Arizona Sonoran soars on new copper ranking

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Arizona Sonoran Copper (TSX: ASCU) shares shot to a historic high Monday after it released a study showing its Cactus project could be the third largest cathode producer in the United States by solvent extraction and electrowinning (SX/EW) capacity.

The pre-feasibility study estimates Cactus could produce about 103,000 tonnes of copper annually over the first 10 years of a 22-year life. The study gives Cactus a post-tax net present value (at an 8% discount) of $2.3 billion, initial capital costs of $977 million and a post-tax internal rate of return of 23% with a 5.3-year payback period. Those economics place Cactus as the highest value red metal mine among developing copper projects in Arizona. The past-producing open-pit mine site is located 74 km south of Phoenix.

The new mine plan speeds up processing of higher-grade ore at Parks/Salyer – the main deposit at Cactus – early in the mine life and delivers a more consistent production profile, Desjardins Securities analyst Bryce Adams said in a note on Monday. 

“We view [it] as a positive update and a key derisking milestone for the project,” he said.

Resource momentum

The study’s release adds to resource tailwinds for the project just over a month ago, when an update for Cactus lifted contained metal by 51%.

Arizona Sonoran shares gained 13% to C$3.51 apiece by mid-Monday in Toronto, valuing the company at C$630.79 million.

“This PFS is a major milestone in the advancement of our lower risk open pit Cactus project towards a final investment decision as early as Q4 2026,” Arizona Sonoran President and CEO George Ogilvie said in a release. “We have the opportunity to become a significant player in the American copper industry, filling a clear gap in the domestic copper supply.”

First production of cathodes is expected in the second half of 2029, Ogilvie added.

Trails Freeport mines

The company’s projection of Cactus potentially becoming the third largest cathode producer by SX/EW processing puts it in league with Freeport-McMoRan’s (NYSE: FCX) Morenci mine in Arizona. It has annual capacity for 408,000 tonnes, while that company’s Safford/Lone Star mine can produce 145,000 tonnes per year.

Looking at other projects in the copper-rich state, Cactus would have the highest NPV compared to peers by a wide margin. Gunnison Copper’s (TSX: GCU; US-OTC: GCUMF) namesake project has an NPV of $1.26 billion at initial costs of $1.3 billion, while Hudbay Minerals’ (TSX, NYSE: HBM) Copper World site is valued at $1.1 billion with expenses of $1.3 billion. Taseko Mines’ (NYSE: TGB; TSX: TKO) Florence project has a post-tax NPV of $930 million and an estimate of $232 million to build it.

The PFS assumes base case copper price of $4.25 per pound.

New reserve categories

Arizona Sonoran’s study also further converts resources, with the new estimate outlining 513 million tons in proven and probable reserves grading 0.52% copper for 5.3 billion lb. of contained metal.

That represents a 65% conversion of leachable measured and indicated resources to reserves, the company said.

Mixed PEA comparison

However, comparing the PFS with Cactus’ preliminary economic assessment, released just over one year ago, reveals a mixed bag.

On one hand, the PFS cuts operating costs by 26% and all-in sustaining costs by 19%; the heap leach and SX/EW processing is simpler; and the study lays out proven and probable reserves.

But on the other hand, the PFS’ improvement to the NPV comes mainly from the study’s higher copper price assumption; it raises capital costs by 46%, lowers the IRR by 1.8% and shortens mine life by nine years.

Arizona Sonoran hopes to complete a definitive feasibility study, including detailed engineering, in the second half of next year.