Arizona Metals plunges as Kay resource misses expectations

[Redator]

Arizona Metals (TSX: AMC; OTCQX: AZMCF) shares plunged to their lowest level in more than four years after a long-awaited initial resource estimate for the company’s Kay polymetallic project revealed a smaller-than-expected scale.

The resource outlines 9.28 million indicated tonnes grading 1.39 grams per tonne gold, 27.6 grams silver, 0.97% copper, 0.33% lead and 2.39% zinc, Arizona Metals said in a statement Monday. Contained metal totals 415,000 oz. gold, 8.25 million oz. silver, 197.9 million lb. copper, 67.3 million lb. lead and 490.1 million lb. of zinc. Kay is located in central Arizona.

“Relative to our expectations, grades were slightly better than anticipated, though tonnage disappointed, and more than offset,” BMO Capital Markets mining analyst Rene Cartier said in a note. Investor expectations relative to the project’s size were “likely associated with the higher end, or potentially even more, particularly given the prior historical resource as a base,” he added.

Cartier was expecting Kay’s tonnage to range from 14 million to 18 million tonnes. Following the resource’s release, he cut his target price on Arizona Metals to C$2 a share from C$2.75 previously. He rates the stock “outperform.”

Located about 70 km north of Phoenix, on a site that has been mined on and off since being discovered in the 19th century, Kay lies amid scores of current and past-producing mines in the leading U.S. copper-producing state. Operators including Black Canyon Copper, Shattuck-Denn Mining and Republic Metals produced about 2,730 tonnes between 1949 and 1956, when a cave-in closed the mine. No one has mined Kay since. 

Arizona Metals dropped 29% to C$1 in early afternoon trading Monday in Toronto, the stock’s lowest level since December 2020. That gave the company a market capitalization of about C$137 million ($100m).

Second-half PEA

Toronto-based Arizona Metals is conducting additional metallurgical test work at Kay with a view to releasing a preliminary economic assessment in the second half of the year. The deposit remains open for expansion beyond this initial estimate both along strike and at depth, the company said.

Kay’s current timeline “suggests first production in the 2030s,” Cartier said in a note published May 30.

In the inferred category, the company’s new estimate calculates 860,000 tonnes grading 1.06 grams per tonne gold, 15.4 grams silver, 0.87% copper, 0.2% lead and 1.68% zinc at a base-case cut-off grade of 1% copper equivalents. This would amount to 29,000 oz. gold of contained metal, 423,000 oz. silver, 16.4 million lb. copper 3.8 million lb. lead and 31.8 million lb. zinc.

‘Expansion potential’

The resource has “clear potential” to expand between existing drill holes within the deposit and to upgrade the inferred resource, Arizona Metals said.

The estimate “marks a major milestone for Arizona Metals and validates not only the scale, but more importantly, the quality of the Kay project,” CEO Duncan Middlemiss said in the statement.

“With over 650 million pounds of copper equivalent in the indicated category alone — and with the deposit remaining open in multiple directions — we see significant opportunity for expansion through continued drilling. We believe this resource represents just the beginning.”

The resource is based on 14,006 metres of drilling from 234 diamond drill holes completed between 2020 and May 2025.

Arizona Metals is aiming to complete about 10,000 metres of exploration drilling in the second half of 2025 at several new targets with holes as deep as 900 metres. The planned work is funded through the end of the year.