Copper King Mining Corp., a Utah-based company that built and for a brief time operated a $60 million copper mill just outside of Milford in Beaver County, has emerged from Chapter 11 bankruptcy.
Although most of its interest in the mill and nearby Hidden Treasure Mine were sold during reorganization, Copper King and its public shareholders still maintain a small 1 percent interest in those properties. The mine and mill now are being operated by new owners who have placed them back into production, saving about 100 jobs.
“What was unusual [in this reorganization] was that the shareholders of Copper King didn’t see their interest [in the company] completely wiped out,” said John Bryan, who was named CEO of Copper King and its affiliated Western Utah Copper Co. shortly after those companies filed for Chapter 11 in May 2010. “And that is almost unheard of when a public company is reorganized in bankruptcy court.”
Copper King unveiled its new mill in mid-2009 and for a time the news seemed good. But in a summary report to shareholders shortly before its Chapter 11 filing a year later, the company said it had suspended copper mining and milling operations. Among the problems detailed:
• The process used to extract copper, gold and silver from the ore taken from the Hidden Treasure Mine was uneconomical.
• Copper King had run into problems with the way it had handled its milling tailings — the material left over after the metals are extracted from the ore — and needed to get into compliance with state and federal regulations.
• And, the company had defaulted on an agreement worth more than $10 million to supply magnetite ore to its customers and was unable to fulfill that obligation. (Magnetite ore is used for a variety of purposes including as an ingredient in magnets, fertilizer and systems to remove arsenic from water.)
Lee Abbott helped lead the effort to give a voice to Copper King’s public shareholders, estimated at about 600, during its reorganization. Abbott, now president of Copper King, said that fight was long and hard and started with the formation of a shareholders committee — the Copper King Shareholders Association — in fall 2010.
“We were hanging on by our fingernails most of the time,” Abbott said, explaining that other company debtors were ahead of shareholders in the line to recover their investments. But he explained shareholders believed that the value of Copper King’s assets exceeded the company’s debts and were growing rather than declining in value.
And when Bryan sold the company’s mining operations to Empire Advisors of Columbus, Ohio, and Clarity Partners of Los Angeles, recovering some $23 million for creditors, the shareholder’s position was borne out.
After purchasing those assets, Empire and Clarity invested more than $65 million in new capital in the Millard County operations, which is now operating under the name CS Mining. The partners brought in a new experienced management team.
“We liked the CS Mining property because there are large existing copper deposits with a potential resource upside of several billion pounds of copper,” said David Richards, president and managing partner of Empire Advisors.
Richards said the mine and mill are now producing more than 1 million pounds of copper per month and generating positive EBITDA, or earnings before income taxes, depreciation and amortization.
“We plan to build a second processing facility to increase production. We would be looking to triple production over the next year and a half and continue to expand our workforce,” Richards said of the company’s plans for its newly acquired Utah assets.
With Copper King’s exit from bankruptcy, the company has “changed from a near total loss into a potential money making opportunity,” Abbott said in a note to shareholders earlier this year.
“Don’t get me wrong, the reorganized Copper King is not awash in cash but we do have some significant assets,” he said. “And we have a number of projects underway that we are working on for the continued benefit of our shareholders.”
As part of the company’s reorganization plan, Copper King shares will undergo a reverse split that will result in the company’s 5.6 billion existing shares reduced to approximately 3.2 million new shares. The company is hoping those new shares will be distributed to existing shareholders within the next 30 to 60 days and that a public market for them soon will be reestablished.
Beaver County Commissioner William Dalton said the efforts of Empire Advisors and Clarity Partners to bring the mine and mill back into production has greatly benefited the area by saving well more than 100 jobs. “It was devastating when they closed down but now that CS Mining is up and running it has given a real boost to our economy.”