Copper One picks up Troilus from First Quantum

VANCOUVER — Stan Bharti and his merchant banking team at Toronto-based Forbes & Manhattan appear to be on the lookout for past-producing copper assets. Roughly six months after grabbing a major share position in junior Kombat Copper (TSXV: KBT; US-OTC: PNTZF) — which holds an 80% stake in the dormant Kombat copper mine in northern Namibia — Bharti’s group has made a second acquisition in the form of the inactive Troilus gold–copper mine, 175 km north of Chibougamau, Que.

On April 8 Montreal-based Copper One (TSXV: CUO; US-OTC: COPRF) — a second vehicle listed under Forbes & Manhattan’s base-metals group — announced it had acquired Troilus from First Quantum Minerals (TSX: FM; LSE: FQM), which had in turn picked up the asset in the US$2.5-billion takeout of Inmet Mining.

Inmet commissioned the Troilus mill in 1996 and achieved commercial production in April 1997 at a rate of 10,000 tonnes per day. The operation eventually ramped up to 18,000 tonnes per day. Troilus cranked out over 2 million oz. gold and 50,000 tonnes copper before closing in 2010.

During peak operations Inmet was pulling 45,000 tonnes of material from the Z-87 and satellite J4 pits per day, after which coarse gold was recovered using gravity concentration, and a 22% copper concentrate was produced via flotation cells. The combined milling circuit at Troilus recovered 90% of the gold from 15,000 tonnes of processed ore daily, with the concentrate mostly free of penalty metals like arsenic.

The operation also benefitted local communities, as 70% of Troilus’ workforce was hired locally, including 25% from from the Cree communities of Oujé-Bougoumou and Mistissini.

Troilus has 81 mineral claims over 64 sq. km and features strong infrastructure, such as road access, power lines, camp buildings, a permitted tailings pond and associated water-treatment facilities. Copper One notes that the mill was sold and removed during the first phase of reclamation.

Inmet established an extension of the Troilus deposit below its Z-87 open pit in 2005. The Z-87 underground zone hosts 29.4 million measured and indicated tonnes grading 0.16% copper and 1.48 grams gold per tonne for 105 million contained lb. copper and 1.4 million contained oz. gold. Inferred resources tack on 7.9 million tonnes of 0.14% copper and 1.18 grams gold for 24.8 million lb. copper and 300,000 oz. gold.

It should be noted that existing resources were calculated using a US$450 per oz. gold price, a US$1.10 copper price and a 0.8-gram-gold cut-off grade.

“The infrastructure at Troilus gives us a fast-track to move this project through the development phase over the next 12 months while we work to expand the resources,” noted president and CEO Scott Moore, who also serves as chief operating officer at Forbes & Manhatten. “Agnico Eagle Mines’ Goldex mine, located outside of Val-d’Or, is a large-tonnage, low-grade underground operation. We believe that like Goldex, under the current market conditions, Troilus could have a second profitable life.”

Under terms of the agreement Copper One will acquire a 100% stake in Troilus by assuming “all obligations and liabilities relating to the property as of Jan. 1, 2014, including the remaining obligations pursuant to the closure plan.” The company will also grant First Quantum a 2.5% net smelter return royalty.

As a condition of the deal Copper One will post letters of credit to Quebec’s Ministry of Natural Resources, Ministry of Finance and Economics, and Ministry of Sustainable Development, Environment, Wildlife and Parks totalling $4.1 million. The funds will go towards obligations under Troilus’ closure plan. First Quantum has agreed to guarantee the letters of credit until whichever comes first: two years from the deal’s closing date, or Copper One having working capital in excess of $10 million.

Copper One had focused on its Rivière Doré — located halfway between Mont Laurier and Val-d’Or, Que. — before its claims were indefinitely suspended due to opposition from local First Nations communities. The company also completed 6,400 metres of drilling at its Quelyus copper–gold property near Chibougamau in early 2013. Moore replaced outgoing president and CEO Benoit Moreau in late September.

Copper One has traded within a 52-week window of 3¢ and 12¢, and closed at 8.5¢ at press time on 110,000 shares traded. The company has 66.5 million shares outstanding for a $5.7-million market capitalization, and reported US$1.1 million in cash and equivalents after the third quarter of 2013.