Production nears for Nevada Copper

Pumpkin Hollow will be the next copper mine built in North America, Matthew Gili, Nevada Copper’s (TSX: NCU) new president and CEO, tells The Northern Miner in one of his first media interviews on the job.

Gili, a mining engineer who joined the company in May, says his mandate from Nevada Copper’s board is clear: build a mine at Pumpkin Hollow that will set in motion the company’s transformation into a mid-tier copper producer.

After 15 years at Rio Tinto (LON: RIO) and five years at Barrick Gold (TSX: ABX; NYSE: ABX), Gili has the qualifications for the job. His responsibilities at Rio included: chief operating officer and vice-president of resource strategy at the Oyu Tolgoi copper-gold project in Mongolia; managing director of Palabora Mining, a Rio-invested company in South Africa; and mine manager at Greens Creek in Alaska. At Barrick, Gili spent most of his time as executive general manager in Nevada’s Cortez district.

“Pumpkin Hollow is exciting for me. This is the right project at the right time,” he says. “It is the only fully permitted, shovel-ready copper project in North America, which puts us in a unique position. We’re not permitting. We’re building a mine today.”

Gili says commissioning should start in the fourth quarter of 2019, and the underground mine should reach 5,000 tonnes per day by mid-year 2020.

Pumpkin Hollow — 13 km southeast of Yerington, Nevada — actually consists of two assets: the underground mine being built, and an open-pit project 4 km away that will be built later, possibly starting in late 2020 or early 2021.

Together the underground and open-pit assets have more than 5 billion lb.copper, which would sustain a 23-year mine life.

The underground part of the project has a 13.5-year mine life based on reserves of 23.9 million tonnes grading 1.74% copper-equivalent. The underground mine will produce an average 50 million lb. copper, 8,000 oz. gold and 150,000 oz. silver a year at all-in sustaining costs of US$1.96 per lb. copper.

Pre-production capex will be US$182 million. That’s because US$220 million has already been spent on the project — long before Gili joined as CEO. Those funds paid for a significant amount of engineering and technical studies, and the construction of a production-sized headframe and hoist, a warehouse, a 1,900-foot deep, 24-foot diameter, concrete-lined production size shaft, and over 600 feet of lateral development. All of that work was put on hold when the copper price fell and the company ran out of money.

Inside the production facilities at Nevada Copper’s Pumpkin Hollow copper project. Credit: Nevada Copper.

The long-term play at Pumpkin Hollow, however, is its open-pit component. Previous studies envisioned a large and expensive open-pit mine with a concentrator running at 70,000 tonnes per day. But Gili and his team favour margins over tonnes in a smaller and less expensive operation that has half the milling capacity and starts in the North pit, where the grade is 40% higher than in the South pit.

“We’d see half the tonnes processed, but an increase in grade and a significant reduction in the capex spend profile,” Gili says.

The optimization studies should be completed before year-end.

In the meantime, the company has started a 10,000-metre surface drill campaign focused on high-value targets. The goal is to convert waste and inferred material into proven and probable reserves, and expand areas of high-grade mineralization — mostly in the North pit and especially in the northern end of the North pit — which was never drilled, because the company didn’t own the land until 2015.

In mid-May the company released results from two drill holes. The first was drilled in the previously undrilled Northern Extension zone of the North pit and intersected multiple copper mineralization zones, including 42.7 metres grading 2.05% copper from 95 metres downhole. A second hole found multiple mineralization zones below the existing deposit in the North pit, including 84.4 metres of 0.57% copper from 142 metres downhole.

Opportunities also exist to increase the underground mine life through resource expansion and exploration drilling, especially in an area called the “Connector Zone,” which lies between the East and East Two zones.

“The grade we intersected there is consistent with the rest of the deposit. It just doesn’t have the drill density to make it into a reserve statement, so as soon as we get East Two into production, we’ll drill out that zone,” Gili says.

Late last year, Nevada Copper entered into arrangements for a US$378-million construction financing and recapitalization package with Triple Flag Mining Finance, Pala Investments, Red Kite Mine Finance and Concord Resources, as well as institutional equity investors, including JP Morgan Asset Management UK.

The financing package has a US$70-million precious metals stream (only for precious metal production from the underground mine) from Triple Flag; an US$80-million, senior-secured loan from Red Kite; a US$53-million, debt-to-equity conversion by Red Kite and Pala; a US$25-million working capital facility, which Concord has been mandated to arrange for the company; a US$90-million equity commitment from equity investors, including Pala; and a US$60-million equity backstop from Pala that can be used at Nevada Copper’s option for subsequent equity offerings.

For his part, Gili is enthusiastic and passionate about the project. “Everyone wants this project to go — the shareholders, the city, the state — and it’s the right time for copper,” he says. “It’s different than working for a bigger company. You spend a lot more time worrying about things you didn’t have to worry about, but it’s very exciting.”

Gili is also keen to reinvigorate the Yerington mining district.

“We’ll be the first ones there. We’ll have first-mover advantage, and we’ll be converting Yerington back into a major, copper-producing region.”