Big Jobs Offshore

If you’re a Canadian working abroad, it often comes at a cost. It may be in the form of strange languages, unfamiliar laws or even suspicious regulators and regardless of where or whenever companies or individuals work offshore, they tend to encounter working conditions that are not entirely the same as they are at home.

Luckily, however, many foreign countries are similar to Canada in many ways and none falls into this category more closely than its neighbours to the immediate south in the United States. At least that’s what Quadra Mining Ltd of Vancouver has experienced during the development of its two mines in the southwestern part of the country.

Quadra Mining is a copper and base metal producer with mid-tier aspirations. The company’s assets include the pre-production-stage Franke copper project in northern Chile; two development projects, the Sierra Gorda copper project in northern Chile and the Malmbjerg molybdenum project in Greenland; its primary asset, the Robinson Mine, near Ely, Nevada, where it produces copper and gold; and the Carlota Mine, a heap-leach solvent extraction-electrowinning copper operation in Globe/Miami, Arizona. The Franke Mine is expected to be in full production very soon, which will enable Quadra to produce an average 250-300 million pounds of copper per year by 2010.

Home on the (American) range

Derek White, Quadra’s executive vice president of corporate development, says there are benefits to being a Cana- dian mine operator in the United States.

“If you’re a Vancouver-based company, as Quadra is, it’s comfortable working in the southwestern US,” he said. “They’re both in the same time zone and many Americans know Vancouver from having visited or worked here.”

Other similarities work in Quadra’s favour.

“In the States, like Canada, there are tested regulations and mine approval processes you can count on,” he said. “Sometimes they’re time-consuming, but you know where you stand.”

There are also important differences. Compared to Canada, for example, the US is more litigious.

“Quadra is not listed on any stock exchanges in the States,” White said. “That’s partly because the cost of directors and officers liability insurance is much higher there.”

One of the benefits of operating mines in the southwestern US is a ready supply of experienced mine labour. Because Robinson employs about 575 people and Carlota about 230, that’s an important consideration.

In addition, the different types of mining equipment that are used in open-pit operations like Robinson and Carlota are easily available south of the line.

“There are multiple equipment dealerships where we operate in Nevada and Arizona,” White said. “In Canada, you might find only one.”

There is also good industry infrastructure.

“The Robinson Mine produces concentrate that’s 20-30 percent metal,” White said. “After it’s produced, the concentrate goes to a smelter and then to a refinery where it becomes copper. That’s a lot of infrastructure, and fortunately it’s all here and easily accessible.”

A fortuitous benefit to being in the States is that Quadra’s operating costs at the Robinson and Carlota mines are in US dollars.

“With the downward pressure on the American dollar, the company should be able to maintain its margin on sales of copper,” White said.

As for Arizona and Nevada, there are both similarities and differences.

“Both are high desert and have similar geographies and topographies,” White said. “And both contain major cities.”

However, their regulatory environments are different. Every state in the US has different regulations for operating a mine,” he said. “For example, Nevada has no state corporate or personal income taxes, but Arizona does. In Nevada, permitting is federal, through the US Bureau of Land Management, but in Arizona the state government looks after it. As a result, there are more jurisdictions in Arizona to contend with, and sometimes their jurisdictions overlap. Compared to Canada, many aspects of the regulatory process in both states is less streamlined.”

Quadra has a plan

Founded in 2002 by Paul Blythe and William Myckatyn (respectively CEO and Chairman), Quadra today “has its foot on the bottom rung of the mid-tier ladder,” in White’s words.

“We believed there was a shortage of mid-sized, North American-listed base metals companies. There had been a consolidation of companies during the 1990s, and most mid-tier producers, especially in Canada, had been acquired.”

To take advantage of the situation, Quadra devised a strategy.

“The idea was to grow the company into a mid-sized producer, with 4-5 operations that produced around 500 million pounds of copper, for cash flow, and one large growth project, to attract investors,” said White.

Subsequent events seem to prove the founders’ prescience.

“Recently we looked at the market caps of juniors, majors and mid-sized mining companies between 2004 and mid- 2008, when the market collapsed,” White said. “We saw that mid-sized companies’ market caps had increased by a factor of about 10, compared to 4-5 for majors and juniors.”

The Robinson Mine

Soon after Quadra went public in April 2004, it acquired the Robinson Mine from BHP Billiton. The mine had been built in the 1990s and run by BHP until operations were suspended due to low commodity prices. Quadra restarted the mine and reached full production in October 2004.

Robinson consists of an open-pit mine and processing facility, with associated infrastructure. It produces copper concentrate and by-product gold and some molybdenum. The concentrate is sold to a number of international and domestic smelters and traders.

Approximately 160 million pounds of copper and 138,000 ounces of gold were recovered from the processed ore in 2008. Based on current reserve estimates, the mine plan provides for mining activity until 2016, with processing of stock pile ores until 2017. Copper and gold production for 2009 is expected to be 130 million pounds of copper and 100,000 ounces of gold respectively.

The Carlota Mine

Carlota is a heap leach-solvent extraction-electrowinning operation in the west end of the Miami-Globe mining district of east-central Arizona. Quadra acquired the mine from Cambior Inc in late 2005 and began production of copper cathode in December 2008. The plant design has a capacity of 70 million pounds of copper cathode production per year over its estimated 11-year mine life.

Mining is by conventional open pit methods, using drilling, blasting, loading and truck haulage of ore and waste. The electrowinning plant design has a capacity of 34,000 tonnes (75 million pounds) of copper cathode per year. The mine life is nine years, plus two years of residual leach. In 2009, cathode copper production is expected to be approximately 35 million pounds, increasing to 70 -75 million pounds in 2010.

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