The Conversation (0)
Last year, Quaterra Resources inked a deal with Freeport-McMoran Nevada for an option agreement worth up to US$138 million for its projects in the Yerington district of Nevada. On Monday, the company announced that Freeport Nevada has completed Stage 1 of the agreement and has committed to moving to Stage 2.
On Monday, the company announced that Freeport Nevada has completed Stage 1 of the agreement and has committed to moving to Stage 2. That means the company will make option payments of US$7.1 million over the next 12 months as Quaterra and Singatse Peak Services (SPS) explore the Bear deposit in Yerington.
The market reacted well to the news, with Quaterra’s share price closing up 18.75 percent, at $0.095, in Canada, and 20 percent, at US$0.799, on the OTCQX in the US. Roughly 334,000 shares traded hands in Toronto, and 773,386 in the US, almost five times the average trading volume for the company.
Despite today’s tough market, Quaterra’s share price has gained about 111 percent, or 5 cents, in Canada, in the past three months.
The Investing News Network (INN) had the chance to speak with Steven Dischler, president and CEO of Quaterra, to get more insight into the news. In the interview below, he speaks about what’s in store for the Bear deposit, and about Quaterra’s strategies as well as some of his views on copper and the market in general.
INN: Freeport Nevada recently agreed to move to Stage 2 of your option agreement, which is big news for Quaterra. What would you highlight for investors?
SD: The bottom line is Freeport Nevada has now committed US$7.1 million towards option payments for Quaterra and SPS over the next 12 months. We’ll use these proceeds to fund exploration of the Bear deposit, which is a large porphyry copper system in the historic copper district of Yerington in Nevada.
Freeport Nevada is a subsidiary of one of the largest producing copper companies, and they have an option to earn a 55-percent interest in SPS by providing US$40 million in funding for [our projects].
INN: What do you think that Freeport’s continued commitment says about your project and about the Yerington district in general?
SD: Yerington is a past producer, and our focus right now is on the Bear deposit. Bear is a high priority for us because of its size. There’s historic drilling and a potential for higher grades than the district averages. It’s underexplored and open in several directions. Overall, just because of its size and potential, we have an interest in exploring it further
INN: Bear is below the current Yerington mine site. Could you give a bit more insight into the deposit and what your goals will be with your exploration work there?
SD: Sure. There is historic drilling on the Bear deposit, about 125,000 feet in 49 holes. So we know the copper mineralization is present. There’s no question about that. Although it’s historic drilling — we don’t rely on historic resource estimates — there’s no question that it’s there.
What we’re going to focus on now is [getting] a better understanding of the size of the system, the copper grades and the distribution in the system, and ultimately, on finding out whether it would be economic to mine.
INN: How does the Bear deposit tie into your other projects in the region?
SD: At the moment, we believe the Bear deposit is our next focused area, but success there could be a catalyst for developing our other properties in Yerington, which includes the old Yerington pit – the Anaconda site – and our MacArthur project. Both of those projects have 43-101 resources, both oxide and sulphide, and we have a PEA for McArthur, which was published in 2012.
Clearly, these assets will require additional exploration and development to assess the value. But right now, the Bear deposit is a key catalyst to really understanding how it all fits together, because of its large size and [because of] its potential for higher than district grades. It’s under explored, and it’s a large system.
All three of the projects are adjacent to each other, so they could be developed with sort of a hub-and-spoke concept with a centralized brownfield area.
INN: Also, for Stage 1 of your option agreement, Freeport Nevada spent US$2.5 million with Quaterra and SPS, and those companies have done plenty of due diligence with regards to water rights, mineral rights, environmental impacts, and so on. How is that progressing?
SD: I think the due diligence went well. It took some time to work through all the details, but obviously, Freeport Nevada is willing to go through to the next stage and spend another US$7.1 million. I can’t speak for them, but the due diligence in my view went very well. It was able to check the boxes on our property and on environmental issues, and so we’re very excited about it.
INN: You already have significant water rights for the project, correct?
SD: Yes, in addition to our 51 square miles of property that we manage and have control of, we also own very substantial water rights. We’ve also optioned additional water rights on part of the property that we have leases on.
We think that’s a big differentiator, as water is an important resource for mining – and it will become more important.
INN: Quaterra has gone through a bit of a change as of late, focusing on its Yerington assets and employing a specific strategy to secure funding while preserving shareholder value. What have you been doing, and how has that been working for you?
SD: We really changed the strategy, I would say, 18 months ago. Sometimes, necessity is the mother of invention. We reinvented ourselves, and I think our strategy was essentially to stabilize our financial position so that we could achieve some staying power in a very difficult market.
We’ve lowered our costs substantially. We’ve sold our non-Yerington assets and, I think, importantly, we’ve negotiated this option agreement with Freeport Nevada. So we’ve really done a number of things to change the culture of the company and the focus. We’re largely doing what we set out to do 18 months ago.
INN: That seems to have caught the attention of some of your shareholders, as some insiders have been buying over the past few months. What specifically do you think is attracting them to the stock?
SD: I think it’s a lot of what I just mentioned. We’ve stabilized our financial position. We’ve now got some staying power in a tough market, and we believe we’ve got a great asset in Yerington. We got the interest of a major company that has an option to help us finance it.
INN: You’ve been in the industry for a long time, and this certainly isn’t your first time getting through a bear market. What are your thoughts on what it takes to keep going in markets like the one we’re in right now?
SD: Well, I started in this business some 35 years ago, so no, it’s not the first time. Honestly, this has probably been as extended and as deep a trough as I’ve experienced.
There’ve been others, [and] the markets will always continue to be cyclical. It’s really about being able to hang onto the core assets that you have in these low times to be positioned to take advantage of [the situation] when things turn around. Because they will, eventually.
INN: Speaking of the market, we’ve spoken before about the copper space, and there are still a few conflicting views out there. What are your thoughts on some of the differing predictions for copper?
SD: The case for copper, in my humble view, is that it’s got solid uses in housing, [and for] communications infrastructure and a growing middle class. That’s the demand side of things.
On the supply side, large mines are getting harder and harder to find and permit. We know copper grades are declining worldwide – for many of the big deposit producers, the grades are falling and/or they’re going underground.
And then you’ve got resource nationalism, political instability, environmental opposition and permitting. I think the supply side has some constraints to it, but will provide some positive tension here [to copper fundamentals].
The conclusion for us is that copper fundamentals look strong. And it’s not just us. Some of the bigger producers – Rio Tinto (NYSE:RIO), Freeport McMoRan (NYSE:FCX), Glencore (LSE:GLEN) and others – they’ve kind of said similar things with the market moving into deficit and fundamentals looking stronger in the mid to long term.
INN: Finally, what can investors expect to see next from Quaterra, aside from an announcement regarding the details of an exploration program at Bear?
SD: We expect that we’ll announce the drilling plans [soon], but we do intend to start drilling at Bear later this summer, in the third quarter. And we’ll start releasing the results when we get them, by the end of the year.
INN: Thanks for joining me Steven.
SD: Thank you.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Quaterra Resources is a client of the Investing News Network. This article is not paid-for content.
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