Dear Quaterra Followers:
As the new President and Chief Executive Officer of Quaterra Resources, I am reaching out to the Quaterra shareholder family with an update regarding ongoing developments of your company. We plan to stay in touch with you more frequently in the future and l welcome your contact with me personally.
Since 2011, the capital markets for mining companies, and particularly the junior exploration companies, have been difficult and not been spared in market capitalization erosion. In spite of this, we remain optimistic of the new Quaterra and its future. As Chief Executive l assure you that we will do our best to keep you informed of our progress and encourage open communication.
We have been busy on numerous fronts since I have taken on the role of President & CEO in early August 2013. Our efforts have focused on stabilizing our financial position, cutting our costs and rationalizing our portfolio of mineral assets. These actions have set the stage so we can focus on advanced exploration and development of our Yerington copper district in Nevada. We have much to do in the upcoming weeks and months to create the kind of company and value that our shareholders deserve. Our plans are outlined below.
The Company’s Financial Position
We have stabilized the Company’s cash position over the past two months through several previously announced transactions. Firstly, we received a cash payment from Freeport McMoRan associated with a property sale that was completed last year. Secondly, we completed a successful private placement of approximately $3M. Third and lastly, we sold three properties in central Mexico to Goldcorp, who are a 6% percent owner of Quaterra’s equity.
During this time period, we have also restructured our Management team and Board of Directors while reducing our corporate spending by approximately 40%. These restructuring transactions outlined above added approximately $4.375 to Quaterra’s treasury and provide a platform for our future plans.
Quaterra’s Key Focus: Monetization of Non-Core Assets and Portfolio Optimization
Our management and Board of Directors intend to transition Quaterra from an exploration company to an exploration and development company. In the first part of this process we will continue to evaluate and monetize select assets as a source of organic funding to support our flagship copper project in Yerington, Nevada.
Through the leadership of Dr. Thomas Patton, Quaterra’s Chairman of the Board, we have acquired and developed a valuable portfolio of mineral properties, diversified by commodity, location and stage of project. This model has served the company well in the past, but in this current environment, we believe we need to focus our efforts on advancing our copper assets in Yerington, Nevada.
This process started late last year with the sale of an early stage exploration copper project in eastern Nevada (Butte Valley) to Freeport. Recently we announced restructuring of our 2008
Agreement with Goldcorp in which we have effectively been their greenfield exploration team in Central Mexico. The restructuring included the sale of three precious metal properties to Goldcorp for cash and a royalty as well as continuing the exploration for another year.
We are currently evaluating alternatives for the monetization of other non-core assets that will allow us to focus our efforts on our Yerington copper projects that we believe have the potential to be a world class asset.
Yerington Copper Projects — As mentioned above, our new focus will be on advancing our Yerington copper projects. The Yerington District has several unique aspects that set it apart from most other copper projects in the world,
- Low political risk — located in mining friendly Nevada our Yerington copper projects have excellent support from Local, State and Federal elected officials,
- Low technical risk — as a brownfield copper camp, Yerington has a history of profitable production as a low cost copper producer.
- Excellent developed infrastructure — power, railroad with access to international ports, well developed highways, water and a full-service community are all in place,
- World-class copper resource — The USGS refers to Yerington as a “proven copper super- system.” There are approximately 25B lbs of known copper resources in the District, and Quaterra controls approximately one-third of these pounds, and
- A Clear path to production — including a well-defined and known permitting process.
There are few large copper projects worldwide with low political and technical risk. We believe the Yerington copper projects, when combined into an integrated copper camp, rank high in size as well as being low in risk. The success of any large mine is related to its marginal cost of production.
Remember that Yerington has been a mine, a very productive one for Anaconda over many years. We believe that its well-developed infrastructure and its location in Nevada are superior characteristics.
Assets under Quaterra’s control in the Yerington District and their strategic significance to building an integrated mega-copper camp
Our assets in Yerington include the MacArthur Mine, Yerington Mine, Bear Deposit, strategic land position and water rights, and other exploration targets. Both the MacArthur and Yerington Mines were previously operating mines and have great potential to be expanded and restarted. The Yerington Site is also strategically located as a central mineral processing location. The Bear Deposit is a very large porphyry system that has been previously drilled by both Anaconda and Phelps Dodge with a published historic resource. And importantly, we have the support of the community, as well as State and Federal elected officials.
Quaterra controls almost 50 square miles of real estate in the Yerington District and over 8,600 ac-ft/yr of water rights. Having adequate water is a strategic differentiator for Quaterra in Yerington. We believe our water rights are sufficient to support a consolidated mining operation in the District.
Additional water rights are also under Quaterra’s control through recent private land transactions at the Bear Deposit.
Through recent geophysical interpretation, Quaterra has identified several high priority geophysical targets in the District. These targets require drilling for verification. We believe that a new discovery is possible and could be a game changer for Quaterra at Yerington.
Three key issues required to successfully develop any major project are having a great project, adequate financing and the right team in place to execute the program. Quaterra has the right asset with the right address and great people in place to be successful at Yerington. With adequate financing, l am convinced the probability of success for Quaterra at Yerington is high.
In closing, l want you to know that we will remain laser focused on creating shareholder value. We are optimistic of the company’s future. We are grateful for the continued support of our shareholders and will continue to provide you with regular updates on our progress. l personally welcome your suggestions.
Steven Dischler, President & CEO