Cochise County mine site purchased, 20 jobs saved

The pending $8.4 million purchase of the old mine site will mean the county will get $1 million in back taxes — enough to balance its budget. But the bank that loaned more than $50 million to the site’s current owner won’t get most of that back.

Also, resumption of copper processing and large-scale mining and employment aren’t likely at the old Johnson Camp Mine site for at least a year, says an official of the buyer, Excelsior Mining Corp., which also plans to build a new copper mine adjoining Johnson Camp. Ultimately, Excelsior says it will employ up to 140 people at both sites, but that could be years off.

Excelsior announced Thursday it has agreed to buy the Johnson Camp site out of receivership, where it has sat for nearly a year. The company said it has raised $12 million in financing to buy the property and to conduct studies and exploration of the site.

The deal is expected to close in late November, assuming a Superior Court judge who had placed the mine’s assets in receivership approves the sale.

The purchase announcement came three days after current owner Nord Resources laid off about seven of the site’s 27 staffers and two weeks after the company stopped processing copper concentrate from copper ore sitting at the site.

“There weren’t sufficient funds anymore to do that (copper processing) anymore,” said Christopher Linscott, the court-appointed receiver managing the site’s assets. “Copper prices are down.”

Until the mine is restarted, the company won’t resume copper processing, said Steven Twyerould, Excelsior’s president and CEO. The mine has produced copper off and on since the 1870s, and last shut down in 2010. Its peak recent employment figure was about 85 people.

Excelsior sees the mine site’s existing processing plant as a good fit for its planned Gunnison North Star Project copper mine, to be located just southeast of Johnson Camp. Once that mine is operating, its ore could be processed at Johnson Camp.

But the company won’t be filing applications until late 2015 or early 2016 for key permits from the Arizona Department of Environmental Quality and the U.S. Environmental Protection Agency for the Gunnison site. It also will finish and publish a feasibility study, so that mine is not likely to open for a few years, Twyerould said.

The proposed mine faces strong opposition from some neighboring Dragoon residents who fear its operation could contaminate groundwater because it would inject sulfuric acid into the ground to dissolve copper from bedrock. But Twyerould said he believes that’s not a threat.

Part of the purchase money will pay off about $4 million in back property taxes that Nord owed Cochise County. The site lies near the unincorporated community of Dragoon, and cheek by jowl with the tourist attraction The Thing.

Largely left behind in this purchase was Nedbank Limited, a South African Bank that had loaned Nord Resources $53 million to get the mine and processing facility started.

As the purchase agreement now stands, the bank will get about $4 million of the sale proceeds, said receiver Linscott. The bank must write the rest of its debt off, he said.

LENGTHY SEARCH
FOR BUYER

Since Linscott was appointed receiver in November 2014, he was engaged in a protracted search to find a buyer. Originally, he reached out to 20 different companies potentially interested in buying the mine, he said in an interview.

Four submitted bids, and in March, the Korean-based PSONS Ltd. was selected as buyer. But PSONS and its U.S. subsidiary, Mars Resources LLC, ultimately backed out of the deal in August after pushing back the closing date twice.

“My understanding is that they were unable to raise the money,” Linscott recalled. “That was in the midst of the period when copper prices were going down and stock prices were going down.”

Excelsior and the other two remaining bidders were asked to resubmit bids, and this time, the receiver selected Excelsior, in part it was because of the Gunnison site’s proximity to Johnson Camp and because, “We knew that the physical plant at Johnson Camp was something that would jive well with their operations,” LInscott said.

Third, “We were comfortable with their ability to finance the deal,” Linscott said.

Excelsior’s executives work in Phoenix, although it handles corporate financing out of Vancouver, B.C.

The Johnson Camp site contains a solvent extraction plant capable of pumping 4,500 gallons per minute, a tank farm, an electrowinning plant that can produce 25 million pounds of copper cathodes a year, solution storage ponds, a truck shop, a core storage building, offices, a warehouse, a laboratory, a mechanical shop, a primary and secondary crusher and various other equipment.

PURCHASE HELPS COCHISE COUNTY

Even though it may take a long time for the site to start processing, let alone mining copper, news of the purchase was welcomed by a Cochise County supervisor and an economic-development official in the area. They had been worried about the prospect of a total shutdown and of the possibility that the county wouldn’t get its back taxes anytime soon.

The county will get $1 million of the back taxes, enough to balance its fiscal year 2015-16 budget, with the rest going to schools and other public entities, said Richard Searle, the county supervisor who represents the mine area.

The Southeast Arizona Economic Development Group is excited to see Excelsior Mining as the prospective buyer, said George Scott, the group’s executive director. “We’re impressed by their qualifications and their long-term vision.”

Nedbank attorney Nancy March said she had no reaction to the fact that the purchase agreement didn’t cover most of Nord’s debt to the bank.

“It’s a commercial reality at this point,” said March, a Tucson-based attorney. “It’s just the state of the economy and the price of copper these days.”