Copper Discovery Opportunities with a Hedge
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Chilean Metals Inc. (TSXV:CMX, OTCQB:CMETF, SSE:CMX, MILA:CMX, FRA:IVV1, BER:IVV1) is a Canadian junior exploration company with a portfolio of copper, gold and cobalt properties across both Chile and Nova Scotia. The company has assembled a top-notch technical team with special expertise in exploring for massive copper-gold and cobalt deposits, particularly within iron-oxide-copper-gold (IOCG) geological settings.
IOCG deposits are typically extremely large and high-grade with simple metallurgy, producing immensely profitable mines. These deposits primarily host copper, however, they can also contain economic levels of gold. BHP Billiton’s Olympic Dam in Australia is the largest known IOCG deposit and also ranks as the world’s fourth largest copper deposit.
The company’s Nova Scotia portfolio includes five properties in the province’s Cobequid – Chedabucto Fault Zone, a 250-kilometer long structure in which a large number of IOCG targets have been identified by Minotaur Exploration—an Australian miner highly experienced in IOCG deposts—. Nova Scotia is a favorable mining jurisdiction with access to a skilled work force, rail and utilities. Nova Scotia has the potential to become an IOCG province. The Nova Scotian Department of Natural Resources is a supportive partner offering exploration assistance to the company. Chilean Metals has contracted Precision GeoSurveys to conduct magnetics and radiometrics surveys across the Cobequid properties with the goal of identifying drill targets.
Chilean Metals’ premiere property for this portfolio is the Bass River project, which it has recently expanded through the acquisition of the Trident prospect, a prospective area for cobalt. Modeling by Minotaur has identified three priority targets on the property which saw initial drilling in the spring of 2018.
Chilean Metals also holds a significant land package in Chile’s proven and world-class Atacama IOCG belt. The Zulema property is located just 30 kilometers from the world’s second largest IOCG deposit—the low-cost producing Candelaria mine owned by Lundin Mining. Phase one drilling at Zulema has identified IOCG-style mineralization consistent with the known geology of the Candelaria system. Chilean Metals is currently looking into farm out opportunities for its Zulema and Tierra de Oro properties, and have engaged Kura Minerals to help with this process.
Chilean Metals’ discovery potential across two countries is not the only potential value on offer to shareholders. When the company sold the Copaquire copper project to Teck Resources for US$3 million, it retained a 3 percent net-smelter-return royalty—a significant hedge for CMX shareholders and a unique asset that sets the company apart from other junior explorers. Copaquire is contiguous with Teck’s Quebrada Blanca mine, which is expected to run out of mineable ore in 2019. Teck is currently exploring on the project which has an existing 43-101 resource.
Copper’s excellent supply and demand fundamentals continue to make it a compelling investment. Copper demand is expected to continue to rise in the United States as well as in emerging markets in China, India, Brazil and Indonesia. This demand comes alongside a growing supply shortfall.
Chilean Metals has assembled one of the best technical teams in the junior mining space for evaluating and advancing IOCG exploration projects. Team members have a track record for success in major discoveries both in Chile and geological settings similar to Nova Scotia. Dr. Chris Hodgson leads the Zulema project and was the first geologist to identify Santa Domingo, a major Chilean deposit which sold for over $700 million. Dr. Tony Belperiro, also the Executive Exploration Director for Minotaur, led the team that discovered Prominent Hill, one of the world’s largest IOCG deposits which sold for more than $1.2 billion.
- Experienced technical team specialized in exploring for massive copper-gold-cobalt deposits in IOCG environments.
- Drilling has confirmed the presence of IOCG-style mineralization at Zulema; potential for Candaleria-style deposit in world-class IOCG belt.
- Opportunity to make first discovery in emerging Canadian-based IOCG province.
- Recent acquisition of prospective cobalt concessions in and nearby Bass River project.
- Potential for spinning out Nova Scotia properties into new public companies.
- Royalty hedge with 3 percent NSR on Copaquire; contiguous with Teck’s Quebrada Blanca mine.
Nova Scotia Portfolio: Discovery Opportunity in Emerging IOCG Province
Chilean Metals’ Nova Scotia portfolio includes five wholly-owned copper-gold-cobalt properties: Fox River, Parrsboro, Lynn, Bass River and Economy East. These properties are located on the western flank of the Cobequid-Chedabucto Fault Zone.
Bass River: targets identified for IOCG potential
The Bass River VTEM target is the largest airborne VTEM anomaly delineated from over 2,000-line kilometers of data.
The company’s main focus in Nova Scotia is the Bass River. Airborne geophysics performed at Bass River North in Q1 2015 identified a major VTEM cluster on trend with the lead-zinc-silver mineralization exposed at surface and in drill holes to the southwest.
Modeling of the airborne data by Minotaur Exploration identified eight targets. Three of those were identified as priority targets for a pulse electromagnetic (PEM) survey that was conducted in late 2017 alongside other exploration activities.
The PEM survey indicated a target of notable strike length (540 meters) and depth (476 meters).
The company launched its first drill program in early 2018, focusing on the identified target.
Expanding the focus to include cobalt
In May 2018, Chilean Metals entered into an option to acquire the Trident prospect, three cobalt licenses within the area of the Bass River project. The Trident project was the site of six core holes and a 1,000-tonne bulk sample in the late 80s. The Natural Resources department identified notable cobalt results in the bulk sample, and Chilean Metals has submitted historic core for further analysis.
This was followed by the acquisition of the Economy East IOCG-cobalt project, 12 claims located eight kilometers west from the Trident prospect. The Economy East project is understood to have similar geology to Trident, which is prospective for IOCG-cobalt mineralization.
The company has engaged Precision GeoSurveys to conduct magnetic and radiometric surveys over the Bass River project area, particularly across its Casterleagh, Trident and Elk Exploration zones.
Upcoming plans for Nova Scotia Portfolio
The next steps for Chilean Metals’ Nova Scotia portfolio will be to prepare the Bass River cobalt concessions, Fox River and Lynn properties for drilling. Depending on the findings, the company might decide to spin out between one and three public companies dedicated to advancing these projects. That would leave Chilean Metals focused specifically on their Chilean portfolio.
Chilean Portfolio: Atacama IOCG Belt
Chilean Metals five exploration properties in its namesake country encompass a total land package of 19,500 hectares and include Zulema, Terra de Oro, Palo Negro, Hornitas and Tabaco.
Zulema: Candelaria-style mineralization system
The Zulema project covers 4,300 hectares in Chile’s Atacama mineral belt—rich in IOCG-type deposits. The property benefits from excellent infrastructure including the PanAmerican Highway and Chile’s main northern power grid which are both located a mere 15 kilometers from the property.
Zulema is located 30 kilometers west of and hosts similar geology to Candelaria, the world’s second largest IOCG deposit after the Olympic Dam in Australia. Owned by Lundin Mining, Candelaria is a producing open-pit mine with 430 million tonnes of Proven & Probable Reserves grading 0.5 percent copper. Pre-mining reserves at Candelaria were 600 million tonnes grading 0.95 percent copper, 0.22 g/t gold and 3.1 g/t silver
Phase One drilling confirms IOCG-style mineralization
The Zulema property is owned 100 percent by Chilean Metals with no underlying third party royalties or net profits interests. It is road accessible and ideally located at low elevations of less than 400 meters, 30 kilometers from the mining town of Copaipo, 15 kilometers from both the Pan-American Highway and Chile’s main northern power grid, and 25 kilometers from the coast. Intensely skarned hydrothermal breccia is exposed on the property over an area of one square km and is open to extension beneath sand plains.
Sporadic but widespread disseminated copper oxides on surface assay in the range of 0.4 to 5.5 percent copper and 0.2 to 0.4 g/t gold. Previous drilling at the extreme southern tip of the main prospective area encountered up to 22 metres of 0.45 percent copper and 0.11 g/t gold in stockworks. The target is a Candelaria look-alike: a blind, copper-gold deposit beneath desert sands and siliceous skarn breccias associated with strong surface geophysical features and amenable to bulk, open pit mining methods.
Zulema Drill Program Highlights – Stage 1
Zulema Drill Program Highlights – Stage 1 In January 2017, Chilean Metals initiated Stage 1 of their 2 Stage Drill Program. Stage 1 was a minimum of 2,000 meter and up to 9 Drill Targets. Chilean Metals confirmed an IOCG Style Mineralized System with similar host rocks as Candeleria. Some of the highlights from drilling included:
- Drill Hole #1, intersected Chalcopyrite between 107 meters – 126 meters.
- Drill Hole #3, intersected copper–gold at 285 meters – 334 meters, with select IOCG Lenses having copper grades from 0.12 percent – 1.19 percent and gold grades from 0.05 – 0.99 g/t.
- Drill Hole #5, intersected copper–gold at 179 meters – 218.50 meters, with assay intervals up to 0.44 percent copper and 0.27 g/t gold.
- Drill Hole #8, assays reached 0.60 percent copper and 0.15 g/t gold. Over select intervals.
Zulema historic drill holes on the south side of target area returned 99.16m of copper at 0.24 percent and gold of 0.06 g/t, including a 24-meter section of 0.45 percent copper and 0.11 g/t gold.
Zulema Next Steps:
Conduct ground Geophysical Program, over target area with new technology that was implemented at Candelaria by the same Geophysics firm and processing conducted by Minotaur Exploration (Australia) and provide recommendations and possible new Target areas. Strategy is to conduct Stage 2 drill program in Fall of this year.
Royalty Hedge: Copaquire
Chilean Metals holds a 3 percent net smelter return royalty on future production from the Chile-based Copaquire property it sold to Teck. The property is adjacent to Teck’s Quebrada Blanca mine which is expected to run out of leachable ore resources by 2019 at current production levels and is also nearby Anglo-Xstrata-Mitsui’s massive Collahuasi copper mine.
Terry Lynch —Chairman and CEO
Mr. Lynch graduated in 1981 from St. Francis Xavier University with a joint honours degree in Economics and BBA. Prior to becoming a director with International PBX Ventures in 2012, Mr. Lynch had been CEO of privately held Nevada-focused Relief Gold. He also had been a director and later CEO of TSX-listed Firstgold Corp. He assumed the CEO position after the company had run into financial difficulty bringing its Relief Canyon mine into production. He arranged a sale of 51% of the company for a total capital injection of $26.5 million from Northwest Non-Ferrous Metals, one of China’s largest mining engineering and consulting groups. From 2005 to 2008 Mr. Lynch was a partner with Kingsmill Capital Partners, a financial advisory firm specializing in advising public and private early stage growth companies. Prior to joining Kingsmill Capital he spent 15 years operating startup companies in industrial products, oil and gas and media.
Mick Sharry —President and COO
Mick Sharry has over twenty years experience in Australia, South East and Central Asia, South America and the Caribbean. He has also been involved in detailed project reviews in Europe, Africa and North America. He is an Explorationist with strong technical, management, commercial, interpersonal, stakeholder relations and safety management skills. Roles include effectively managing in excess of 130 staff from nine nations where he has proposed and managed annual budgets up to US$16M.
Dan Crandall — CFO
Dan was announced as CFO of the Company on June 11, 2014. In addition to acting as the Company’s Chief Financial Officer, Mr. Crandall is a Manager at Marrelli Support Services Inc., providing CFO, accounting, regulatory compliance, and management advisory services to numerous issuers on the TSX, TSX-Venture and other Canadian and US exchanges. Previously, he was a Manager at Collins Barrow Toronto LLP, a public accounting firm where he worked for over five years. Mr. Crandall holds a CPA, CA, as well as an Honours Bachelor of Accounting degree from Brock University.
Patrick J. Cruickshank, MBA, CFM—Director
Since 2013, Mr. Cruickshank has been active as President and CEO of Cogonov Inc. where he successfully raised over 2 million dollars and negotiated 2 joint ventures on 3 of Cogonov’s Iron Oxide Copper Gold (IOCG) projects in Nova Scotia in a challenging economic environment. Prior to that Mr. Cruickshank has a highly extensive background in the financial industry. He has over 15 years working in the securities industry with Merrill Lynch, Citigroup Smith Barney and several other National Securities firms and was Founder of Commonwealth Advisors LLC in the United States. A former NFLPA Advisor for 10 years assisting HNW Individuals & Professional Athletes manage & protect their Wealth. For the past 5 years Mr. Cruickshank has been instrumental in the Private Equity space in the US & Canada. Most recently, Energy & Mining Resource companies, both in Canada & Texas. Mr. Cruickshank earned his MBA from the highly decorated York University Schulich School of Business.
Gary Lohman, P.GEO. — Director
Mr. Lohman is a Founder and Chief Operating Officer of Cogonov Inc. and has has over 30 years of experience in both precious and base metal exploration within the Americas as well as management experience within and outside of the mining industry. He is skilled in most geological, geochemical and geophysical exploration techniques in a wide variety of settings and terrains. Mr. Lohman is also the Founder of Santa Rosa Mining Corp. and former President and Chief Executive Officer of Canuc Resources Corporation. He has worked as a consultant for several mining companies including NWM Mining Corporation, US Silver Corporation and Virgin Metals Inc. While with Virgin Metals Inc. he was responsible for the definition drilling programs on the Los Verdes porphyry molybdenum-copper project. His experience also includes evaluations and/or research conducted on bonanza grade and bulk tonnage gold-silver properties in Mexico, California and Ecuador.
Thomas R Comfort, B. SC. ENG., MBA — Director
After graduating from University of Texas with BSME, Tom was commissioned in the United States Navy and served 6 years. His specialty was as a Nuclear Propulsion Officer where he finished his career on the USS Carl Vinson. After leaving the Navy, Tom moved back to Austin and completed his MBA @ The University of Texas – Austin. For the past 10+ years Tom has excelled at Dell Computers running the Americas in Environmental Asset Recovery. His main focus now is Private Equity opportunities in alternative assets.
Greg Mckenzie, LL.B, MBA —Director
Greg is a senior investment banker with 20 years of experience in financing, M&A, financial advisory, valuation, and strategic advice primarily to mid-cap companies. His transactions are valued in excess of $18 billion. Mr. McKenzie has worked in New York and Toronto and has held positions with Morgan Stanley, CIBC World Markets, Haywood Securities and Salman Partners. While at these firms, Greg advised managements and boards of companies in various sectors including: metals & mining, industrials, consumer products, technology and healthcare. Mr. McKenzie was also called to the bar in New York and Ontario and practiced law with a leading Canadian securities and M&A law firm.
Peter Kent, J.D., LLM —Director
Fomerly with the TecSyn Group of Companies where he was Vice President general Counsel and Corporate Secretary. Peter brings over 25 years of business experience regarding complex business and legal affairs. In addition to his time at Tecsyn Peter also was a corporate commercial lawyer at Bassel Sullivan a Toronto based boutique law firm.
Ian Pirie, MSC, P.GEO. —Technical Advisory Committee
Up until his recent retirement, Ian worked for Inmet Mining Corporation and its predecessor companies for over 31 years. During his tenure with Inmet, he held various positions including General Manager, Latin America (based in Chile), where he was responsible for the acquisition and development of the Antamina project up to the beginning of the construction phase. Most recently he was Vice President, Projects for Inmet during which time he was responsible for the development of Cobre Las Cruces in Spain and the Cobre Panama project in Panama. Mr. Pirie is a Professional Geoscientist registered in Ontario and British Columbia.
Chris Hodgson, PHD, P.ENG (BC) —Technical Advisory Committee
Formerly VP Exploration, Chris has been retained as our Geological Consultant in Chile. Chris has had an outstanding career first at Amax Exploration where he rose to Chief Geologist, then at Canamax Resources where he rose to VP Exploration, followed by successful tours as Exploration Manager at Canada Tungsten and Minera Inmet in Chile and most recently as VP Exploration for a Canadian junior mining company exploring an historic silver district in central Mexico. Chris speaks fluent Spanish and has worked in Chile for more than twenty years. One of his highlights in Chile was his recognition of the Santo Domingo IOCG (iron oxide-copper-gold) deposit, subsequently developed by Farwest Resources and ultimately sold for $700 million to Capstone Mining.
Dr. Tony Belperio, PH.D., B.SC, IMM, F.AUS. —Technical Advisory Committee
Dr. Belperio is the Executive Director & Exploration Director of highly recognized Minotaur Exploration Australia. Dr. Belperio served as Minotaur’s Chief Geologist from 1996 – 2007 and was instrumental in the discovery of Prominent Hill IOCG, in Southeast Australia. He has received the University of Adelaide’s Tate Memorial Medal, The Geological Society of Australia’s Stillwell Award and AMEC Prospector of the Year Award. Currently, Dr. Belperio & Minotaur recently announced their Cloncurry Cu-Au discovery and JV with Oz Minerals.
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