Copper Mountain bids
 US$70M for Altona Mining

VANCOUVER — Copper Mountain Mining (TSX: CMMC; US-OTC: CPPMF) has tabled a US$70-million, all-share bid for Australia-based Altona Mining (ASX: AOH) and its district-scale Cloncurry copper-gold property, 95 km northeast of Mt. Isa in Queensland, Australia.

The company reported on Nov. 19 that it is offering Altona shareholders 0.0974 of a Copper Mountain share, which will be dual listed on the Australian and Toronto stock exchanges for each share held. The offer equates to a 41.7% premium based on closing prices at the time of the deal.

Copper Mountain’s flagship asset is the 75%-owned Copper Mountain open-pit copper mine outside the town of Princeton in southern British Columbia.

Japan’s Mitsubishi Materials holds the remaining stake in the operation, and has an off-take agreement entitling it to all the life-of-mine copper concentrate production. Copper Mountain expects to produce between 75 million to 85 million lb. copper this year.

Mt. Roseby on Altona Mining’s Cloncurry copper-gold property, 95 km northeast of Mt. Isa in northwest Queensland, Australia. Credit: Altona Mining.

The mine has 15 years life remaining based on proven and probable reserves of 133 million tonnes grading 0.35% copper, 1.47 grams silver per tonne and 0.12 gram gold per tonne.

Meanwhile, Altona is advancing the wholly owned Cloncurry project, which hosts measured and indicated resources of 163 million tonnes grading 0.58% copper and 0.05 gram gold per tonne, and inferred resources of 127 million tonnes at 0.57% copper and 0.04 gram gold.

Aerial shot of the Copper Mountain mine, looking north, with Pit 3 in the foreground. Credit: Copper Mountain Mining.

“We looked at this project a couple years ago, but at that time the copper markets were not in our favour,” Copper Mountain CEO Jim O’Rourke said during a conference call. “So we didn’t end up pursuing it at that time, and they had an agreement with a Chinese group that didn’t work out. In August, we picked up the phone to rekindle the negotiations.”

The property hosts iron oxide copper gold (IOCG) mineralization, which Altona reports can “manifest in a variety of styles,” including: vein networks, breccias, disseminations and replacements. The deposits are typically localized in dilation zones of structures active during pluton emplacement and cooling.

“It’s actually quite similar to Copper Mountain,” Copper Mountain vice-president of exploration Peter Holbek said. “There’s very similar alteration and dispersion of mineralization in terms of copper and gold. It’s quite well drilled off, and well understood. They have done a great job geologically in understanding the structural controls.”

Altona released an updated feasibility study on Cloncurry earlier this year, which models a 19,200-tonne-per-day open-pit mine that would produce 86 million lb. copper and 17,200 oz. gold annually over a 14-year mine life at cash costs of US$1.92 per pound.

Altona has earmarked four copper-gold deposits for production: Little Eva, Lady Clayre, Ivy Ann and Bedford.

The historic Lady Clayre copper workings at the Cloncurry IOCG project in Australia. Credit: Altona Mining.

O’Rourke noted the project has “all major permits,” but will require “some amendments” and more regulatory work to move into construction.

Copper Mountain said it is targeting production by 2020, and would likely fund the US$217-million capital expense requirement via debt facilities and treasury.

Based on a US$2.95 per lb. copper price, Altona estimates a $293-million, after-tax net present value at a 7.5% discount rate, and a 28% internal rate of return.

“We’ve achieved what we set out to do with Copper Mountain, and have also met our second goal in terms of exploration success at the project to create organic growth,” O’Rourke added. “Our development and operation experience will effectively combine with Altona’s exploration expertise as we work towards becoming a mid-tier copper producer.”

Aerial shot of the concentrator building and coarse ore stock pile at the Copper Mountain site. Credit: Copper Mountain Mining.

Furthermore, Copper Mountain cites potential to add resources at depth and along strike, as well as through exploration at numerous prospective targets within Altona’s regional land package, which totals nearly 4,000 square kilometres.

Scotia Capital analyst Orest Wowkodaw has a “sector perform” rating on Copper Mountain and a one-year price target of $1.70 per share. He noted that Cloncurry “appears to have reasonable economics,” but expressed concern over the company’s “ability to fund … the development” and its “project-execution capabilities in Australia.”

Copper Mountain has traded within a 52-week range of 69¢ to $1.85 per share, and closed at $1.51 at press time. It reported $44 million in cash at the end of the third quarter, and has 132.4 million shares outstanding for a $200-million market capitalization.

The pro-forma combined company would have $78 million in cash and a $300-million valuation.