Equinox Copper (TSX: V.EQX, Stock Forum) is a publicly-held copper exploration company focused on developing near term projects, with significant exploration history, into producing mines.
You have a wealth of capital markets experience on both the buy-side and sell-side of the market. What do you think retail and institutional investors should be doing in these markets?
These markets are clearly challenging, especially for those who service or invest in the resource sector. Under these circumstances, I would take the opportunity to separate the wheat from the chaff, that is, I would be looking for resource companies which may have the ability to generate revenue and cash flow in the short- to medium-term. With cash flow, these companies can mitigate their potential overdependence on the equity and debt capital markets; moreover, this may appeal to investors who would prefer to avoid significant and, potentially, continuous investment dilution.
Tell us why you ultimately entered the resource sector?
I spent the past few years looking at, and writing about, various commodities from both an equity sales and equity research perspective. This was driven not only by my own personal interest in commodities, but also by the interest shown by numerous clients which, in many ways, is a reflection of Canada being a resource-driven economy. Moreover, I have been fascinated by how the geographical range and scope of commodities provide critical insights into the political, social, economic and technological positions in many regions of the world. Finally, the opportunity to participate in a sector where global economic growth plays a significant role was too good to pass up.
What attracted you to Equinox Copper?
There were a number of reasons I found Equinox Copper appealing. First, the Company has two assets in two distinct geographical regions – Arizona and Chile – so there is some mitigation of risk based on geography. In addition, one of Equinox Copper’s assets – Aura, in Chile – is now shipping copper ore to its state-owned off-take partner, Enami, which means that the ramp-up to sustainable cash flow has begun. Finally, the Company’s Arizona asset – Binghampton Copper Queen – is the combination of two past-producing, high-grade copper mines, with a significant footprint on patented land.
What distinguishes your Company from other copper exploration companies?
I think the biggest differentiator – especially in the current funding environment – is our ability to generate revenue and cash flow in Chile. As this part of the business continues to grow, we could potentially rely less and less frequently on the equity and debt capital markets for funding, thereby subjecting investors to less-frequent dilution. In contrast, many other junior mining companies remain in the exploration or development stage – that is, where project funding cannot be generated internally – which potentially leaves these businesses at the mercy of the equity and debt capital markets.
Tell us about your two copper projects?
Aura, in Chile, is an asset consisting of eight land concessions. It is located just outside of the town of Copiapo, about a 90-minute flight north of Santiago. We acquired it in 2012 and spent much of the year preparing the asset for mining. Copper is visible at surface in many areas of the property, which means that we are able to identify copper targets relatively easily. We commenced production in late January 2013 and, so far, our average copper grade shipped to Enami has been 2.3%.
Binghampton Copper Queen (BCQ), in Arizona, is an asset which consists of two former-producing mines in an area commonly known as the Arizona VMS belt. Historically, Binghampton produced approximately 4Mlbs of copper at an average grade of 3.1%, while Copper Queen produced less than 100Klbs at an average grade of 9.95%. Recent drill results confirmed the presence of both copper oxides and sulfides on the property, with copper oxides found at less than 50 metres from surface.
What are the catalysts for Equinox to move forward?
We would like to have sustainable revenue and cash flow generation at Aura. We have targeted a monthly rate of 640 tons/month of production and, once this has been achieved on a consistent basis, we would aim to increase production at a reasonable rate. Of note, Enami can purchase up to 4,000 tons of copper ore per land concession from each of its customers, so we have a great deal of potential growth available to us.
As for BCQ, we would aim to define a copper resource estimate on the property. This would provide us with a better understanding of the property’s potential upside. If the resource estimate is considered positive, we would then look to determine the project’s economic viability.
What milestones are you hoping to achieve for 2013?
We are aiming for sustainable monthly production at Aura. We are also aiming to define a copper resource estimate at BCQ; however, to err on the conservative side, we feel this may not be completed until early 2014.
Why should investors be thinking of investing in Equinox Copper?
There are very few opportunities to invest in early-stage junior resource companies with revenue and cash flow generation – and with significant growth potential – so I feel that we stand out from this perspective. Moreover, we provide the market with a multi-purpose commodity which is in demand – copper – and operate in jurisdictions which are considered safe and business-friendly.
Disclosure: Equinox Copper is a Stockhouse client.