Shares of Curis Resources (TSE:CUV) reached a new 52-week high Wednesday after the company reported its highly anticipated prefeasibility study for its Florence copper project in Arizona, showing strong economics and lower initial capital costs than a previous preliminary report.
Investors have been eagerly awaiting the results of the study, with the company's stock almost tripling in the past six months. In the last month alone, its shares have risen more than 44%, and were lately trading at $1.27 - up more than 10% on the day as the results clearly impressed.
The report, authored by M3 Engineering & Technology, shows that using a long-term copper price of US$2.75 a pound, the project has a pre-tax net present value of US$748 million at a 7.5% discount rate, with a 38% internal rate of return (NYSE:IRR) and a pre-tax payback period of just under two and a half years.
After tax, the net present value is $505 million using the $2.75 per pound copper price, with a 31% IRR and a payback period of just under three years.
The economics were modelled based on a design production rate of 55 million pounds of copper per year in the first five years, rising to 85 million pounds in year six.
At a higher US$3.00 per pound copper price, around current levels, the pre-tax net present value increases to $875 million, Curis said, with an IRR of a whopping 41%.
"The study further confirms the robust economic potential indicated by the company's 2010 PEA [preliminary economic assessment]," said president and CEO, Michael McPhie, who called the latest study a "critical milestone" for the company.
"And with capital and operating costs that are estimated to be among the lowest in the global copper industry and a revised near term development plan now in place that provides a clear path to commercial operations, the PFS demonstrates both the economic and technical viability of the Florence Copper Project."
Indeed, the direct operating cost for the life of the project is estimated at US$0.79 per pound of copper recovered, with initial capital costs pegged at US$196 million - an 18% decrease from the initial estimate in the 2010 preliminary study.
Curis said the commercial operating life of the Florence project has also been extended from 19 to 25 years.
The property, which is located in central Arizona and owned outright by Curis, hosts a shallowly buried porphyry copper deposit with a significant oxide mineral resource that is amenable to in-situ copper recovery.
The in-situ recovery process requires no movement of rock or overburden, and there is therefore a substantially smaller footprint, with much less of an environmental impact on the surrounding area than with more traditional open pit mining operations.
The technique also requires substantially less mechanical energy in the form of trucks and explosives, and therefore generates significantly lower operating and capital costs.
The Florence property also has a history, as it was advanced to a prefeasibility study level, attaining full project permits when it was owned by BHP Copper in the late 1990s.
Curis has been working to amend and update these operational permits, with the aim of starting copper production at a phase 1 production test facility late this year. The junior copper explorer last September received a permit that authorizes the construction, operation and closure of the process, which involves a 24-well in-situ copper recovery operation at the project.
The copper explorer is still awaiting approval from the Environmental Protection Agency for an underground injection control permit for its phase 1 test facility. Once this permit is in hand, it will begin formal construction and operations.
The company said the in-situ copper recovery process was successfully tested by BHP in 1998, showing that the technique can be used without "adverse impacts to local or regional ground water quality".
Last month, Curis took another step toward boosting the value of the project with another round of large scale metallurgical tests that topped prior work, with the latest total copper recovery estimates used in the prefeasibility study announced today.
The latest in-situ recovery tests 17-22 were completed, with copper extraction ranging from 51 to 90%, and averaging 69%. When all the copper extraction results are incorporated with recent sweep efficiency modelling, Curis said that preliminary indications showed overall copper recovery of about 70% from a typical mineralized block.
The September 2010 preliminary economic assessment on the project used an average total copper recovery rate of just 49%.
The most recent study is based on 339.95 million tons of probable mineral reserves grading 0.358% TCu at a cutoff grade of 0.05% TCu, with the project expected to produce a total of roughly 1.7 billion pounds of copper.
The recovery operation will be accompanied by an art solvent extraction/electrowinning facility that is designed to produce 99.999% pure copper cathode sheets.
According to the latest timeline, the company is slated to begin full commercial production by 2016.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.