Students often study one subject at university, but end up shifting gears and graduating in a different field. It’s how Copper North president and CEO Harlan Meade accidentally discovered mineral exploration while studying chemistry.
In Meade’s case, the twist of fate involved a summer job accident that left the young man with a fractured wrist, but functional enough to still qualify as a camp cook. That camp’s head geologist needed an afternoon assistant, which is where the chemistry student found his passion of exploring for mineral treasures.
Fast-forward a few years and he obtained a PhD in Mineral Deposits from University of Western Ontario. Shortly thereafter, Meade began his career in British Columbia with Westmin Resources at the Premier gold mine in northwestern B.C., where he was involved in everything from asset acquisitions, resource expansion, feasibility studies, permitting, and environmental management. Over the next 15 years he would exclusively work on B.C. projects.
Throughout that time he also held industry positions including:
- President for Canadian Institute of Mining & Metallurgy, Geology
- Co-chair of review of Canada mine water discharge regulations for the Mining Association of Canada
- Member of the environmental committee for the Association for Mineral Exploration B.C.’s aboriginal affairs.
Meade was as strong an advocate for B.C. mineral exploration as any other resource professional. He was also an entrepreneur.
And it wasn’t in British Columbia that he earned the nickname “Dr. Zinc” – that was in the Yukon. What attracted him to the Yukon was the geological opportunity he noted in a few early-stage exploration projects. He spent the next 20 years in the Yukon turning those projects into mines, making shareholders happy in the process.
In the early 1990s, while acting as VP exploration with Westmin Resources, he recalled the company was looking to raise $50 million from the RBC investment banking group. RBC did not see the upside as they noted Westmin was fully valued with their Myra Falls base and precious metals mine on Vancouver Island. Westmin asked Meade to assist the company in securing a project that could bring investor interest to Westmin, and it happened to be in the Yukon.
After performing his due diligence, Meade felt a $250,000 budget would be sufficient to secure the property it had identified and begin surface exploration. The property was held by Atna Resources, which agreed to do a joint venture with Westmin. After Westmin granted Meade the exploration budget, the team was on the property the next summer doing geochemical studies, soil sampling, and analyzing trenches. Meade was quick to point out that it was a Volcanogenic Massive Sulfide (VMS) system and he pinpointed where the deposit might lie.
He went back to Westmin management and requested an additional $200,000 to roughly define the deposit through a drill campaign. He was so confident he stated the odds of making a discovery would be 50/50. Management was skeptical but granted the additional funding to him in 1993. Sure enough, the company hit mineralization in hole 1, 2, and 3 – and almost every hole after that.
After the Wolverine high-grade zinc-copper-lead-gold-silver discovery, the original $50 million the company was looking to raise ended up becoming $350 million.
On the back of the Wolverine Zinc project, Meade and Westmin were responsible for doing $1.2 billion in transactions including the purchase of Gibraltar and its Lomas Bayas copper project in Chile. Shortly after a rapid increase in value, Westmin was taken over in 1998. The project was turned into a producing zinc mine in the Yukon. Meade took Wolverine to feasibility and obtained the licences to build the mine.
During his early years in the junior sector, Meade acquired the Selwyn project in eastern Yukon. The rapid expansion of Selwyn – which became one of the largest undeveloped zinc-lead deposits globally – and consolidation of the district led to some calling Meade “Doctor Zinc.” Today, Selwyn Chihong has acquired all interest in Selwyn and is advancing the deposit toward production.
Few resource companies are striking financing deals in the hundreds of millions of dollars these days, so I asked Meade what he thought about this current bear market we are experiencing.
He commented, “The miners have created what I believe is to be the perfect storm. They have damaged this space through mismanagement and poor financial performance yet global demand has not weakened throughout this past decade. I also don’t believe it will lessen going forward. Our industry is aging out in terms of human capital and it is not attracting the leaders to replace those retiring executives. In terms of capital, economic projects which should be built are not as that capital is being deployed elsewhere. With all of this going on, it is my belief there will be a bright future for commodities ahead of us as major projects will not come online quick enough to fill the supply gap.”
The Yukon, Meade believes, is very early in its infancy in terms of exploration. The discoveries that have been made to date are from outcroppings and near-surface discoveries, known as low-hanging fruit. But as infrastructure improves, easing property access, he thinks second- and third-generation discoveries will be made. Several projects that have been known for some time are only now seeing attention in terms of advancement. One such project is Copper North’s 100% owned flagship asset, the Carmacks project.
When Meade first looked at Carmacks, he saw an opportunity coupled with plenty of work. The project had three issues:
- the existing economic study did not factor in gold recovery, which made up 30% of potential revenues;
- CAPEX was too high;
- it had a 7-year mine life.
The project, in his eyes, needed to be reengineered.
To be able to raise capital the company completed a Preliminary Economic Assessment (PEA) showing updated metrics on the project. The still-growing resource is currently 11.98Mt @ 1.07% Cu, 0.46 g/t Au, and 4.56 g/t Ag for production of 282M lbs Cu, 172K oz Au, and 1.71M oz Ag. Cash costs to produce a pound of copper were US$1.07/lb Cu, compared to US$1.61/lb previously. CAPEX is $227M in the June 2014 PEA but the re-engineering indicates substantial reduction of costs.
Dr. Meade noted having a copper project in the lowest deciles of the cost curve would be an asset with a better-than-average chance to get financing. A new PEA is in progress to better cost the new leach plan utilizing agitated tank leaching of copper and gold & silver. Leach times have decreased from 250 days to 4 hours and gold leaching lowered from 300 days to only 16 hours. With the reengineered leaching process, the company would be able to mine the ore, process it, take it to market, and be paid, all in the same week. That would have taken a year and more previously.
Copper North resumed exploration at Carmacks in fall 2014 with some success in finding new copper mineralization. This year’s exploration program, which was increased to approximately $1M, has defined substantial new mineral resources. A new resource model for this year’s drilling is expected to demonstrate the addition of tonnage to the existing resource . With the reengineering of Carmacks, Copper North has met its target and overcome the three hurdles it faced in early 2014.
With a copper project as its key asset, I asked Meade for his thoughts on where copper might be heading. He provided a forecast of copper nearing US$2.80/lb by year-end and remaining in the range of US$2.80 to $3.20/lb for 2016. Further out, in 2-3 years, he believes copper will once again break the US$4/lb level as demand remains consistent, supply is not met, and the global population continues to steadily grow.
He also stated that companies would need US$3.40/lb Cu to attract the financing to turn big mine projects into producing mines. That price would have to be sustained for a minimum of 6 months to see the major banks once again become interested in the resource space. He does not think the private equity space will be able to fund the billions required.
China will remain an important player but not as key as they were this last cycle, due to slowing growth in their economy. As a result of all this, it is going to be a much slower process of bringing on a new mine. It will be the smaller projects, such as Carmacks, that will be built first, he believes.
To summarize: Copper North management has de-risked the project from an environmental permitting perspective, there is tremendous support from First Nations and Yukon regulators (YESAB, Water Board), the project is on track to be a producer in the lower deciles of the cost curve, the metal is not hedged thereby providing shareholders maximum leverage, the Carmacks has blue-sky exploration upside and importantly the capital required is suitable for debt financing in the private equity markets.
Meade has successfully sold two Yukon mineral projects to the Chinese. He mentioned there is current interest from numerous groups and believes Carmacks could be his third big win for shareholders.
Symbol: TSX.V – COL
Market Cap: $7.01M
Shares Outstanding: 155.69M
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