital costs that run just over US$1 billion for initial costs and a full second billion for sustaining capital with a 3.6-year payback. Anticipated copper production costs, net of gold and silver credits, comes in at US$1.37 per lb. for the first five years and US$1.43 for the life-of-mine.

The numbers released in January did not please everyone, with the company’s share price dropping from $5.56 to $4.75 within a week after the study was released. 

But Nevada Copper is hardly resting on its current study, with an updated resource incorporating 50,000 metres of drilling due in the second quarter, and an iron magnetite resource to be incorporated in an updated feasibility study in the third quarter. The iron resource stands at 340.9 million measured and indicated tons grading 32.6% iron for 111 million tons of iron with a 20% iron cut-off.

The company is also ploughing ahead with development and recently celebrated an official groundbreaking for Pumpkin’s new shaft. The 7-metre-diameter, 671-metre-deep shaft on the East deposit will provide access for bulk sampling and underground drilling, as well as serve as an eventual production shaft. The shaft-sinking should take up to 22 months to complete.

And the company is working on a deal to speed up permitting. Most of the defined resources sit on 2.5 sq. miles of patented ground on the company’s project east of Yerington, but the nearly 20 sq. miles surrounding it are managed by the Bureau of Land Management (BLM). The company, with the support of local politicians, is trying to have the town of Yerington acquire the surrounding lands and incorporate them into the city, giving the town greater revenue and Nevada Copper a faster, state-level permitting route.

Nevada Congressman Mark Amodei introduced the Yerington Land Conveyance and Sustainable Development Act, which would allow the land transfer to take place in Congress in mid-February. The deal, which would see Nevada Copper covering the costs of the acquisition for the town, is unanimously supported by the town and county councils.

If the deal does not go through and the land stays with the BLM, Nevada Copper will have to complete a plan of operations with the BLM and prepare an environmental impact statement along BLM guidelines. The company expects the BLM will add two years to its permitting timeline and push back its first production from 2015 to 2017.

On the exploration front, the company announced step-out drill results from the east and south edges of the open-pit North deposit and between the North and South deposits as it considers combining them into one pit. Hole 11-29, drilled along southwest border of the North deposit, hit 70 metres grading 0.33% copper from 436 metres downhole along with several other intersections ranging from 4 metres to 29 metres in length, while on the eastern border of the North deposit, hole 11-33 cut 42 metres averaging 0.41% copper from 47 metres depth and hole 11-34 hit 59 metres averaging 0.48% copper. All holes showed modest gold, silver and molybdenum grades.

The company has three drill rigs active on the site as it works to complete its 50,000-metre drill program and upgrade the resource later this year. The North, South, and Southeast open-pit deposits host 558.4 million measured and indicated tons grading 0.39% copper for 4.3 billion contained lbs. copper using a 0.15% cut-off grade. The East, JK-34 and E-2 zone underground deposits host a combined 50.6 million measured and indicated tons grading 1.45% copper for 1.5 billion contained lbs. copper using a 0.75% cut-off grade. The western pits also host inferred resources of 388 million tons grading 0.3% copper, and the eastern deposits host 12.1 million inferred tons grading 1.11% copper.

The feasibility study established global proven and probable reserves of 405.5 million tons grading 0.53% copper, 0.8 gram gold and 2.31 grams silver for 4.3 billion lbs. copper, 952,000 oz. gold and 27.3 million oz. silver.

Nevada Copper’s share price closed at $4.74 on the latest drill results with 72.8 million shares outstanding. The company had $68 million in cash-on-hand at the end of January and was  looking at financing options following the feasibility study release.

The company also recently added Victor Bradley to its board as it moves into the advanced-development stage. Bradley founded Yamana Gold in 1994 and led it as CEO until becoming chairman for several years in 2003. He has been chairman of Osisko Mining (OSK-T) since 2006.