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Waiting For Feasibility
Abacus’ Ajax Copper-Gold Project Is Set To Produce In Late 2014
~ By Kevin Michael Grace - May 6, 2011
When equity analysts speak of the optimum conditions for a successful Since the publication of the PEA two years ago, Abacus has secured
mining company, they mean a company like Abacus Mining & Explora- Ajax’s financing through its joint venture with KGHM, clarified its ownership
tion Corp. Abacus has first-rate management, a solid resource in a secure structure with Teck and expanded its resource through 27,000 metres of
jurisdiction, excellent infrastructure, strong financial backing and commodi- drilling last year. Assay results from January include 1.31% copper and 1.23
ties near historic highs. For all this, the company’s market cap has been cut g/t gold over 23.1 metres, 0.61% copper and 0.49 g/t gold over 60 metres,
in half, to $36.5 million, since October, and its shares trade below 20 cents. 0.51% copper and 0.31 g/t gold over 202 metres, 0.44% copper and 0.4 g/t
Why? President and CEO Jim Excell responds, “It comes with the nature of gold over 140.9 metres.
the industry. It’s the pain you have to go through when you’re transforming
from an exploration company to a producing company.” KGHM is the world’s ninth-largest copper producer and third-largest silver
producer. Excell explains how they join forces with Abacus. “A couple of
Excell, former President and Chairman of BHP Billiton Diamonds, is refer- years ago, they took it upon themselves to grow their business to 700,000
ring to Abacus’s Ajax copper-gold project, located just outside Kamloops, tonnes of copper a year. They see tremendous growth potential in cop-
BC. A joint venture with Polish commodities giant KGHM Polska Miedz SA, per outside Poland and have been looking externally, particularly in the
Ajax is scheduled to begin production in late 2014. A bankable feasibility Americas. We were looking for a partner. From the time we met there was
study is due, Excell reports, “in the fourth quarter of this year.” It’s the wait common thinking about how to get Ajax accomplished and acquire other
for this study, Excell believes, that’s depressing the share price. He says, projects.”
“We are working very diligently to put together this study. We’re working
hard on our relationships with the community. We’re working hard on our A definitive agreement between the two was signed in October. KGHM
environmental assessment work. All of which is not really exciting news but paid $37 million for 51% of Ajax, thereby funding the recent drilling and the
is very important. In fact, the trouble with the feasibility study is that until we feasibility study. Upon completion of the latter, KGHM has the option to buy
complete it, we can’t really talk about it.” another 29% for up to $35 million. Thereafter KGHM is responsible for fi-
nancing its 80% share of Ajax and will offer to arrange financing for Abacus’
20%, although Abacus is free to seek third-party funding.
In other words, Excell says, “Abacus has essentially got a carried interest
through to operations.” Which will protect its shareholders from the signifi-
cant dilution common in these development situations. And on April 18,
Abacus announced that Teck’s back-in rights to Ajax had been settled for
20.7 million shares. Teck now owns 19.9% of Abacus.
Permitting will likely run through 2012. Nowadays, when the prospect of
a major mine in BC is contemplated, the fate of Taseko’s Prosperity Mine
Ajax was part of a historic open-pit mine site formerly operated by Teck must be considered. Excell argues, “We don’t really have the same issues
Resources. Abacus acquired the 8,100-hectare property (including the Prosperity had. We’ve been working very closely with the First Nations in
mill buildings, tailing ponds, water access and powerline) for $28.5 million Kamloops. They’re very experienced with mining opportunities, and they’ve
beginning in 2002. Teck’s main pit there, Afton, 10 kilometres from Ajax, is got a good relationship with New Gold. They’re looking forward to having
now owned by New Gold, a company with a $3.7 million market cap. New a new relationship with us. The core principle is to make sure you’re really
Afton is scheduled to begin underground operations in late 2012, producing open with the public.”
75 million pounds copper, 214,000 ounces silver and 85,000 ounces gold
annually for 12 years. Ajax’s environmental hurdles will be easier to clear for two reasons. First, it’s
a historic site. Second, Ajax will produce a clean concentrate with no acid
According to a 2009 preliminary economic assessment, Ajax contains 442 generation or toxic chemicals.
million tonnes measured and indicated at average grades of 0.30% copper
and 0.19 grams per tonne gold. Inferred resources are 81 million tonnes Excell believes that the market will catch up with what Abacus has at Ajax.
at average grades of 0.22% copper and 0.16 g/t gold. At a 0.13% copper- He points to the possibility of further ventures with KGHM. And the big
equivalency cut-off, this is 2.9 billion pounds copper, 2.65 million ounces news, the kind that gratifies shareholders, is coming soon. He concludes,
“
gold measured and indicated and 391 million pounds copper and 404,000 “We’re only a few months away from releasing our feasibility study, which
ounces gold inferred. really should make people excited.”
The PEA foresaw a project cost of $550 million and mining of 60,000
tonnes per day producing 110 million pounds copper and 100,000 ounces We’re only a few months away from
gold annually for 23 years. Significantly, this is twice the rate achieved by
Teck. Based on a 3-year average price projection of US$2.99 per pound releasing our feasibility study, which
copper and US$773 per ounce gold, the study estimated a 28.8% Internal really should make people excited
Rate of Return, a pre-tax Net Present Value (at an 8% discount rate) of
US$1.15 billion and a 3.8-year payback.
—Jim Excell
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