By Brian Boutilier
VANCOUVER ( Bullions Bull Canada) -- As 2012 winds down and I look ahead to the investment climate in 2013, I'm troubled by increasing warnings of potential "hyperinflation" ahead.
As an investor, one way I can deal with this potential threat is to look for producing mining companies with large, verified resource deposits, and the capacity to develop these resources.
One company that fits that description is Revett Minerals (RVM), a copper and silver miner I recently visited to tour its operations.Imagine, if you will, the quiet of a valley morning unbroken, the view ringed by the Cabinet Mountain Wilderness of Montana. This scene is disrupted by activity in the foreground, pipes are delivering a brown, clay-like slurry coming from the direction of the mountain range above. Its contents landing like a soft serve, piling up over time. Pan out, and one sees that there were hundreds of square meters of this dried slurry, aging, drying out, creating fields that are being planted. Readers need to appreciate the natural beauty of Northern Montana. I just described the scene at the Troy Operation of Revett Minerals -- an operating copper/silver mine -- amid the Cabinet Mountain Wilderness of the surrounding area. The "conservation experiment" is the tailings pond/fields. This isn't some "sideshow" for environmentalists but an operation within the operation, and one of which Revett is very proud. We spent as nearly as much time touring the tailings and conservation areas as we did the mine and the mill. Many in society have a pre-existing distrust of large mining operations, and the environmental hazards that they pose. It can be hard for some to wrap their heads around the idea that mining operations and conservation aren't mutually exclusive. The ore body consists primarily of 0.7% copper and 1 oz/ton silver and is reportedly quite benign, having no arsenic or other chemicals that would harm the groundwater. The company has to monitor the copper being extracted and a few other trace elements. Because the ore body is nearly devoid of chemicals such as arsenic, this makes it a comparatively clean operation from mine to mill to tailings pond below. The plant has no cyanide circuit, the end product is concentrate shipped to a smelter, for electrowinning and the eventual production of copper and silver. There are no leach fields, no liners, so the ground water is not in danger of contamination by cyanide or other toxic chemicals. Water coming from the mine is tested often, and is potable. The slurry from the plant is capable of growing grass without any other ground cover, which is what the company is doing in the older, dry tailings ponds. Not what one expects for a copper-heavy operation. The company briefings were confident: We have resources, we are efficient, we are good corporate citizens and conservationist, lets us prove it. We produce 10 million ounces of copper and 1.3 million ounces of silver annually. We have one operation now, which features multiple strata of ore bodies, and we are adding mine life with surface and underground exploration. The plant is of large capacity, with redundancy in its infrastructure. This is a versatile design due to the twin circuits. There are two sets of ball mills and gravity separation that have a combined capacity of 8,500 tpd. The company can speed up, by using both circuits, and catch up to the mining rate if needed. It also can take one circuit off-line, to do repairs without missing a beat. Management has a good handle on long-lead items, and contract for lower bulk rates for items with predictable lifecycles. Much of the tour was given by Larry Erickson, the manager for technical services. He manages the plant, and much of the water quality and conservation aspects of the operation. When in the plant, he speaks as a chemist. When outside, one would think he's a forest ranger. He is very proud of the efficient production of copper and silver and equally passionate about water quality and the tailings he's sending down the hill. Let's put on an investor cap on for a few moments. Is there any blue-sky value here? The Troy operation has more mine life, which buys time to develop another operation and keep a strong balance sheet. The latent value is the Rock Creek Project. As with all large projects, this is a double-edged sword to investors, and one has to be discerning about when to invest. Over the shorter term, it represents a development story that could create sideways trading, if not a reduction in share price due to potential dilution. However, it has a potent share structure now, roughly 35 million shares out, after already doing a reverse split a few years ago. This may represent accretive dilution, depending on the share price, and the feasibility of the project. Rock Creek is 9,300 acres with 370 unpatented claims, and 99 patented load claims. There is 230 million ounces of silver and 2 billion pounds of copper resource here representing one of the largest untouched resources of its kind in the US. The ore is similar to the Troy Ore Body, devoid of toxic chemicals that would create watershed issues. Rock Creek remains in the permitting stage, and is successfully progressing through the various issues, including buying a large, surrounding "reserve" to keep the bear population from being affected. Development plans are progressing: a feasibility study in two years, construction in three years. The goal is a 10,000 tpd operation, anticipated to produce six million ounces of silver and 52 million pounds of copper annually over a 20-30 year life of mine, based on current resource numbers. So why put Revett on your watch list? It is a good corporate citizens, efficient yet conservation-minded. It is good for the local economy, and creates a workforce in an area with few jobs. Revett has a low float with only 35 million shares outstanding, creating shareholder value if metal prices hold or appreciate. There is "blue sky" potential with the massive Rock Creek Project in the wings. If you are looking for exposure to a Junior Copper Operation, with silver credits that has the potential to be a mid-tier producer, Revett is worth considering. It certainly wasn't what I expected. Follow @bullionbulls This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts