Quadra FNX releases initial Victoria resource

Vancouver – A first resource estimate for Quadra FNX Mining’s (QUX-T) Victoria project has established a new high-grade, deep polymetallic project in the Sudbury district.

Located on the Sudbury south range breccia belt, Victoria hosts 12.5 million inferred tonnes grading 2.3% copper, 2.2% nickel, 3.2 grams platinum per tonne, 4.3 gram palladium per tonne, and 1 gram gold per tonne for a contained copper equivalent of 3.4 billion lbs.

“We believe this resource we’ve announced is one of the most significant finds in Sudbury in the last 40 years” said Paul Blythe, president and CEO of Quadra FNX, in a conference call.

“Victoria’s quickly evolved into a key development project for Quadra FNX,” continued Blythe. “With approximate in-situ value of over $14 billion of metal at current prices, it’s clearly very significant to us.”

The resource is heavily concentrated in zone 4, with only about 500,000 tonnes contained in the surrounding zone 2 and mini. The shallower zone 1, which was first discovered in 2008 and led to Quadra hitting the other zones, was not included in the resource.

Zone 4 ranges in depth from about 900 metres to almost 2 km, while its sulphide mineralization is still open in all directions. The resource is characterized by vein, semi-massive and massive, pyrrhotite-dominant sulphide mineralization, with varying amounts of pentlandite and chalcopyrite.

Quadra FNX drilled 31 diamond drill holes to establish the resource, with 23 intersecting zone 4. The company plans further drilling, including step out drilling and exploring between zones 1 and 4, but such deep drilling from surface is challenging.

To accelerate exploration, and development, Quadra FNX is planning to start work on sinking a shaft in 2012. Such a significant step, however, will have to wait until the company gets past several hurdles.

“We don’t control our own destiny in any of the next steps,” said Blythe, “First Nations consultations, permitting, even discussions with Vale (VALE-N), we don’t control the timeframe. All we can do is push hard towards getting rolling as early as we can in 2012.”

The Vale discussions relate to a back-in right as part of Quadra FNX’s option agreement on several Sudbury Basin properties dating from 2001. The deal stipulates that if Quadra FNX establishes the equivalent of 600 million lbs. nickel and decides to complete a feasibility study, Vale has the right to acquire 51% of the deposit in a joint venture with Vale as operator. The option would also require Vale to fully fund the project, while it would get a significant portion of proceeds until costs are paid. A 2003 agreement also gives Vale the right to all off-takes from the Sudbury properties.

Blythe said that up until now there had been little to discuss with Vale, but talks would start soon.

“We are now at the point we can usefully engage Vale,” said Blythe.

The inferred resource is indeed only a first step, with development still at a very early stage. Still, the company has started to prepare mining strategies and potential financials, with an in-house scoping study complete.

Early capital cost estimates are roughly $750 million, with the company targeting 2012 for initial development and 2017 for possible production. Two shafts could be used in conjunction with long-hole stoping.

In the more present day for Quadra FNX, the company released first quarter results concurrently with the Victoria estimate, which helped to distract from lower than expected production.

UBS analyst Onno Rutten wrote in a note that first quarter copper production of 46 million lbs. was 18% lower than his 56 million lbs. estimate, though he did acknowledge Quadra’s caution that 2011 production guidance would be back-end loaded.

Quadra FNX has had troubles at its Nevada-based Robinson copper mine, where operations are constrained to the upper portion of the pit. The company is working to remove mud from the pit bottom, as well as add a second access to allow it to mine more ore. Production was also affected by a switch at its Carlota copper mine in Arizona from truck dumping to conveyor stacking, and at its Franke copper mine in Chile where it switched from contract mining to owner mining.

Production challenges were more than off-set by the positive Victoria news, with Quadra FNX’s share price climbing $1.44 or 10.2% to $15.59 on the day with 7.2 million shares traded. The company has 190.6 million shares outstanding.