Cardero Resource Corp. – Focused on Steel Commodities: Metallurgical Coal and Iron Ore
OVERVIEW
Cardero Resource Corp. (TSX:CDU,AMEX:CDY) is a Vancouver-based exploration company focused on coal and iron ore. The Company’s two key assets are the Carbon Creek metallurgical coal project and the Sheini Hills iron ore project. Carbon Creek is located in the Peace River Coal District in British Columbia. A NI 43-101 compliant resource estimate includes 121 Mt Proven and Probable Reserves as well as 468 Mt Measured and Indicated Resources with an additional 232 Mt in the Inferred category. Cardero Resource is committed to responsible and sustainable mining with a strong focus on building positive stakeholder relationships. The Company boasts a strong, experienced management team with decades of experience in coal projects including in the areas of financing, exploration, development and production.
INVESTMENT HIGHLIGHTS
Carbon Creek Metallurgical Coal
- One of the largest, contiguous deposit of coal in the Peace River coalfield in northeastern British Columbia
- NI 43-101 compliant resource estimate of 121 Proven and Probable Reserves (468 million tonnes measured and indicated resource)
- One of the lowest operating cost in the region – $110/tonne FOB
- Base case NPV8 $633M on a post-tax, post NPI basis, with 23.7% IRR
- Undiscounted cash flow valuation of $2,132 million
- First coal production planned for Q4 2014 – average production rate of 4.1Mtpa
- Percentage of hard coking coal increased from 35% to 60% of planned production
Sheini Hills Iron
- First ever comprehensive drill program completed on the project in 2012 – completion of an NI 43-101 resource calculation anticipated before the end of Q4 2012
- Highlights from 2012 drill program include:
- Hole 039, which returned 278 metres from surface grading 43.2% iron, including 10.7 metres grading 50.6% iron
- Hole 063, which returned 51.60 metres from surface grading 48.50% iron, including 16.00 metres grading 50.81% iron.
- Airborne magnetic survey identifies outcrop-supported exploration potential over an additional 24 kilometres of strike – multibillion tonne potential
- Ghana is a stable modern democratic country with strong economic ties to global markets
KEY PROJECTS
Carbon Creek Metallurgical Coal Project – British Columbia, Canada
The Carbon Creek metallurgical coal development project comprises approximately 17,200 hectares and is located in the Inner Foothills of the Canadian Rocky Mountains in the Peace River Coal District of northeast British Columbia, Canada. Cardero has a 100 percent interest in the project which it acquired from Coalhunter Mining Corp. (now a wholly-owned subsidiary of Cardero and the operator of the project) in June 2011. Carbon Creek has a current NI 43-101 compliant resource estimate of 121 Proven and Probable Reserves as well as 468 million tonnes measured and indicated resources with an additional 232 million tonnes inferred resources.
Geology
The Inner Foothills structural province of western Canada is characterized by folded and faulted Mesozoic sediments, and contains medium volatile bituminous coals of the Gething Formation. Structural interpretations of the Carbon Creek property portray a doubly plunging syncline lying between two anticlinal belts that straddle the western and eastern boundaries of the property. Based on the available data and existing geological interpretation, coal mineralization is of the Moderate geology type.
Coal seam development on the property is typical of the Gething Formation; a total of 63 coal seams are present, up to 28 of these seams are significant and with economic potential. Some of the coal seams, particularly the stratigraphically lower seams show favourable metallurgical properties.
Environmental Assessment
In May 2012, the Environmental Assessment Office (EAO) accepted Cardero’s Carbon Creek Project Description and the first draft of the Application Information Requirements (AIR) for an Environmental Assessment Certificate (EAC) application was submitted to EAO in July 2012. The Company expects the AIR to be completed by the fourth quarter of 2012 followed by the preparation of an effects assessment in the first quarter of 2013 and submission of the final EAC in the second quarter of 2013.
Prefeasibility Study
In September 2012, Cardero announced the positive results of a Prefeasibility Study (PFS) on the Carbon Creek project. The results show pre-production capital costs estimated at $217M to bring this project into production. Additional capital estimated at a total of $475M will be required to bring the project to full production. Sustaining capital of $364M will be required over the remaining life of the mine. Operating costs per tonne of clean coal average $74 (mining & processing costs).
The study shows an average clean coal full production rate of 4.085 million tonnes per annum (Mtpa) through mine life which is forecast for 2016 to 2034 with peak production of 5.1 Mtpa achieved in 2022.
Cardero plans to construct a 1200 tonnes per hour Coal Processing Plant to be located at Carbon Inlet with a targeted run-of-mine coal throughput of 7.2 Mtpa at a 68 percent effective utilization.
An independent market analysis prepared by Kobie Koornhof Associates and provided to Cardero in September 2012 identified three products (Hard Coking Coal; High Volatile Metallurgical Coal; and Thermal Coal) from Carbon Creek for sale on the international seaborne market and compared them to a series of benchmark coals traded internationally to determine appropriate pricing. Using base-case pricing, the average realized Free On Board price over mine life is $173/tonne; this has been calculated based on mine production and relative proportions of coal products produced year-on-year. Mine products are 60 percent HCC, 34 percent HV Metcoal and 6 percent Oxidized (thermal) coal.
The 2012 drill program is nearing completion. The objectives of the program include:
- Infill Drilling – aimed at upgrading resource classification across the remainder of the deposit.
- Initial Production – the current PFS work has identified areas where underground and surface production could commence, based on mineability and prioritization of highest quality seams. The 2012 program will ensure these areas are adequately assessed to support mining commencement.
- Resource Expansion – targeted drilling to expand areas already defined as potentially mineable and included in the PFS. These additional resources may be incorporated into the Feasibility Study.
- Engineering Studies – feasibility-level engineering studies, including mine geotechnical and hydrogeological analysis, will be completed in 2012.
The Feasibility Study is planned for completion in the second quarter of 2013.
Sheini Hills Iron Project – Republic of Ghana, West Africa
Cardero, through its wholly-owned subsidiary Cardero Ghana Ltd., has a joint venture agreement with Emmaland Resource Limited, a Ghanaian company, to explore and, if warranted, develop the Sheini Hills Iron Project. Cardero has the right to earn a 100 percent working interest subject to a 10 percent NPI in favor of Emmaland and a 10 percent fully carried interest in favor of the Government of Ghana.
The Sheini Hills project is located within the eastern part of the West African Craton called the Eastern Pan African Domain. It is located in the Togo Belt comprising supracrustal sediments and volcanics of probable late Precambrian to early Phanerozoic age. The observed geological, mineralogical and geochemical features indicate that the Sheini mineralization fits a Banded Iron Formation (BIF) model.
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In August 2012, Cardero completed Phase I of the 2012 program in which exploration targeted outcropping haematite ironstones and surface haematite ferricretes. Highlights from the results include Hole 063, which returned 51.60 metres from surface grading 48.50% iron, including 16.00 metres grading 50.81% iron. Regional work, including satellite interpretation, airborne geophysical surveys and verification mapping have identified an additional 24 kilometres of potential ironstone deposits, which will be drill-tested in Phase II.
Metallurgical testing (bench scale) and a NI 43-101 resource calculation are currently underway on the project, and the Company anticipates completion in Q4 2012.
The proposed work program for 2013 includes 18,750 m of Ironstone drill testing, 4,000m of Ferricrete drill testing, metallurgical testing and a Preliminary Economic Assessment.
For more information on the Sheini Hills Iron Project, click here.
SUMMARY
Cardero Resource is focused on generating shareholder value through the acquisition and development of large-scale bulk-tonnage iron and metallurgical coal deposits. Both the Carbon Creek metallurgical coal and Sheini Hills iron ore projects exemplify that strategy.
The Carbon Creek metallurgical coal project in the Peace River coalfield in British Columbia, Canada contains a NI 43-101 compliant estimated reserves of 121 Mt Proven and Probable as well as 468 Mt Measured and Indicated resources with an additional 232 Mt in the Inferred category. A positive PFS shows sufficient mineable tonnes of various grades of metallurgical and thermal coal in the Carbon Creek resource area to produce approximately 4.1Mtpa saleable coal for a 20 year period with a base price scenario averaging $173/t. The Carbon Creek project is expected to generate positive cash flows and achieve an IRR on investment of 24 percent. Initial production is planned for Q4 2014.
MANAGEMENT
Hendrik van Alphen – Chief Executive Officer and President
Mr. van Alphen has had a successful career in the mining business for over 25 years. Since 1999, he has been a Director of Cardero Resource Corp and was instrumental in establishing the Cardero Group of Companies. Mr. van Alphen holds senior management and director positions with several resource exploration and development companies. He has raised over $200 million for mining exploration. His leadership, knowledge and access to capital are an invaluable asset to the company.
Since founding the Company in 1999, Mr. van Alphen has created significant value for shareholders, not least through acquisition of undervalued projects like Pampa de Pongo, which was acquired for less than $1 million six years before it was sold for $100 million. He will continue to focus on corporate strategic initiatives for Cardero.
Angus Christie – Chief Operations Officer
Mr. Christie is a highly respected senior executive with over 25 years international experience in coal mining operations, resource and reserve management, mine development and exploration and strategic planning.
In his career, Mr. Christie has been involved in several projects from exploration and feasibility through to mine commissioning. His operational experience has focused on both underground and surface operations extending from deposits including five underground and open pit mines. He most recently served as Manager of Strategy and Resources for Anglo Coal (Peace River Coal).
Lawrence W. Talbot – Vice President and General Counsel
Mr. Talbot is a mining lawyer with over 25 years experience representing a wide range of clients in the mining industry, from individual prospectors, junior and mid-size explorers and producers through to major mining companies, in both the hard-rock and industrial mineral fields. He has extensive experience acting for public natural resource companies and providing advice on all aspects of their businesses, including corporate finance, securities and regulatory matters, corporate governance and shareholder issues, and all aspects of corporate acquisitions, takeovers, divestitures and reorganizations.
Keith Henderson – Executive Vice President
Mr. Henderson, formerly Vice President Exploration, brings 19 years’ global mining-industry experience to Cardero. Prior to joining Cardero, he was Project Manager for Anglo Coal’s Canadian subsidiary, focused on metallurgical coal deposits in northeast British Columbia. At Cardero, Mr. Henderson played a critical role in advancing the Pampa de Pongo through a positive scoping study and ultimate sale for US$100 million (2009). Most recently, he was responsible for Cardero’s original investment in Coalhunter (2010), acquiring 49% of the company for $3.6 million.
Mr. Henderson is a mining industry executive with global experience in Africa, Europe, and the Americas. He has extensive knowledge of the exploration and mining business from both a major and junior public company perspective. With a proven track record he has successfully managed exploration and mining companies through significant growth periods.
Blaine Bailey – Chief Financial Officer
Mr. Bailey is a Certified General Accountant who has worked with numerous private and public companies over the past 20 years. He brings complementary skills to the team in the areas of finance, administration and financial reporting.
Ryan Dunfield – Director
Mr. Dunfield has financial professional experienced in capital markets. He specializes in acquisition and divestiture in resource sector.
Stephan Fitch – Director
Mr Fitch has a background in international corporate finance and investment banking. He has been specializing in venture capital for 27 years.
Leonard Harris – Director
Mr. Harris has 52 years of experience in mineral processing and mining. He has a strong background in large-scale mine operations start-up.
Paul Matysek – Director
Mr. Matysek is a mining entrepreneur that specializes in mine development and divestment. He is the Founder of Lithium One (2012) and the Founder of Energy Metals Corp (2007). Mr. Matysek is the former CEO of Potash One.
Andrew Muir – Director of Investor Relations
Mr. Muir holds a Bachelor of Science (Honours) in Geology from the University of British Columbia and the Chartered Financial Analysts (CFA) designation. He joins Cardero from Haywood Securities Inc. in Vancouver, an independent full service investment dealer, where he served as an Investment Advisor building and managing retail and institutional relationships. Prior to Haywood, Mr. Muir was a highly regarded Mining Analyst with Vancouver based investment dealers Canaccord Capital Corporation, PI Financial Corp., and Yorkton Securities Inc.
Guy Gilron – Vice President Environment and Regulatory Affairs
Mr. Gilron has 22 years’ global experience, most recently specializing in BC coal projects. He was previously Teck’s Director Environmental Science.
David Thompson – Resource Manager
Mr. Thompson is a geologist with 15 years’ metallurgical coal experience. He was previously a Project Manager with Anglo Coal.
Bob Osborne – Community Relations Director
Mr. Osborne has 25 years’ experience in Aboriginal Affairs. He was the previous Aboriginal Affairs Coordinator for BC Environmental Assessment Office.
Leigh Harris – Material Logistics
Mr. Harris has 20 years’ experience in material handling and transportation. He was previously with Smit Marine Canada.
