Analyst lauds Copper Ridge for innovation in tough time Investment Commentary

Old mining properties never die; they just get recycled . . . or so goes an industry adage. And that means someone was bound to dust off the Howard’s Pass zinc deposit, which didn’t quite make the rocky road to production a few decades ago, and give it a fresh look to see if technical advances can transform mineralized rock into ore.

Taking on that challenge is Copper Ridge Explorations (KRX-V), which recently picked up an option to buy a 100% interest in the project from Placer Dome (PDG-T) and U.S. Steel. The non-binding deal, though still subject to due diligence and various approvals, caught the attention of Dorothy Atkinson, senior mining analyst for IPO Capital, who initiated coverage of Copper Ridge for “demonstrating innovation in a tough time.”

In a research report, Atkinson describes Copper Ridge as “an excellent opportunity for speculative investors.” She notes that, since the announcement, shares have strengthened to the 25-30 range. “If Copper Ridge and a major company proceed to the next stage of the project review, we anticipate the stock will strengthen to the 70-cent range,” she adds.

Discovered in 1972, Howard’s Pass is on the border of the Yukon and the Northwest Territories, within a belt of rocks that host sedimentary (or “Sedex-type”) mineralization. The previous owners spent $15 million over 10 years to explore the property, which contains estimated resources of 110.5 million tonnes grading 7.7% combined zinc and lead (about 5.3% zinc and 2.4% lead) at a 4% combined cutoff within a much larger global resource of 485.5 million tonnes at 5.2% zinc and 1.95% lead.

As a first step, Copper Ridge has a 150-day due diligence period in which to examine issues that were project-killers in the past, beginning with metallurgy. It will also review reserve and resource calculations, mining plans and infrastructure alternatives.

Atkinson says original metallurgical testing, using traditional flotation recovery methods, had difficulty producing clean, high-grade zinc and lead concentrates owing to the fine-grained nature of the ore and its graphite content. Bulk lead-zinc concentrates provided better recoveries but weren’t always easy to sell to smelters. “In either case,” she adds, “high transportation costs from this remote site and high smelter costs were the two key factors in producing negative economics for this project.”

What does Copper Ridge plan to do differently? A lot, according to Atkinson. “The company is in discussions with a major mining company that holds proprietary rights to new hydrometallurgical technology that could be applicable to Howard’s Pass ores, potentially providing simplification of the metallurgical process and improved zinc recoveries.”

As Atkinson notes, the pressure-oxidation and zinc electrowinning plants now in commercial operation provide a process that would eliminate the need to transport concentrates to smelters, thus lowering costs. “The hydrometallurgical/electrowinning plant proposal, however, requires significant electrical energy usage.”

The power problem may not be a problem for long if plans to develop gas fields in the surrounding region come to fruition. However, Copper Ridge also intends to examine slurry pipeline movement of a bulk concentrate to a central processing plant (possibly at Watson Lake) capable of handling concentrates from other zinc deposits, as well as a southern transportation corridor through British Columbia, possibly connecting to rail lines.

The Copper Ridge team examining these and other issues will be headed by John Chapman, a mining engineer. Large-scale, open-pit mining is envisioned, though a significant amount of drilling is required to upgrade resources to a minable reserve. The two main deposits, X-Y and Anniv, were estimated by Placer to contain a mineral inventory of 32.7 million tonnes grading 9.4% zinc and 4.2% lead.

“During the due diligence period,” Atkinson writes, “the company proposes to carry out preliminary hydrometallurgical testing on Howard’s Pass mineralization, digitize the surface, underground and drill-hole data, and calculate block models under a variety of cutoff grade and stripping ratio scenarios.”

The analyst speculates that Billiton may be the major company waiting in the wings, though Cominco also has expertise in this area.

Atkinson views the option costs as “negligible.” It can be exercised by spending $10 million over four years, with a further $5 million payable on a production decision. On the corporate front, Atkinson says Copper Ridge has a “respected management team,” which includes President Gerald Carlson. Kinross Gold (K-T) owns 25.8% of Copper Ridge.