Ross Beaty closes in on 10 for 10

Of the 10 copper projects acquired by Ross Beaty’s Lumina Copper (LCC-V) in 2003 near the end of a five-year downturn for the resource sector and a dramatic fall in metal prices, it has kept just one, Taca Taca, in Argentina. The rest it sold – for a total of about $1.2 billion – during the next five-year bull market, which in turn came to an abrupt halt with the 2008 financial crisis. Now, with metal prices back on the rise and the global economy well on its way to recovery, Beaty and Lumina are looking to make it 10 for 10. 

After sitting on its Taca Taca copper-gold-molybdenum project in Argentina for nearly two years waiting out the worst of the financial crisis, Lumina started work on the property again in mid-2010.

In August 2010, Lumina completed a small drill program on the property to test the known resource at depth. While the program did not encounter deeper zones of mineralization, it did find higher-grade copper intercepts in step-out drilling which exceeded expectations. 

The company is now in the early stages of a 40,000-metre, two-rig drill program for 2011, and expects to add two more drill rigs over the next six weeks. It is also completing advanced metallurgical testing and engineering studies to enhance the project’s value. Lumina expects to complete all three by year-end, “at which time we believe we will be in position to market the project for sale,” said David Strang, Lumina’s president and Beaty’s long-time business associate, in the company’s 2010 annual report. 

Taca Taca already has an inferred resource of 11.2 billion lbs. copper, 460 million lbs. molybdenum and 3.77 million oz. gold, assuming a copper-equivalent cutoff of 0.3%, US$1.50 per lb. copper and US$600 per oz. gold. It is also in the relatively mining-friendly Argentine province of Salta, about 90 km east of the world’s largest copper mine, Escondida, in Chile. The nearest village to Taca Taca, named Tolar Grande, has a population of 100, and is 32 km to the east.

Mineralization at the property is primarily hypogene, supergene and oxide copper-molybdenum-gold porphyry that is typical of Andean porphyry deposits. Hosted by Oligocene granitic porphyry intrusions, hypogene chalcopyrite mineralization is common beneath the quartz sericite altered portion of the porphyry and is capped on the west and north side by a supergene enrichment zone. According to Lumina’s January 2011 amended technical report, the supergene zone is generally 20 metres to 60 metres thick and consists of chalcocite and covellite coatings on hypogene chalcopyrite and pyrite.

Recent drilling at the property turned up hypogene high-sulphidation copper mineralization in a new zone that the company hopes will contain higher-grade mineralization in significant tonnage. The zone mainly comprises bornite, chalcocite and digenite.

Initial metallurgical testing showed recoveries of 85% for copper, up to 53% for molybdenum and up to 38% for gold. 

As a result of Lumina’s several corporate restructurings, the company has just 35 million shares outstanding and working capital totaling roughly $23 million. It also has four net smelter return royalties of up to 1.5% on four South American copper properties, which it plans to spin out into a new company, Lumina Royalty, later this year.

As for Beaty, he controls 9.69 million shares for about 35% of Lumina, though he holds no formal role with the company. The value of his shares has increased considerably as the stock has risen from its mid-2010 low of 90¢ to over $7 in April 2011; they are now worth roughly $68 million on paper. In March, he even helped cool fears the stock was overvalued by buying 700,000 shares for $3.6 million in a private placement. 

As one of Vancouver’s most successful promoters, Beaty’s story is one that has been told many times. A geologist with an entrepreneurial streak, Beaty got his first taste of success in 1994 by selling his first public company, a small gold miner named Equinox Resources, to Hecla Mining (HL-N) in a $107-million deal. He used the proceeds to start what would eventually become the world’s second largest primary silver producer, Pan American Silver (PAA-T, PAAS-Q), and the rest, as they say, is history. 

Beaty’s foray into copper started almost a decade ago. As Beaty explained in a 2009 interview with The Stealth Investor‘s John Pugsley,  “In 2002, when metal prices were at rock bottom, I wanted to gain exposure to the likely commodity boom that was coming, but because of the conflict of interest (with Pan American) I didn’t want to do another silver company.

“I decided to follow the same strategy I followed in silver: that is, to search the world for large deposits that were known but were uneconomic at low (copper) prices. I formed Lumina Copper and took it public. The strategy was to buy large resources at the bottom of the copper cycle and sell them as copper prices rose.”

He called it, “Wealth creation by good corporate strategy, successful exploration, good financial engineering and very close execution of a very simple business plan.”

Lumina bought 10 deposits scattered throughout the Americas and reorganized itself into four separate public companies: Regalito Copper, which was sold to Pan Pacific Copper in early 2006; Lumina Resources, sold to Western Copper (WRN-T) in late 2006; Northern Peru Copper, sold to a syndicate including China Minmetals and Jiangxi Copper in early 2008; and Global Copper, sold to Teck Cominco, now Teck Resources (TCK-T, TCK-N), in August 2008.

A condition of the last sale allowed Beaty to spin out a new public company, renamed Lumina Copper, which held all of Global Copper’s assets except for the Relincho copper-molybdenum deposit in northern Chile. This allowed Lumina to retain control of Taca Taca – the last of the 10 original deposits.