Cardero Resource: Moving from Coal to Copper

Cardero Resource (TSX:CDU) has been hit as hard as any junior mining company in the midst of weaker commodities prices. Its share price has plunged 42 percent since the start of the year, and it was notified of a delisting review by the Toronto Stock Exchange in May.
Still, Cardero Resource isn’t giving up yet. On Monday, the company announced a comprehensive restructuring plan that includes the sale of its coal subsidiary and the acquisition of a copper exploration property. In other words, it looks like Cardero is moving from coal to copper.
“We are delighted to announce a comprehensive restructuring plan that we believe will provide a platform on which to build a copper exploration and development company,” said Cardero Resource President and CEO Henk van Alphen in a statement. “We are completing due diligence on a number of other copper opportunities and we intend to make other acquisitions, aiming to build a portfolio of copper assets at various stages of development.”
As mentioned, the restructuring plan for Cardero Resource includes the sale of its subsidiary, Cardero Coal, with the retention of a participation right in the Carbon Creek metallurgical coal project. At the same time, the company will secure an option to acquire a 100-percent interest in the Zonia copper project in Arizona from Redstone Resources (ASX:RDS).
Under the terms of the agreement, Cardero Resource must make aggregate cash payments worth US$2.1 million and issue 16 million post-consolidation shares over a three-year period. The company has made a payment of US$25,000, and must make another payment of US$425,000 five business days after the completion of its debt restructuring transaction.
There will also be a restructuring of Cardero’s US$8.5-million debt, as well as a 10-to-one share consolidation. Cardero Resource is planning a private placement of post-consolidation shares to raise $1.5 million. Net proceeds will be used to make the initial option payment mentioned above, and for general working capital.

Cardero Resource: all about timing

With the copper price tumbling to a six-year low of around $2.34 per pound, it may not seem like the best time to get into the copper space. But Cardero argues in Monday’s press release that the timing makes sense.
“Copper is a commodity for which demand is expected to continue to expand as industrialization continues at pace across the globe,” van Alphen said. “Large copper projects typically have long-lead times to development and medium-scale projects like Zonia create the opportunity for profitable production when copper prices start to move sharply upward.”
Certainly, that’s a point of view being taken by a number of copper analysts. For example, Bruce Alway of Thomson Reuters (TSX:TRI,NYSE:TRI) has said that he sees the copper price moving much higher by 2017 to 2018, although he also correctly predicted back in March that there would be more downside for the copper price first.
In any case, it will be interesting to see what happens next for Cardero Resource. The company is planning to put together a work program aimed at completing a NI 43-101 compliant resource estimate as well as a preliminary economic assessment for Zonia.
Some permitting work has already been completed for the project, and Cardero is targeting a development plan focused on private land in order to allow for an easier permitting route. Of course, Cardero Resource will also look for a development partner and financier to help move the project forward.
At close of day on Monday, Cardero’s share price was up half a penny, at $0.02, with 132,000 shares trading hands.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.