Interview: Anfield Resources (V.ARY) puts focus on uranium, copper, and near-term cash flow17 Jun 2014
What is the investment case for Anfield Resources?
The way the company is set up today, we have three what we would consider to be world class assets under one umbrella, each of which could potentially be its own company. First of all, we have small scale copper production at the Aura mine in Chile with some upside potential. Secondly, we have a large past-producing copper asset in Arizona (Binghampton Copper Queen).
We have a joint venture partner with deep pockets that will be helping us to fund that Arizona project through to production. We also have an offtake deal with the same partner that makes us very unique among a number of junior resource companies. For example, many companies have feasibility studies completed on projects but have been unable to secure offtake agreements, which are difficult to find. But we have been able to secure an offtake agreement despite us being at a very early stage.
We have uranium assets, including 600 claims in Utah and Colorado, all within a 100-mile radius of the White Mesa mill, the only operating conventional uranium mill in the United States. It is owned by Energy Fuels Inc. (NYSE: UUUU, Stock Forum). Our business plan is to replicate what we do in Chile which is essentially to sell ore to the mill at a discount to the spot price, in order to generate near-term cash flow, and cash flow is king in this market.
What distinguishes Anfield from other companies in your space?
We have small scale cash flow coming out of Chile. A lot of other juniors are strictly in the exploration and development stage whereas we have an asset which is producing cash flow and has the ability to produce much more in the future.
We have a suite of uranium assets (Colorado, Utah and Arizona) that could generate additional cash flow by selling ore to an operating mill. We believe that we can generate additional cash flow a lot sooner than many other junior exploration companies in our space.
How are things going to unfold cash-flow-wise over the next 12 months and beyond?
The Aura Project is as small operation located 31 kilometres east of Copiapo, and covers 1,140 hectares, including 8 land concessions. What we essentially have down there is a beach head. We will probably need to invest some money in order to realize significant cash flow on the property. Right now, Aura is running at about break even. If we invest between $500,000 and $1 million into that asset, we can certainly generate more [cash flow]. The contract that we have in place allows us to sell ore to Enami, a Chilean government agency. The contract calls for a sales of up to 4,000 tonnes-per-month. The price has typically ranged between US$75 and US$100 per tonne. So there is significant upside potential if we can get production ramped up in that market.
Is there anything else in your portfolio that could generate additional cash flow in the near term?
We have a 2-year plan for some of our uranium assets. Late 2015 or early 2016 would be our aim. I think the cash flow that we could probably get out of that will be more significant than the cash flow we generate from copper at the moment. It will complement what we have in Chile.
What would be the biggest potential cash flow generator in your portfolio?
I would think that the Binghampton Copper Queen asset that we have in Arizona has the potential to be the largest cash flow generator. Right now we don’t have a copper resource estimate on the property, but in the past, the Binghampton property, the larger of the two properties, produced 127,247 tons of copper at an average grade of 3.1 per cent.
Copper Queen produced 1,413 tonnes at a grade of 9.95%. There is a lot of work to be done there.
Anfield has a joint venture development agreement with Blue Zen Memorial Parks Inc. (CNQ: C.BZM, Stock Forum), an affiliate of the China-based Jiangsu TianDiLong Land Resource Technology Co. Ltd. Blue Zen has agreed to invest $2 million in the Binghampton/Copper Queen project in a bid to delineate a copper resource estimate. Ideally, we are looking to outline a significant resource of 2 billion pounds or better.
A resource of that magnitude would not be unrealistic as we are located in the Arizona volcanogenic massive sulfide (VMS) belt. Arizona is the leading copper-producing state in America. The largest mine in the VMS belt was called United Verde. It is located near Jerome, Arizona, and produced 2.5 billion pounds of copper at a grade of 4.4%. United Verde closed back in the 1950s or 1960s. Miners didn’t have access to the same technologies that are available today. So there was likely significantly more copper available to be mined than was previously extracted and sold.
Can you tell us more about Blue Zen Memorial Parks and explain how your agreement with them fit into your strategy.
BZM trades on the Canadian Securities Exchange. Its principal partner is China-based founder and CEO Jiaping Jiang. Jiang is an entrepreneur and owner of a copper manufacturing business, which generates over US$2 billion a year in revenue. Moreover, he is building a copper smelter in China. So Jiang is aiming to secure a supply of copper as his copper business expands and continues to grow in China. Partnering with us gives him a beach head both into Arizona and to the North American copper market.
What does this agreement mean to Anfield?
It means that we now have a partner with deep pockets. The plan moving forward is, once we have been able to establish a big enough copper resource, to jointly fund the project, advancing it through to production. The offtake agreement is important because it is usually serves as collateral in order to secure the debt portion of the capex to build a production facility. Since we have an offtake agreement in place, obviously it makes it easier for us to actually fund and build the plant that will be producing the copper.
How much copper and uranium does Anfield ultimately expect to produce?
If we are able to meet our goal by outlining a 2 billion-pound copper resource, we would hope to extract a significant portion of that material.
Because we don’t have a resource on the uranium side, it is very difficult to say what our production profile would look like. We have 600 claims with 114 claim groups, and each of the claim groups has at least one past-producing mine or underground workings associated with it. So we think that we have a significant opportunity to find a lot of uranium. Given that we have over 100 targets, I think there could be a significantly-sized uranium resource within our portfolio.
How much copper will you be producing in Chile this year?
Chile is a small scale operation. We have probably produced about 1,800 tonnes since production began. Since we currently have a run rate of between 100 to 200 tonnes a month, we are in line with last year’s production total. That is basically break even. Once we invest more money into the project, we can certainly move that number up significantly.
In general, copper in Chile is located near surface and remains highly visible. We are essentially following the visible copper veins and blasting the rock. We separate the rock from the ore, then we transfer the ore to the back of a truck and then ship it to Enami, the Chilean government agency, which does all the processing and sells the finished product to buyers in China and elsewhere. We are basically a provider of ore to Enami. They buy from us at a discount.
Whatever we sell to them, they determine a price based on the spot price at the beginning of the month, depending on the grade of the ore that we provide to them. The higher the grade, the more of the spot price we would capture. We usually receive payment within two weeks of delivery.
How does that compare or contrast with what you plan to do with the uranium properties?
It will be the same type of arrangement. The one thing we will have is more flexibility with respect to the type of arrangement we make with the mill. We may use a toll milling agreement or or sell directly to the mill itself.
We have just added a new board member, Don Falconer who has done a lot of work in the uranium marketing and sales side. If we decide to pursue toll milling, Don will be able to facilitate the sale of the resulting product for us.
Which of the uranium properties is the most advanced right now?
We have identified a project in Utah near the Colorado border. We call it the Firefly Mine Complex. It consists of three past producing mines. We have done some ground work there which exceeded our expectations. As a result, we expanded our original 8 claims on this property to 55. So that will be the first target to move towards production. The property is less than 75 miles from the White Mesa mill.
Will you be spending any money on that project this year?
We will. As we expect to raise money to fund our projects, we will allocate funds to the uranium projects and allocate funds to Chile. We may also allocate some funds to our Arizona copper project, but not nearly as much, given that our partner would be investing $2 million.
What are your key goals for the remainder of 2014 and on into early 2015?
On the uranium side, given where the uranium price is today, we believe that there is an opportunity to continue to acquire assets at attractive prices. There are a number of properties that are held by individuals who may not have the ability to continue to pay the fees associated with holding those claims. We will continue to see if we can grow our portfolio, whether it is in Utah or Colorado.
We will look to develop the Firefly Mine Complex in order to outline a uranium resource estimate on that property within the next 12 months.
On the copper side, we expect to advance the Arizona project. We plan to put a few million dollars into the ground, courtesy of our partner in order to define a resource on that property. So we are aiming to have a resource estimate within the next 12 months.
Depending on how much we are able to raise, we will invest in Chile too as we look to push the Aura project to the point where we are generating significantly more cash flow, a move that could obviously help to cover a lot more of the costs associated with Anfield’s overall operations.
How much cash does the company have right now?
We have approximately $500,000.
Do you anticipate that you will be going to the market to raise more money in the near future?
We continue to look at opportunities to go to the market to raise money. We will be opportunistic.
How much do you think you might try to raise?
So far this year we have raised about $2 million. We have put that toward exploration and development, acquisitions and payments of past debts. We will probably look to raise something similar going forward.
Who are the key players on your management team and what kind of experience do they bring to the table?
I am based in Toronto and spent a number of years as an analyst in institutional equity research, starting at CIBC in 2003. My years in the capital markets sphere has allowed me to develop relationships on both the buy side and the sell side of the market which, in turn, has resulted in perhaps more exposure than we may warrant at this stage.
We have a very strong board. Director Joshua Bleak, for example, is from a fourth generation mining family out of Arizona, with some roots in Utah. He has been very important in our ability to acquire assets in both of those areas, through local knowledge and contacts.
We have a mix of geologists and lawyers on our board, including Roy Fuller who has expertise in environmental.
Director Don Falconer brings more than 35 years of private and public sector experience within the uranium sector, both from the mining side and the utility side. In addition, Don has significant uranium marketing and sales experience which we hope to leverage in the future.
We are resource agnostic, we look for near term cash flow in whatever commodity makes the most sense. We are not terribly interested in looking at exploration assets at the moment, especially given market sentiment towards such assets. We understand that investors these days aren’t interested in investing and waiting five years for a potential return. They would prefer see a relatively quick and tangible return for their investment.
Moving forward we will continue to look at assets that make sense from a cash flow generation perspective.
FULL DISCLOSURE: Anfield Resources is a Stockhouse Publishing client.