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Hot Chili eyes expansion of Chile copper-gold project

Updated: Apr 19


Hot Chili has an option to purchase Bastion Minerals’ Cometa project near its Costa Fuego operation. Credit: File

ASX-listed Hot Chili is looking to expand its Costa Fuego copper-gold project in Chile after entering into a binding letter of intent (LOI) for an option to acquire Bastion Minerals’ neighbouring Cometa project.


Costa Fuego holds 725 million tonnes of measured and indicated resources grading 0.47 per cent copper equivalent for 2.8 million tonnes of copper, 2.6 million ounces of gold and almost 10.5 million ounces of silver, in addition to molybdenum credits.


Bastion’s Cometa project would add exploration and mining concessions covering about 56 square kilometres directly south of Hot Chili’s holdings and some 15km south-east of the proposed operating centre at Costa Fuego.


The terms of the LOI give Hot Chili an exclusivity period of 60 days to conduct due diligence and for its subsidiary Sociedad Minera La Frontera to enter into a definitive option agreement with Bastion’s subsidiary SCM Cornet Constelación to pick up Cometa.


Once the option is granted, Bastion will receive an immediate non-refundable cash payment of US$100,000 (AU$155,400) and then another non-refundable cash payment of US$200,00 (AU$310,810) a year later to keep the option in good standing.


Bastion will receive US$2.4 million (AU$3.7 million) if the option is exercised within 18 months of the grant of the option, or US$3 million (AU$4.7 million) if exercised within 30 months of the date of the grant. The purchase can be completed with 100 per cent cash or a split of 50 per cent cash and 50 per cent ordinary Hot Chili shares.


Costa Fuego sits in the low coastal range of the Atacama Region, 600km north of the Chilean capital of Santiago in a country famed for its copper resources.


Hot Chili recently revealed a preliminary economic assessment (PEA) showing the project will spit out a massive $309 million a year on average in free cash across a 16-year mine life. With the impressive set of numbers outlined, the project is emerging as one of the world’s biggest and lowest-cost copper plays, with an estimated post-tax net present value (NPV) of US$1.1 billion (AU$1.66 billion).


A PEA study is similar in nature to an Australian JORC scoping study. Hot Chili believes its cursory assessment at its Costa Fuego project suggests it could churn out about 112,000 tonnes of copper equivalent each year for the first 14 years of an initial 16-year mine life.


The company is currently working on a 30,000m expansion drilling campaign and has knocked over nine reverse-circulation (RC) holes in 2010m at its flagship Cortadera deposit. Once the remaining RC collars are drilled, the rig will begin a hydrogeological program, which is expected to begin next month.


A diamond drill rig is set to also launch into double-shift drilling next month, with plans for a second diamond rig to be online at site as the company ramps up its extensive campaign.


Hot Chili also says it is more than 80 per cent of the way through its prefeasibility study (PFS) for Costa Fuego. While it is early days in its agreement to expand with its latest deal with Bastion, the company could be looking at a significant operation in Chile if its plan to add Cometa falls into place.


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