The beginning of Piedras Verdes Mine
In March 2002, Frontera Copper Corporation (“FCC”) was incorporated to purchase 70% Phelps Dodge's interest in the Piedras Verdes Project, and bring into production the run-of-mine heap leach SXEW copper project in Sonora, Mexico. One year later, FCC acquired the remaining 30% of Piedras Verdes Project from Azco Mining.
In Q4 2004, Toronto Stock Exchange (“TSX”) listed FCC started the process of financing and building the open pit and run of mine copper heap leaching operation at the Piedras Verdes Mine (PV Mine). It did so through a wholly owned Mexican subsidiary, Cobre del Mayo (“CDM”).
Deposit modeling, grade control, the contract mining arrangement and other relevant aspects of mine planning and operation were deficient. These caused a loss of permeability in the heaps and impaired production. In combination with the interruption of acid supply in 2008, they resulted in high cash costs and negative cash flow.
In late 2008 – as the financial crisis progressed – these operational deficiencies, in combination with high leverage, falling copper prices and the loss of access to capital markets (evidenced by its share price declining from a high of $7.86 to $0.24), rendered Its operation untenable in the absence of external support.
In mid 2008, Invecture Group S.A. de C.V. (“Invecture”) identified the PV Mine as an asset that could deliver significant value by the implementation of revised mining and processing strategies under the direction of a new management and technical team, with substantial new financial investment and support.
On December 3, 2008, Invecture announced an offer to acquire all of the common shares of FCC. On May 4, 2009, the acquisition (the “Acquisition”) was completed. FCC delisted its common shares from the TSX. Through this Acquisition, Invecture obtained full control of FCC’s 100% ownership of CDM. FCC redeemed its TSX listed senior secured notes in March 2012 and ceased to be a reporting issuer.
Key Initiatives Implemented by the ownership of Invecture
Since the Acquisition, CDM under the new ownership of Invecture has:
- Changed from contract mining to owner operation and purchased the former contractor’s equipment fleet.
- Purchased, re-engineered and installed a crushing, screening, conveying and stacking system (collectively, the “Crushing System”) to convert the operation from Truck Dump Run of Mine (“ROM”) to a primarily crush-conveyor stacked heap leach.
- Undertaken the successful recharacterization and modeling of alternative styles of mineralization.
- Developed new mining and processing plans (“Mine Plan”) based on this new understanding of the styles and spatial distribution of mineralization.
- Developed and implemented an effective ore quality and grade control system providing good characterization of ore types and directing selective mining and processing to improve copper recovery.
- Hired new senior operating management with relevant experience in comparable operations.
- Initiated an aggressive resource definition and expansion drill campaign.
- Developed plans to process the high-grade chalcocite and chalcopyrite ores, using a grinding and flotation plant to achieve much higher metallurgical recoveries to concentrate.
- Developed a new resource model and Mine Plan to produce a target ~47 ktpa (~100 M lbs) of copper.
Over the last year, the resource expansion and infill drilling program and has increased the LOM planned production by over 1.0 Bn lbs of copper. The drilling and exploration program is planned to continue until Q4 2013 and continues to add resources with a high rate of conversion into reserves. Based on the success of this program along with other exploration efforts including a recently completed ZTEM geophysical survey, the Piedras Verdes deposit appears to be significantly larger than currently defined and open in three directions. Management believes the LOM resource and production estimates will grow very significantly.
Invecture’s business strategy and investment mandate is to identify opportunities where significant value can be realized by combining management capability, technical expertise and financial resources to execute a successful operational turnaround. The PV Mine has been transformed into a high quality copper producing asset and has been operating at its nameplate capacity of ~85 tpd for the past ten months with near-term production expansion and an attractive growth profile through its ongoing exploration program.