Quadra FNX boosts resource at Victoria

Infill drilling at Quadra FNX Mining‘s (QUX-T) polymetalic Victoria project in Sudbury, Ontario has increased tonnes of inferred resources by 16% and raised by 32%, 26% and 4% its contained nickel, copper and total precious metals, respectively, the company says.  Victoria now has inferred resources of 14.5 million tonnes grading 2.5% nickel, 2.5% copper and 7.6 grams total precious metals per tonne.

Metal prices used for the updated resource were US$5 per lb. copper, $14.50 per lb. nickel, platinum at US$2,910 per oz., palladium at US$910 per oz. and gold at US$1,820 per oz. and a Canadian dollar exchange rate of $1.00.

Borehole geophysical surveys have demonstrated extensions of electromagnetic conductance that the company interprets as sulphide mineralization down-dip of the known Victoria Zone 4 mineral envelope. The company notes that additional conductive domains have been discovered several hundreds of metres to the west of Zone 4 and will drill tested this year.

Last year the company produced 220 million pounds of copper, 103,000 ounces of total precious metals and 10 million pounds of nickel. Consolidated payable production for the three months ended Dec. 31 2011 reached 59 million pounds of copper, 24,000 ounces of total precious metals and 3 million pounds of nickel.

The company also reported that Robinson, its open-pit copper mine in Nevada, delivered “record ex-pit mining volumes and continuing grade improvement as mining transitioned into the higher grade benches at the bottom of the Ruth pit.”

Quadra FNX has mines in Nevada, Arizona, Chile, and Canada. Its two development-stage projects are Victoria and its flagship Sierra Gorda, a copper-molybdenum project in Chile.

In December 2011, Polish copper mining giant KGHM made an all-cash offer for the company of $15 per share–a 41% premium to Quadra’s 20-day, volume-weighted average price–and Quadra’s board has backed the offer. A meeting of shareholders is planned for February.

Tom Meyer, a mining analyst at Scotia has a one-year target price on Quadra FNX of $17.50 per share.

“We believe KGHM’s $15 per share offer does not account for the potential at Victoria, Sierra Gorda, and improving operating flexibility and exploration optionality at Robinson,” he wrote in a Jan. 16 note to clients.

He notes that the KGHM offer implies a price-to-net-asset-value (NAV) multiple of 0.53 times, whereas its peers trade at 0.62 times price to NAV.

The acquisition requires 66% approval from Quadra FNX’s shareholders. The deal is also subject to regulatory approvals that fall under the Investment Canada Act.

KGHM operates three mines in Poland: Lubin, Rudna and Polkowice-Sieroszowice, as well as three smelters and a wire rod plant.

Shares of Quadra FNX closed at $15.32 after touching a high of $15.34 earlier in the session. The company has traded within a 52-week range of $7.69-$17.55 and has about 191.5 million shares outstanding.