Arizona Sonoran’s Cactus project is steadily advancing towards a construction decision. Credit: Henry Lazenby.
Arizona Sonoran Copper (TSX: ASCU) is pressing its Cactus copper project in Arizona toward an updated resource and prefeasibility study (PFS) by year-end while cutting project royalties and shoring up funding.
Given the company’s development momentum, shares in the Casa Grande, Arizona- and Toronto-based company appear to be undergoing a re-rating. Its TSX stock nearly doubled this year to an all-time high of C$2.75 apiece before easing to $2.67 near press time for a market capitalization of about C$474 million ($342 million).
President and CEO George Ogilvie says the market move, at roughly 0.3 times price-to-net asset value, still leaves “substantial runway for a further re-rating”, but doesn’t mean the team can relax. It’s gearing up for first copper cathode in 2029 with plans to organize financing next year, Ogilvie told The Northern Miner by phone in August.
“We plan to open the data room in the fourth quarter, work through lenders over the next 9 to 12 months and aim to announce project debt in the second half of 2026,” Ogilvie said. “Once debt is in place, we’ll look at the equity component and move to a final investment decision in late 2026 or early 2027.”
Investor appetite for US copper development was also highlighted on Aug. 13 when Mitsubishi agreed to buy 30% of Hudbay Minerals’ (TSX, NYSE: HBM) Copper World project for $826 million, a peer transaction in Arizona. That followed Hudbay’s strategic investment in Arizona Sonoran.
“Hudbay’s strategic investment in January – after four months of due diligence – was a huge validation,” Ogilvie said. “They don’t put upwards of $30 million into a company unless they expect significant returns.”
Gathering momentum
So far this year, Arizona Sonoran has reduced the net smelter return (NSR) royalty on Cactus to 2.5% from 3.2%. It completed a 0.6% royalty buy-down in August for total cash payments of $8.91 million to subsidiaries of Royal Gold (NASDAQ: RGLD) and Elemental Altus Royalties (TSXV: ELE). Royal Gold’s interest fell to 2% (from 2.5%) for $7 million and Elemental Altus’ to 0.5% (from 0.7%) for $1.91 million, management said.
The buy-down follows Royal Gold’s February purchase of a pre-existing 2.5% NSR on part of Cactus for $55 million.
A busy financing calendar has helped fund the de-risking work.
In June, Arizona Sonoran closed a C$51.75 million bought deal at C$2 per share. The company said the net proceeds are expected to fully fund it through a potential final investment decision at Cactus as early as the fourth quarter of 2026.
Hudbay maintained a 9.9% stake in July by exercising pre-emptive rights through a C$5.8 million private placement. As a result, Arizona Sonoran now has about C$85.4 million in cash and 177.6 million shares outstanding. The company also closed a November 2024 Nuton placement, seeing the Rio Tinto (ASX, LSE: RIO) venture investing C$3.1 million.
Studies and timeline
A 2024 PEA outlines average production of 116,000 short tons of copper cathode per year for the first 20 years, an after-tax net present value, at 8% discount, of $2.03 billion and a 24% internal rate of return at $3.90 per lb. copper, with initial capital outlay of $668 million over two years.
A July 2024 resource underpins the study. It outlined measured and indicated resources of 574.1 million tonnes at 0.6% total copper for 7.3 billion lb. contained copper and 430 million inferred tonnes at 0.4% total copper for 3.8 billion pounds.
Arizona Sonoran plans updating the mineral resource followed by a PFS before year-end, with a definitive feasibility study to follow soon after. The roughly 40,000-metre infill program supporting the PFS has been completed and results are expected over the coming months.
Market observers point out that Arizona Sonoran is well positioned ahead of the upcoming milestones. Despite analysts expecting the initial capital cost will go up in the PFS relative to the PEA capex of $668 million, Ogilvie maintains that the capital cost will remain comfortably below $1 billion.
This makes Cactus “one of the lowest capital intensity copper development projects globally,” Haywood Capital Markets mining analyst Pierre Vaillancourt wrote in an Aug. 1 note.
While there is no formal talk of a buyout yet, the analyst suggests that Hudbay maintaining its stake in the company during the most recent financing, and that three companies have signed non-disclosure agreements with access to Arizona Sonoran’s data room points to high interest in the asset. Rio Tinto did not participate in the recent financing but still maintains its investor rights.
Next steps
Early results from the Parks/Salyer deposits confirmed continuity. It includes long mineralized runs such as 391 metres grading 0.7% total copper from 226.8 metres deep in hole ECM-299 (with higher-grade enriched intervals) and 465 metres at 0.7% from 162.2 metres deep in ECM-289.
Metallurgical column work indicates recoveries that meet or exceed assumptions used in the 2024 PEA, Ogilvie said. Enriched material columns project 90% soluble copper extraction under best-practice “heap efficiency” assumptions versus 85% in the PEA. The team also trialed a Wirtgen SM 280 surface miner in the historical Cactus West pit. Preliminary results exceeded modelled throughput and cost expectations.
Ogilvie says the project’s trump card lies in benefitting from private-land status and a state-led regime. Major permits based on an earlier study are in hand. The company further cites 87% local support from October 2024 polling of Casa Grande residents.