Arizona Sonoran Copper Company Inc. is looking to raise $60-million in an initial public offering on the Toronto Stock Exchange, hoping to cash in on investor enthusiasm for one of the best-performing metals this year.
Run by former Kirkland Lake Gold Ltd. chief executive officer George Ogilvie, the private-equity-owned junior filed paperwork to go public on Wednesday. Arizona Sonoran hopes to revive a copper mining camp in Arizona that ran dry in the 1980s. London-based Tembo Capital Management Ltd. and Resource Capital Funds of Denver are the biggest shareholders.
Copper has risen from US$2.20 a pound at the start of the pandemic to a record $US4.76 a pound in May. It now sits at US$4.17. The metal has benefited from a snap back in industrial demand this year, as global economies stage a brisk rebound with COVID-19 restrictions easing. Increased demand for copper in cleaner energy uses, such as electric car batteries has also been a contributing factor in copper’s bull run.
Arizona Sonoran plans to use proceeds from the offering to fund the development of its Cactus copper project. It is located about 60 kilometres south of Phoenix, on the site of a prior producing mine called Sacaton, which operated between 1974 and 1984. The Cactus project should have an 18-year mine life, and produce copper at an average all-in sustaining cost of US$1.88 a pound.
Cactus still requires more drilling and engineering work before construction can begin. The current capital estimate for building the mine is pegged at US$124-million. The company is hoping Cactus will start up as an open-pit operation in 2023, and gradually transition to an underground operation.
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Before joining the company, Arizona Sonoran’s CEO, Mr. Ogilvie, ran Canadian junior gold company Battle North Gold Corp. It was sold in a friendly transaction earlier this year to Australia’s Evolution Ltd. for $343-million.
During his tenure at Battle North, Mr. Ogilivie oversaw a complete turnaround of a problem asset. In 2016, a previous iteration of the company, called Rubicon Minerals Corp., filed for creditor protection after the company ran out of money. Rubicon rushed its Red Lake, Ont., gold project into production without doing enough due diligence, and about $1-billion in shareholder capital was lost. Mr. Ogilvie joined Battle North during the restructuring phase, and succeeded in reviving the gold project, albeit on a smaller scale.
Mr. Ogilvie also ran Kirkland Lake Gold Ltd. from late 2013 to mid-2016. While he helped resurrect the then-struggling Canadian gold-mining company by overseeing various operational improvements, a clash with chairman Eric Sprott over strategy resulted in the replacement of Mr. Ogilvie with Tony Makuch. Kirkland, still run by Mr. Makuch, last month agreed to be acquired by Agnico Eagle Mines Ltd. for more than $13-billion.
While reviving dormant mine sites can be lucrative, they are far from risk-free. Earlier this year, Pure Gold Mining Inc. restarted the Madsen gold project in Northern Ontario, but it has experienced a host of problems, including grade shortfalls. The underground gold mine had previously been in production for 40 years up until the 1970s.
The Arizona Sonoran IPO syndicate is being led by Canadian investment banks RBC Dominion Securities Inc. and Haywood Securities Inc. Bankers stand to earn a commission of 6.5 per cent, worth about $3.9-million.
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Niall McGee