Argonaut Resources (ASX:ARE) and Antofagasta have started its major and highly anticipated drilling program of over 8,500 metres at its Lumwana West copper project in Zambia.
This will test the large footprint copper targets at the West Mwombezhi and Kavipopo targets as well as interpreted extensions and repetitions of the Nyungu Central copper deposit.
Argonaut had recently increased its ownership of the project to 90% after meeting the second phase expenditure target of US$2.4 million and making a final payment of US$1.1 million to the project vendors.
The drilling as well as IP geophysics and soil sampling forms the first phase of the recently announced option agreement with Chilean copper major Antofagasta plc (LON:ANTO).
Under the agreement, a US$3.9 million exploration spend in the first year will earn Antofagasta a 25% interest in the project.
"The Lumwana West project has enjoyed a remarkable technical history since exploration by Argonaut began in 2011," director Lindsay Owler said.
"In the course of two drilling campaigns, historical indications of copper mineralisation at Nyungu Central have been transformed into a significant deposit.
"The company has progressively refined several other major targets within the tenement including those at West Mwombezhi and Kavipopo. Additionally, potential repetitions and extensions to the Nyungu Central deposit have been defined.
"The drilling program, if successful, will catapult the project forward into an exciting phase where we seek to determine the limits of mineralisation and consider the priorities for resource drilling."
Drilling Program
The 2014 program was planned jointly by Argonaut and Antofagasta and aims to considerably expand the known copper mineralisation at Lumwana West.
This is focused on testing major targets previously defined in the project area by Argonaut.
Drilling to test the substantial geophysical and geochemical anomalies that define the West Mwombezhi target started on 2 June.
Three initial diamond core holes are planned to test the West Mwombezhi target with two further holes planned for later in the season subject to initial results.
Drilling at the Kavipopo target and at Nyungu South, Nyungu West and Nyungu North will follow.
The drilling program of approximately 8,500 metres will be progressively revised by the technical committee on the basis of results.
The field program is expected to be completed in November 2014, at the commencement of the Zambian wet season.
Antofagasta Option Agreement
Under the Option Agreement, £7.6 billion market capped Antofagasta can earn 70% of the Lumwana West project by spending US$18.9 million on exploration plus the amount required to complete a feasibility study to international standards.
In the event the project continues to move forward and Argonaut elects not to fund its pro-rata share of construction expenses, it will be either carried into production or bought out at the value of its interest.
Argonaut will remain the operator until an election by Antofagasta during Phase II of the five phase agreement.
Antofagasta has also become a cornerstone shareholder in Argonaut via a US$1.1 million placement, giving it a 13.78% stake in Argonaut.
The Lumwana West licence area covers numerous prospects, as defined by regional soil geochemistry, and has a global exploration target of between 1,090 million and 1,560 million tonnes at 0.45% to 0.65% copper.
Analysis
The start of drilling marks the beginning of extensive exploration by Argonaut and Antofagasta at the Lumwana West project.
Success will provide a window on the potential at Lumwana West and provides a pipeline of news flow as well as price catalysts.
That Antofagasta is earning up to 70% in the project speaks volumes about its prospectivity.
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