Aussie rich-lister likes New Mexico copper deal

Having spent the last two decades making a A$338-million fortune providing accommodation to mining companies, Australia’s Kevin Maloney has now decided to try his hand at mining himself. In March, he invested $10.2 million in Vancouver-based Themac Resources Group (MAC-V) so it could buy a past-producing open-pit copper project in New Mexico. The Copper Flat property last saw mining activity in 1982, but only for three and a half months before copper prices tanked and the project became uneconomic. Maloney, Themac’s chairman, will try to succeed where at least five other operators have failed since the mine’s closure.

The deal is off to a slow start. Maloney joined the board of a shell named Helena Resources in 2005 and began receiving shares of the company for paying its listing fees and various other costs. In 2007, he changed the shell’s name to Themac Resources and began buying shares through private placements. By 2008, he controlled roughly half of its outstanding shares and by early 2010 controlled more than 77%. 

As Barrett Sleeman, Themac’s CEO, describes it, “We’ve been looking for the right project for many years. We’ve looked at a half dozen projects in various parts of the world, and nine out of ten simply weren’t good enough.” 

In March 2010, Themac signed a deal to option the Copper Flat property from ECR Minerals (MSC-L) for 10.5 million units and $10 million. Themac then arranged to raise up to $15 million with a Toronto brokerage firm, but cancelled the financing months later without raising any money. Five amendments and one year later, Maloney paid for the acquisition himself, acquiring 40 million shares at 25.5¢ each for $10.2 million, as well as 44 million warrants exercisable for five years at 34¢.

During the year, Themac completed a preliminary economic assessment for Copper Flat using mainly historical data. It hosts a porphyry copper-molybdenum deposit in the Las Animas mining district of south-central New Mexico, about 30 km southwest of a town called Truth or Consequences and 241 km south of
Albuquerque. 

“The good news is being in the United States means political risk is very low. The bad news is we have a lot of tasks in front of us regulation-wise before we get environmental permits,” Sleeman says. He notes the project is in a relatively mining-friendly area, 40 km from the Silver City mines operated by Freeport-McMoRan Copper & Gold (FCX-N).

SRK Consulting estimates Copper Flat’s indicated resource to be 97 million tonnes grading 0.303% copper and 0.010% molybdenum, with another 41.7 million inferred tonnes of 0.240% copper and 0.006% molybdenum. 

According to SRK’s technical report, the project is best described as an alkalic copper-gold mineralized breccia pipe likened to Thompson Creek Metals‘ (TCM-T, TC-N) Mt. Milligan project in British Columbia. The deposit is within a roughly circular block of andesitic volcanic rocks that have been intruded by a quartz monzonite porphyry stock. The breccia pipe is currently defined at 400 metres by 183 metres with a depth of 305 metres, though opportunities remain to extend it at depth. 

As historic drilling programs did not typically assay samples for precious metals, there is no current resource estimate for gold or silver, resulting in further upside potential. 

Quintana Minerals developed Copper Flat as an open-pit mine in the early 1980s which processed roughly 13,600 tonnes per day, providing several advantages for today’s operator. 

“It was financed when copper was at US$1.50 per lb.,” explains Sleeman, with copper prices retreating as low as US66¢ per lb. by the time production began.

Access to the site is via paved highways and gravel roads that are still in good condition, though some upgrades are required. Quintana also brought power and water to the site, including an electrical substation and 21 km of power transmission lines. It even pre-stripped the waste rock from the pit, resulting in an estimated strip ratio for Themac of 0.38.

Metallurgical tests show recovery rates of 90.9% for copper and 55% for molybdenum over a 17-year mine life, with an estimated operating cost of US$1.41 per lb. copper. Initial capital costs total US$179 million, with sustaining capital of US$112 million also required over the life of the mine, including a US$40-million mine closure cost.

Last December, Texas-based oilfield services conglomerate Oil States International (OIS-N) bought Maloney’s MAC Services Group for A$651 million. Maloney started MAC in the 1990s as a provider of mining accommodation and services in remote areas of Australia. At the time of its acquisition, MAC was an ASX-listed, top-300 company, with 5,300 rooms and six unique mining villages. Maloney’s family had a 52% interest in the company.

Maloney now controls 50.8 million shares of Themac Resources or 68% of the company. He spent most of March finalizing the Copper Flat acquisition and beefing up management. On March 28, Themac appointed former BHP Billiton (BHP-N, BLT-L) exec Ken Pickering as a director, and on March 29 hired former Quadra FNX Mining (QUX-T) mine manager Ferol Baker as general manager. 

On April 21, Themac’s shares closed at 65¢, within a 52-week range of 13¢-$1.50.