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Curis Resources' Phase 1 Florence Operations Brewing As Just One Federal Permit Remains

Curis Resources (TSE:CUV) has just surpassed one of the few major hurdles left in getting the phase 1 operations at its Florence copper project going, which according to CEO Michael McPhie, is a strong vote of confidence in the technical viability of the asset and the general direction the company is headed.

The company last week announced it received the amended Aquifer Protection Permit (APP) from the State of Arizona for phase 1 operations, following an exhaustive public consultation process that lasted eight months, culminating the permitting process with the U.S. state for the first phase.

The company received the initial permit last September, but under the process administered by the Arizona Department of Environmental Quality (ADEQ), the permit then needed to undergo a review by the public and other interested parties through a formal consultation process.

The amended permit, granted by the ADEQ with some minor modifications from the original document, authorizes the construction, operation and closure of a 24-well in-situ copper recovery field and processing facility at the company's project site in central Arizona.

"To come out of an exhaustive and comprehensive public comment process that lasted 8-months and have the final permit issued with only very minor modifications is a strong acknowledgement of the merits and safety of the proposed project and shows support for what we are doing," says McPhie in a follow-up interview with Proactive Investors.

"We hope it will give comfort and some renewed focus to the federal Environmental Protection Agency [EPA] for our final approval required to get going," he adds, referring to the underground injection control (UIC) permit from the federal agency - the absolute final permit required for the phase 1 production test facility, which is in the final stages of review, according to the company. It hopes it will secure the last permit before the end of the year.

McPhie says the process for the state permit was "thorough", with the company receiving approximately 200 comments from the public consultation, which Curis was "able to address fully", according to McPhie. "There were questions making sure the science and engineering was protective of the water quality."

The Florence project has a long history, having been advanced to a prefeasibility study level and 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 phase 1 copper production later this year.

The company recently wrapped up a C$6 million "premium-to-market" non-brokered financing, and last year closed a $40 million finance facility with RK Mine Finance Trust (Red Kite), to help fund the development of its project. With its financing in place, detailed engineering complete, and long lead time equipment ordered, the final state permit brings Curis one step closer to the start of copper production at the site.

Copper from the project will be recovered through an in-situ process, which according to McPhie offers significant advantages over other mining techniques. Importantly, he says there are only modest surface impacts, with no open pits, waste rock piles or tailings facilities and no need for the use of explosives. When finished, the land can be returned "to equally productive use". "It has very little impact while mining. The wells are 12 inches in diameter, and when finished, you can remove the well and fill in the 12-inch hole with concrete and there will be almost no evidence you were ever there."

The company says it has both a "first life and second life" plan for the project in place, where copper extraction takes place during the first phase and the site is then converted to a multiple set of uses in the second phase, which are desired by the community. This could include ball parks, trails, community facilities and residential development.

"With the $40 million raised last May, combined with $6 million from the private placement, we are in good position to move forward," says the chief executive.

Indeed, in a preliminary feasibility study released in March this year, the internal rate of return for the Florence copper project was projected at 29 per cent, using a base case 70 per cent copper recovery rate and a price of $2.75 per pound of copper. The report also estimated the project has an after tax net present value of $505 million using a 7.5 percent discount rate, and a payback period of just under three years. Initial capital costs are pegged at about $208 million.

"We're in great shape financially, and the prefeasibility study has a sufficient level of detail to allow us to move into phase 1 operations. The bankable feasibility study is not expected until next year, as this is only necessary for the commercial operating phase sometime in 2014." At this point, the company is not planning or needing to raise more funds for current activities.

Curis has also been working to improve the economics of the project, and is hoping that the phase 1 operations will help prove up the copper recovery assumptions and refine some of its engineering estimates. It has even modeled an economic development scenario with up to a 75 per cent copper recovery rate, which yields a net present value of $552 million after tax, and a higher IRR of 31 per cent.

"We think we can do better than the base case 70 per cent, and hopefully we will prove even stronger recoveries," says McPhie.

Getting this close to the phase 1 operations for the Florence project has not been an easy process for Curis. The company has had to overcome some legal obstacles along the way, and the CEO says it has been making "very steady progress in this regard", having been successful in solving two primary cases.

"The first was a challenge to our phase 1 operating permit, which we won, clearing the way for the final state permit, while the second was an ordinance brought by the town of Florence regarding the use of sulphuric acid, which was voluntarily withdrawn.

"This was a show of goodwill toward the project," affirms the chief executive, adding that Curis is continually working to improve its relationship with the community, with positive steps being taken. A few legal issues remain that are in active discussion, and which McPhie believes can be resolved.

When it comes to the financing future of Florence, the chief executive says he would entertain the possibility of a partner on a minority basis, but for now, the company is in a "very good place, with capital requirements at a fraction of a lot of other big projects out there".

"We're in a really enviable position to build this while keeping all our options open. Our overall strategy is to finance the project while minimizing dilution, so we can return as much of the profits back to our shareholders."

McPhie is indeed confident in the project's development, with further proof of this evident in the fact that management and insiders control over 21 per cent of Curis' shares. "The project is making steady progress toward development. It has taken time, but we have been able to show we can deliver, and we are one step closer to the start of construction."

Shares of Curis are trading at 70 cents, giving it a market cap of almost $40 million.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.