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Best Drill Interceptions In The Metals Mining Sector For The Week Ended October 6, 2019

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Includes: HHLKF, LMGDF, RGLSF, SBGL
by: Gold Panda
Summary

Aldebaran Resources finds higher grades at Altar.

Lumina with good results ahead of resource estimate update at Cangrejos.

Hot Chili’s Cortadera project is sizzling.

(Source: Exploration Insights)

Introduction

If you're into investing in the mining sector, you should know the above chart very well. This series covers the three projects with the most significant drill interceptions over the past week, as well as the prospects of the companies which own these projects. I will use data from the weekly bulletin of Opaxe, which can be found on their website. Note that the drill interceptions are converted into grades of gold equivalents using the following formula:

(Source: Opaxe)

Opaxe has chosen gold as the metal equivalent for all conversions, as it considers gold to be the most widely used and best-understood benchmark to determine or appreciate the grade tenor of a drilling intercept.

(Source: Opaxe)

1) Altar copper-gold project in Argentina

On October 3, Aldebaran Resources announced results from the 2019 drill program at its Altar project, and the best interception was 141.5m @ 0.465% Cu, 0.043 g/t Au, 1.1 g/t Ag and 75ppm Mo from 237.5m in hole ALD-19-212. This is equal to 747(AuEq.)m.

(Source: Aldebaran Resources)

Aldebaran also announced the discovery of a new mineralized porphyry center below the Quebrada De La Mina surface gold mineralization.

Altar is a very large low-grade project located near several major mines in the province of San Juan:

(Source: Aldebaran Resources)

It currently holds over 14 billion pounds of copper and 4.8 million ounces of gold in the measured and indicated category, and Aldebaran aims to expand the higher-grade zones to identify a higher-grade resource within the project.

Aldebaran is currently earning a 60% stake in Altar through an agreement with Sibanye (NYSE:SBGL), which included $15 million in cash, a 19.9% stake, and funding $30 million of expenditures. The company can get an additional 20% of Altar by spending another $25 million over a three-year period.

Aldebaran is a spinout from Regulus Resources (OTC:RGLSF), which I’ve already covered on SA here.

2) Cangrejos gold-copper project in Ecuador

On October 2, Lumina Gold (OTCQX:LMGDF) released drill results from eight holes at Cangrejos, and the best interception was 537m @ 0.56g/t Au and 0.1% Cu from 168m in hole C19-147. This is equal to 365(AuEq.)m, and these are the last results which will be included in an updated resource estimate for the project, which is expected in November this year.

(Source: Lumina Gold)

Cangrejos is located in southwestern Ecuador in a former mining district near the coast:

(Source: Lumina Gold)

The Cangrejos deposit contains 8.5 Moz Au, 1,033 Mlbs Cu, 7.8 Moz Ag, and 22.5 Mlbs Mo:

Source: Lumina Gold

The Gran Bestia deposit is located just one kilometer away from the Cangrejos deposit, and it’s seen limited drilling so far. I think it could become a satellite deposit which can be used as an initial starter pit.

In June 2018, Lumina Gold released the results of a preliminary economic assessment which put Cangrejos among the top 15 undeveloped gold projects in the world, based on its average annual production potential:

(Source: Lumina Gold)

I’ve already covered Lumina Gold on SA in more detail here.

3) Cortadera copper-gold project in Chile

On September 30, Hot Chili (OTC:HHLKF) announced that the first 350 meters from hole CRP0017D at its Cortadera project intersected 0.6% Cu, 0.2g/t Au, 1.1ppm Ag and 18ppm Mo from 344m. This is equal to 330(AuEq.)m, and the result confirmed that bulk tonnage high grade copper-gold extends from the northern to the southern flank of the main porphyry. The company should release results from the remaining 440m shortly, and the intersection is expected to grow by another 90m of strongly mineralized porphyry.

(Source: Hot Chili)

The Cuerpo 3 porphyry remains open to the north, south, and at depth.

Hot Chili’s main assets are the Cortadera and Productora projects, which are located 14 km apart in coastal Chile:

(Source: Hot Chili)

The company has an option to acquire Cortadera for $31.5 million over a 30-month term. It's a very early-stage project, but some of the drill results have been very impressive. For example, 864m @ 0.4% Cu and 0.1g/t Au from 62m down-hole depth.

In 2016, Hot Chili released a PFS for Productora, which I think doesn’t look impressive:

(Source: Hot Chili)

An IRR of 15% using a long-term price deck of $3.00/lb copper and $1,250/oz gold looks bad. Also, the initial capex is very high.

Hot Chili’s plan is to prepare a revised PFS based on the combined development of Productora and Cortadera utilizing central processing and infrastructure.

Conclusion

Aldebaran intercepted long intervals of over 0.5% copper equivalent at Altar, which is much higher than the historic resource estimate. The project contains a lot of copper and gold and is located near several large mines, so the company’s plan is to prove that there’s enough material at good grades to attract interest from mining companies. I think that Aldebaran is led by a good team and is well cashed up as the spinout from Regulus included a C$30 million financing at C$1.25 per share. The main problem of Aldebaran is the jurisdiction, as Argentina is infamous for export taxes, and mining companies are reluctant to invest in the country amid a lack of regulatory clarity. The company isn’t listed in the U.S., so you’ll have to go the TSX to gain exposure.

Lumina Gold's Cangrejos gold project is among the top 15 undeveloped gold projects in the world and could be producing 400,000 or 500,000 ounces of per year for 20 years. Also, the all-in sustaining costs are low, and the Gran Bestia deposit could boost the project's low IRR. The company is looking to monetize Cangrejos, so dilution isn’t such a major risk here. I think that this project is worth a lot more than the current market cap of Lumina Gold, but there could be short-term problems as the situation in Ecuador is critical at the moment. For example, the mining camp of the controversial Rio Blanco gold project was recently destroyed by protesters.

Hole CRP0017D at Hot Chili’s Cortadera project was aimed at testing a potential 300m extension to high grade copper-gold mineralization at the main porphyry, but it intersected a wide 440m zone of strong mineralization between 340m and 780m down-hole. I continue to think that the combination of Cortadera and Productora could establish a robust new flagship project for the company. My main concern last time was dilution as Cortadera has a $31.5 million price tag, but this has been somewhat resolved as the company has just completed a $A12.1 million private placement.

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Additional disclosure: I am not a financial adviser. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading.