Dec '08/Jan '09

Under the wire

By E. Moore

Rock crusher at the Minto mine

Despite recent instability, the market has generally favoured Sherwood Copper Corp.’s Minto project since it opened in 2007.

The high copper prices on the world market over the past few years may have posed a headache for wire manufacturers, but were certainly a boon to Sherwood Copper Corp. The company’s high-grade copper-gold Minto operation, located in the centre of the Yukon Territory, commenced commercial production on October 1, 2007. And, despite the current market uncertainty, expansion is in the offing for the open pit operation, over and above the recent forecasts for the production of 50 to 60 million pounds of copper, 20,000 to 25,000 ounces of gold, and 250,000 to 300,000 ounces of silver per annum, and that level already an increase over the original forecast of 40 million pounds of copper annually.

Although construction began in the mid-1990s as a joint venture between Minto Explorations and Asarco, the 1997 collapse in metal prices put the project on hold until Sherwood acquired Minto Explorations and Asarco’s interests in 2005. “In hindsight, I think our timing was very good because copper prices had just started to move up,” said Stephen Quin, president and CEO of Sherwood. Still below US$1 per pound in 2003, the price of copper climbed to range between two and four dollars in 2006 and spent 2008 hovering around the three dollar mark.

This spelled significant profits for the operation. “Simplistically, if you look at operating costs, we did the feasibility study based on two dollars a pound for copper and were forecasting costs of just under a dollar a pound,” explained Quin. “For much of the past year copper was trading around $3.10 or $3.15, and our costs were coming in at under a dollar a pound. So essentially, the margin was significantly higher than we predicted when we did the feasibility study. Now, obviously, that’s not exactly the situation today, but who knows what the future holds. However, the timing was very good to catch a strong copper cycle.”

On time, on budget

In earning its rewards, Sherwood had to surmount its biggest challenge: finishing on time and on budget. “Many other projects have come in late and/or over budget — sometimes substantially so,” observed Quin. “However, we were fortunate to have had a construction management group, JDS Energy & Mining, who, in cooperation with constructors Clark Builders and their subcontractors, did an outstanding job of delivering the project. We completed it almost six weeks early and were two per cent over budget.” Scheduled to have a capital cost of $98.6 million, the project came in at $100.2 million.

To bring the operation online in just two years from the time of acquisition, Sherwood decided at the outset to find a mining contractor and get an early start. Pelly Construction was brought on board to commence waste stripping several months before completion of the feasibility study and bank financing. The company is contracted until 2010 to provide all the mining equipment; supervise the blasting, excavation, retrieval and trucking of the blasted rock; and supervise ore delivery to the crusher or stockpiles.

Unexpected reserves

The site’s reserves proved more extensive than the original 2006 feasibility study predicted. Initially designed as a 1,560 tonne-per-day operation, the mine has expanded to 2,400 tonnes per day and is targeted to reach 3,200 tonnes per day by year end 2008. A 2007 prefeasibility study added 40 per cent to the reserves from a second deposit, called Area 2, based on 2006 drilling. Sherwood now plans an updated prefeasibility study that will incorporate additional resources defined in 2007 and 2008 and is considering expanding the mill to 4,000 or even 5,000 tonnes per day.

“When we did our due diligence, we saw some exploration potential that I think others had overlooked or perhaps forgotten about,” said Quin. “But the results have definitely exceeded our expectations from when we bought the Minto property. We’ve increased the resource by 140 per cent in two years and we’ve got a third-year set of results in process. So, we would expect to see some gains even beyond that 140 per cent. The exploration results have been outstanding. But that was not known when we bought Minto.”

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