Copper's rebound increases exploration in Yerington area

A rebound in copper prices that results from big construction projects in China has brought a spike in exploration activity around Yerington.

Last fall, as the economy nosedived, copper prices tumbled to around $1.25 a pound after reaching a historic high of $4 only a few months earlier. But copper has steadily rebounded and last week traded at around $2.75 a pound on the London Metals Exchange.

Prices above $2 justify continued exploration, says Greg French, project manager for Nevada Copper's Pumpkin Hollow property six miles southeast of Yerington.

"When copper started to go over $2 people started to breathe a sigh of relief," French says. "Now that it has held and continues to go up, I think we are getting some base to where things are going in the future of copper prices."

Copper's rise stimulates interest and makes it easier for companies to secure financing, says Tom Patton, president and chief executive of Quaterra Resources of Vancouver. "When copper hits a $1.25 no one wants to talk to you."

There are four main players in the Yerington copper district: Nevada Copper, Entree Gold/HoneyBadger Exploration Inc. and Quaterra Resources of Vancouver and PacMag Metals Limited of Australia.

Entree Gold late last month signed an agreement with HoneyBadger to provide exploration financing for the Blackjack property west of Yerington.

Entree Gold will put up nearly $1 million for exploration in exchange for an 80 percent stake in the project. Entree Gold President and Chief Executive Officer Greg Crowe says his company has raised more than $100 million for exploration and seeks additional agreements in which it can take a majority share.

"Other properties in the area might need assistance for development, so there might be room for future deals," he says.

Mike Visher, chief of the state Division of Minerals' abandoned mine lands program, says copper exploration activity has increased because it once again became economical for companies to consider bringing their claims into production.

"With the drop in the economy there just was not as much building and not as much need for copper wire for construction," Visher says. "But anytime you see copper anywhere close to $3 you will see these projects moving forward again. Historical areas like Yerington will always be looked at for copper."

Yerington is best known for the open pit Anaconda Mine, which covers more than 3,400 acres. The Anaconda Copper Company mined the site from 1953 to 1978 and produced 1.75 billion pounds of copper. The site has had significant environmental problems, but many issues have been addressed by former mine operator Atlantic Richfield Company.

Quaterra's Patton says his company is folding the mine into its resource package, which consists of the 13-square-mile McArthur property.

"It certainly could be cleaned up in context of building a new mine," he says. "It is a lot easier to build a mine in a place that has already been messed up than starting out in a pristine area."

PacMag Managing Director Mick Clifford says the Yerington Copper district is in the middle of a renaissance, and that smaller companies such as HoneyBadger and Nevada Copper have seen interest from larger companies willing to back the potential of the area. Quaterra's Patton says a major copper producer may eventually consolidate all claims in the area.

"It is a distinct possibility," Patton says. "It is hard to find big districts in North America that have the potential that Yerington does."

Renewed construction activity in Asian markets is the primary driver behind increased copper demand. Nevada Copper's French says China is the, "800-pound gorilla of the commodities industry."

"Everybody looks West, and when China sneezes the commodities markets sneeze," French says.

Entree Gold's Crowe says copper spiked to $4 a pound on the strength of massive construction in Beijing and Shanghai. Beijing's population is pushing 17 million, while Shanghai's is around 19 million. Crowe likened the level of construction in the two cities to building another Manhattan each year for five years.

"If you are look at continued development on that scale, you are looking at massive consumption of commodities," Crowe says.

Crowe says that much of the copper mined today comes from near-surface deposits, and mining companies will have to use advanced techniques to search for deeper deposits. As the metal becomes more rare and harder to extract, combined with economic growth, prices should continue to rise, he says.

Nevada Copper acquired the Pumpkin Hollow property in 2005 and began exploration drilling in late 2006. U.S. Steel worked the site in the 1960s as a source of iron ore, but drilling led to the discovery of extensive copper mineralization. A database of information from more than 500 holes on the property has been gathered, and Nevada Copper continued drilling in the fall of 2008 to bring the claim up to modern standards.

The property comprises 22 square miles of mostly private and some BLM land.

HoneyBadger's Blackjack Property consists of 484 claims covering 10,000 acres about eight miles west of Yerington. The company holds 526 claims on nearly 16 square miles of land in the Mason Valley.