Johan Raadsma, President and CEO of Crazy Horse Resources Inc.at the New Orleans Investment Conference

Since Asian countries are experiencing an economic boom, there is a huge demand for commodities to build infrastructure to keep up. Investors know this and are investing accordingly, not only in commodities themselves but also in companies that are closely tied to commodities.

Copper is surging and copper-related companies are trying to find inroads into China (and many of the other nearby Asian countries). Recently, we spoke to Johan Raadsma, President and CEO of Crazy Horse Resources Inc. (TSXV: CZH). We talked about a new opportunity that Crazy Horse Resources is exploring and how they will be leveraging their proximity to China for an advantage.

Johan Raadsma has over 30 years of experience in the mining industry. He started by giving us a brief glimpse at his background: “I’m a mining engineer from Australia. I moved to the Philippines in 1996 for the Masbate Gold Project. I finished the feasibility studies on and did some trade sales with CGA Mining. It’s currently producing $200,000 ounces per year at a profit and doing well. I was the director for NM Rothschild & Sons [an investment banking firm] out of Sydney for five years and recently acquired the Taysan Copper Project in the Philippines for development.”

He continued: “The Taysan Copper Project is in the Crazy Horse Resources is a very well-drilled out project we purchased from Phelps Dodge when Phelps Dodge was purchased by Freeport [McMoRan Copper & Gold]. The Taysan Copper Project was considered non-strategic and Freeport has its hands full [with other projects] so we purchased the Taysan Project.”

Next, we spoke in greater detail about the Taysan Copper Project. “It is fully drilled out,” Mr. Raadsma said. “It contains 3.3 billion pounds of recoverable copper and 1.4 million ounces of gold.  It is very close to the largest port in the Philippines. The Taysan project has a very low waste-to-ore ratio. The life of the mine is .56-to-1 compared to the industry average of 2.5-to-1. So the total material to move is not a lot. We would mine open pit in a single pit. The concentrate quality is very clean. This will be very desirable concentrate for blending with higher arsenic grades from some of the other mines. The process is very simple. It has a tailing storage facility site identified. Environmentally it’s a very friendly process.”

So, what work has the company done on the project? Mr. Raadsma told us: We’ve recently done a small fund raiser which was oversubscribed to start the affirmatory scoping to bring the resource to a NI-43-101 compliance and we’ve appointed Amick Consultants, which are large copper processing engineers to manage the study for us. We’ve kicked off the study. WE have four drills onsite and results are coming up as expected. We will finish the confirmatory study in February then we will do and we’ll bring up to the mining permits in parallel with the bankable study we’re doing. We understand that process very well. We expect that by the end of the bankable study, which will be completed toward the end of 2012, we will be fully permitted and ready to commence construction. “

That conversation led naturally into a conversation about the Asian countries and their economic boom and their thirst for commodities. With Crazy Horse being in the Philippines, Mr. Raadsma admitted that this was a definite advantage: “We’re in the bank door of China. Right now there is an explosive disconnect between the supply of copper in China, Japan, and Korea. It has to come from countries like the Philippines which is well endowed with minerals like copper and gold. Taysan is close to the port.”

To cement their advantage, Mr. Raadsma sees the Crazy Horse story being very similar to another mining success story that we at MetalsNews recently wrote about – the Copper Mountain story. Mr. Raadsma said: “We expect we’ll have a Chinese, Japanese, or Korean partner somewhat similar to the Copper Mountain deal with Mitsubishi. Copper Mountain is such a great story. Copper Mountain is the same size and grade as our high grade starter pit, except we also have a gold byproduct. For the first seven years we’re very much like Copper Mountain, and then for eighteen years after we have additional resources to continue milling. So we’re a little bigger [than Copper Mountain] but we really like the story: Maintain control of your company but sell 25% to an off-taker in exchange for complete construction financing.” That is exactly what Crazy Horse is doing: “We’re going forward as if we’re building it ourselves but there will be strong interest from our Asian neighbors – in fact there already is strong interest,” said Mr. Raadsma.

The conversation then turned to financing, which is always a top-of-mind issue for companies (who need to raise money) and for investors (who want to raise money and who worry about dilution of shares). Mr. Raadsma talked about how Crazy Horse is being received in the market and what their financial plans are for the future: “The initial fundraising that we did was at $0.75 closed a couple of weeks ago. We are currently trading at the $1.40 to $1.50 range so we are being well-received in the market. We will have to go back to the market early next year to raise money for the bankable study, which will be $30 million to $40 million. We will decide then how to raise money for the construction, which will be approximately $900 million.”

Lastly, we asked Mr. Raadsma the top reasons that he felt investors might be interested in Crazy Horse. He gave us three: “First, the operating cost for Taysan is very low. For the first seven years it is 90 cents per pound, which really means this project will be very robust in adverse economic cycles.”

“Second, you have to be bullish on copper. As Goldman Sachs and Credit Suisse just announced, they see an increase in copper price up to $11,000 per ton, which is close to $5 per pound of copper. At $5 per pound of copper we would have close to $3 billion NPV at 10% discounts (and post-tax), so there is tremendous financial upside.”

“And third, it is in a great part of the Philippines. It is two hours south of Manila. Very close to major infrastructure of power and a port. It’s in an area of the Philippines that is very well known as an industrial area.”

For investors who have a medium-to-long term vision of prosperity in Asia and want a “backdoor” way to invest, Crazy Horse has a compelling story that may be worth paying attention to.

References

Crazy Horse Resources Inc.

http://www.crazyhorseresources.com/

Suite 900 - 595 Howe Street

Vancouver, BC, V6C2T5

P.604-638-8067