Kalabak region, Bulgaria
This article was first published on www.criticalinvestor.eu, a comprehensive platform for junior mining investors.
Sometimes excellent exploration projects are being dropped by major resource plays during downsizing efforts in downturns. Some of those projects are easily forgotten, but other projects are almost immediately picked up by other, usually (much) smaller, companies that have been waiting for this specific opportunity to occur.
Black Sea Copper & Gold (OTCQB:BLSSF) is one of those companies. It has been patiently selecting and picking up high-quality copper/gold properties in prolific Eastern European regions on the cheap during the downturn as a private company for the last four years. Examples of exploration success in these regions, part of the (Western) Tethyan Belt, are Cukaru Peki (former Reservoir Minerals, now Nevsun (NYSEMKT:NSU)) and Hot Maden (Mariana Resources (OTC:MRLDF)). Some large base metal mines are operating there for decades as well, and giants like Freeport-McMoran (NYSE:FCX) and Rio Tinto (NYSE:RIO) have been involved in all sorts of claim-staking, JVs and exploration/development activities for many years.
Black Sea completed a listing in the summer of this year, raising a few million dollars in an oversubscribed round to immediately kick off exploration programs on its intriguing exploration targets. Even though Black Sea still has a low market cap and is in early stages, every single one of its projects has the potential to be a true company maker.
All presented tables are my own material, unless stated otherwise.
All pictures are company material, unless stated otherwise.
All currencies are in US dollars, unless stated otherwise.
After unveiling its plans to merge with Alternative Earth Resources (NGLPF) (Canadian ticker: AER.V) in 2015, Black Sea Copper & Gold (Canadian ticker: BLS.V) finally completed the share exchange agreement with AER in the summer of this year, and the entire deal was completed at the end of the third quarter.
Black Sea also raised C$2 million in a private placement priced at C$0.20 per unit, which boosted the total cash position to C$3.4 million as of the end of that third quarter. This provided the company with a pretty robust cash (C$3.4 million) and working capital position (C$3 million) at the end of September, allowing to immediately start with several exploration programs on the various projects.
The company is led by president and CEO Vince Sorace who is also at the helm at Desert Star Resources (OTC:IAXFF), and has extensive experience in founding and leading numerous private and public companies in the resource and alternative energy sectors. He accumulated extensive experience in operations, strategic planning, corporate development and the capital markets, also having raised over $70 million in debt and equity financings. A consequence of this is that he has created a powerful network, not only financial but also among other well-known mining execs/companies (for example Teck (NYSE:TECK), Freeport, Rio Tinto) which are happy to work with him on various projects if desired.
Sorace also lined up a C$50 million acquisition of a very attractive asset in Eastern Europe not too long ago, but they were outbid unfortunately. But it clearly indicates a sharp eye for deals to me and the capabilities and connections to act on them in a serious way. The management team also consists of very experienced names in exploration and project appraisal. Rob Duncan, chief geologist worked for Rio Tinto and Inmet, but also Kiska Metals (OTC:KSKTF) and Evrim Resources, and Daniel MacNeil does project acquisition and development, having worked for Anglo American (OTCPK:AAUKY) and Barrick Gold (NYSE:ABX) among others. Interesting names on the Board of Directors and advisors are John Williamson, James Yates and Tookie Angus.
As of right now, the total share count shows a tight 43.74 million shares outstanding with an additional 3.1 million options and almost 12.4 million warrants (with the majority - 10.4 million - exercisable at C$0.35). The current share price is C$0.34, resulting in a market cap of C$14.87 million.
Share price: One-year time frame
After the first enthusiasm about the merger and the concept subsided a bit, alongside gold dropping off after the elections, copper has been on the rise, Black Sea has been increasing coverage gradually (most notably by Eric Coffin who is a big fan), and is progressing on its exploration programs, which caused investors to do some bottom fishing at this stage. As it is still an early stage play, for a big part a copper exploration play and much under the radar, it is relatively shielded from selling pressure by gold coming down on the latest rate hike.
All of Black Sea's projects are located in the very prolific Tethyan Belt which stretches out from Turkey, through Macedonia, Serbia and Bulgaria. The potential of the Belt is absolutely incredible, and several large mines have been built in the area as mentioned (for example, the Bor mine in Serbia). More projects are being discovered on a yearly basis, and for instance, Euromax Resources' (OTCQB:EOXFF) (EOX.V) Ilovitza project in Macedonia, Mariana Resources' (MARL.V) Hot Maden project in Turkey and Nevsun Resources' (NSU) Timok projects are three that could come to mind.
West Tethyan Metallogenic Belt
Black Sea doesn't just stake claims without a decent plan, and the company has developed a 'road map' with three key requirements before taking on a new project. Of course, there should be high-grade potential but the total size should be huge as well, whereas the proximity to other large (proven) deposits in the area is also a key consideration for Black Sea.
Black Sea is currently present in Serbia, Bulgaria and Turkey, and we'll provide a brief overview of the different projects, which all have the potential to be large mineralized systems.
The Alanköy project is located in the utmost western part of Turkey, on the Biga peninsula and not too far away from where Pilot Gold (PLGTF) (PLG.TO) is currently working with Teck Resources (TCK) on its large Halilaga and TV Tower copper-gold prospects.
Location of Alanköy project, Turkey
It's not just Pilot Gold, as Alamos Gold (NYSE:AGI) (AGI.TO) is also present not too far away with the Agi Dagi and Kirazli projects which contain almost 2.2 million gold-equivalent ounces. As you can clearly see on the previous image, Black Sea's claims are right in the middle of huge proven assets.
It's pretty clear that Alanköy meets Black Sea's criteria as it's in the vicinity of some pretty large existing deposits. But Alanköy is just the name of the entire project, which contains no less than four different high-priority targets in different stages of 'development', based on historical exploration. Alanköy was originally explored by a joint venture of the governments of Japan and Turkey, and was the subject of a 1,800-meter drill program focusing on the high sulphidation lithocap target, where copper-gold-silver mineralization was discovered.
Black Sea currently has an option to acquire 100% of the property by spending C$3 million on exploration (divided over six years), whereas property vendor Eurasian Minerals (NYSEMKT:EMXX) will receive a few cash (or gold) payments, and retain a 3% royalty on precious metals and 2% on other metals that will be produced.
The Zlatusha project in Bulgaria is a prospect that has been identified by Black Sea when it still was a private company. BLS acquired existing data from historical surveys, and its follow-up reconnaissance field program confirmed the potential of the project, which is located in a porphyry-epithermal copper-gold trend not too far away from Sofia, the capital of Bulgaria.
Even though Zlatusha is located in Bulgaria, it's just a good hike away from the Timok Belt (just 90 kilometers to the northwest of Zlatusha), and the rocks underneath the Zlatusha license seem to be very similar to those in the Timok Belt. This is being confirmed by the grab samples that were taken a few years ago with values up to 18% copper and 8.5 g/t gold. On the next picture, you can actually see the oxidized copper right on the surface.
Zlatusha; high grade copper outcrops
Not only is the rock pretty similar to the Timok Belt (and the Cukaru Peki deposit owned by Nevsun Resources), it also shows similarities to the Chelopech mine, an existing copper-gold mine operated by Dundee Precious Metals (OTCPK:DPMLF), less than 50 kilometers to the east of the Zlatusha land claims.
There are no less than four (primary) 'zones of interest' on the Zlatusha license, and 'Target Area 1' seems to be the most intriguing part as this is where the field team has encountered the previously mentioned ultra-high-grade copper and gold samples. The samples were taken from a 600-meter long alteration that outcrops discontinuously, and it will be really interesting to eventually find out what's lying underneath.
Zlatusha project; geological concepts
Target Area 2 has actually been the subject of a drill campaign approximately 25 years ago, and encountering 0.3% copper over a total length of 63 meters from surface is encouraging, especially as rock samples from the surface area have indicated the presence of gold as well, with values up to 2 g/t Au. 0.3% copper seems low grade, but for a porphyry combined with low grade gold (0.3-0.5g/t Au) it can very well generate solid economics (see Ilovitza).
Target Area 3 has also seen some limited amount of drilling, and even though the total size of the target area is pretty massive (300 hectares), a previous owner was already able to complete a few holes right into the epithermal component of the system, returning 11 meters of 4.3 g/t gold at a depth of 109 meters. Perhaps even more impressive was the 11 meters containing 3.6 g/t gold which started pretty much at the surface.
Needless to explain why Black Sea was very anxious to get its hands on this property, as the historical exploration results are already confirming there is definitely something hiding beneath the surface.
Black Sea was awarded the Kalabak license in the final quarter of 2014, after its reconnaissance (first stage like prospecting, sampling, geophysical surveys) exploration program identified several potentially interesting hot spots, located on the southeast side of the Rhodope Mountains.
That is an interesting position, as the interpretation and basic understanding of this area is still developing. Originally, the Eastern Rhodopes region was considered to be an epithermal gold belt, but this view has been shifting towards a new consensus, being this might actually be another major copper-gold belt after numerous new discoveries.
The rocks at Kalabak are so-called Tertiary-age volcanic and intrusive rocks, and it is exactly in this type of rock several major discoveries have been made in the past few years. Not only are the Turkish projects near Alanköy considered to be part of the same aged belt, Euromax's Ilovitza project as well as Eldorado Gold's (NYSE:EGO) Skouries project are hosted in the same type of mineralization.
Kalabak is probably the least advanced project, but it definitely has its merits. Not only is it located right in the Tertiary corridor, the main target on the property is literally located just 10 kilometers from the Krumovgrad project, also owned by Dundee Precious Metals.
These are the three main properties Black Sea Copper & Gold is currently working on, but more projects will be added to the pipeline relatively soon. The company has submitted another license application in Bulgaria (Golaka), whereas it's also zeroing in on two targets in Serbia which are on trend with the Cukaru Peki project (Nevsun Resources) and the very large Bor copper-gold mine just a few kilometers down the road.
Serbian mines, deposits, targets
The two acquisition targets are right where you would want to be exploring, in the middle between two huge mines. Majdanpek contained a billion tonnes of rock for a total resource of 13B lb Cu and 11Moz Au, whereas Bor has been mining relatively high-grade copper-gold ore from a total resource estimate of 15B lb Cu and 10Moz Au. And let's not forget about Cukaru Peki, owned by Nevsun Resources, where a total of 2.64B lb Cu and 2.5Moz Au (and counting) have been discovered in the upper zone, whereas the lower zone, according to my estimates from last year, could maybe contain as much as 11B lb Cu.
Owning two projects in this extremely prolific area could be really interesting as not only will Black Sea be able to tap into an existing pool of local labor, the existing infrastructure and existence of the Aurubis-owned Pirdop smelter at Bulgaria are huge plus-points at a later stage.
Long story short, it is safe to say the current three focus points will be just the tip of the iceberg, and Black Sea will very likely add more projects of interest to its portfolio.
4. Exploration plans
Less than two weeks after formally completing the reverse take-over of Alternative Earth and topping up its treasury to in excess of C$3 million, Black Sea Copper & Gold has outlined a plan to tackle all four hot spots at Alanköy.
No drilling is being planned for now, but Black Sea will do some extensive mapping and rock sampling on all four zones, whereas it will also conduct an IP survey (which usually works pretty well in that part of Turkey). This should allow the company's geologists to design a drill program which is anticipated to start in the spring of next year.
At Kalabak, Black Sea has initiated a very systematic exploration program and whereas no drilling has been scheduled for now, the data that will be gathered from the current mapping and sampling program will definitely be very helpful to determine drill targets for next year.
The third property, Zlatusha, is currently also the subject of a first exploration program. As this is pretty much a grassroots project, the current exploration program is focusing on geological mapping and collecting a few hundred rock samples, which will be followed by airborne and ground geophysics in 2017. This should help Black Sea Copper & Gold to identify new drill targets as well.
Zlatusha exploration targets
Zlatusha contains four primary exploration targets as well as multiple secondary exploration targets, so it sounds like Black Sea will be very busy in the next few quarters and years to get a really good understanding of the mineralization ad mineralized structures at Zlatusha.
The company is also busy to review very prolific assets in Romania at the moment, so I'm curious what could come out of this in 2017.
5. Fraser Survey
Most investors are quite wary about investing in Eastern Europe, but it is probably clear that not all countries have been created equal. Whereas it would indeed not be a great idea to invest in Belarusian properties or assets in Ukraine or Moldova, the countries Black Sea Copper & Gold is actually working in, could be considered the more solid ones in the region.
Comparison Eastern European countries, source: old company presentation
After all, every single one of the countries is focusing on strengthening its ties with Western Europe (Turkey might be the exception at the moment, but has historically always been quite open-minded). Bulgaria is a full member of the European Union (and, as such, has to abide by the EU rules), whereas Serbia is trying hard to become the next member of the European Union (and thus wouldn't really do anything to jeopardize its attempts to become a part of it). So the overall impression seems pretty decent. There is other information that supports this view, and that's the Fraser Survey of Mining Companies.
The Fraser Institute publishes an annual survey of mining companies to determine how attractive countries are from the mining sector perspective. This is a very useful survey as it immediately tackles the issue of mining-friendly policies, using the impressions from the companies that are actually working there, rather than using theoretical models.
2015 /2016 Fraser Survey of Mining Companies; Policy Perception Index (PPI)
When you look at the Policy Perception Index, which ranks the countries based on the attractiveness of the mining policies, Serbia, Turkey and Bulgaria aren't scoring too badly. Of course, they aren't a Québec or Nevada, but the mining policies are perceived to be better than in France, Ghana, Peru, California, Brazil and Colombia.
Dundee Precious Metals has been operating in Bulgaria for ages and has never encountered any real issues, nor did Nevsun Resources or Reservoir Minerals (or JV partner Freeport) which was the previous owner of the Timok project in Serbia. And in Turkey, Teck, Pilot Gold and Alamos Gold haven't encountered any problems either, so it's safe to argue the countries Black Sea is operating in are accepting the mining sector in their local economies and don't add additional risks.
Black Sea has been able to put a portfolio of really interesting exploration projects together, and will be advancing three projects to a drill-ready status. The Alanköy project in Turkey is very intriguing, as Black Sea's optioned project is located right in the middle of existing multi-million ounce assets, owned by renowned operators and exploration companies.
Additionally, its 'first' mover advantage (since the commodity markets seem to have overturned the five-year bear market) into the European part of the Tethyan Belt might also pay off, as the two projects it is trying to land in Serbia look very interesting based on the size of the nearby producing and advanced stage exploration projects. Black Sea is also a real first mover in large parts of Eastern Europe on a local scale, as it takes a multi-year presence to build relationships and win the trust of local property sellers. Opportunistic latecomers to this party obviously wouldn't have this advantage.
Black Sea Copper & Gold will be playing in the backyard of Dundee Precious Metals (Zlatusha is pretty close to Dundee's producing Celopech copper-gold mine, whereas the Kalabak project is literally within walking distance from Dundee's Krumovgrad development-stage asset), which has reportedly been looking to acquire new assets. Selling or joint venturing an asset to DPM might be a very valid exit strategy later on, but Black Sea's experienced management team will obviously first try to find out what it actually owns. Exploration is ongoing on all three projects, reconnaissance results are expected shortly, and you can expect to see at least one drill program early next year.
For a market capitalization of just C$14.8 million, you gain exposure to three very promising copper/gold projects, whereas at least one other project will very likely be added to the extensive portfolio within weeks. If Black Sea would be able to hit at just one of those projects, the possible upside could already be very substantial.
I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please follow me on Seekingalpha.com, in order to get an email notice of my new articles soon after they are published.
The author is not a registered investment advisor, and currently, has a long position in this stock. All facts are to be checked by the reader. For more information go to blacksea.ca and read the company's profile and official documents on sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.
Alanköy region, Turkey
Disclosure: I am/we are long BLSSF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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