Hot Chili has gone back to the future by grabbing two historical copper mine areas near its Costa Fuego copper hub in Chile to further tighten its focus on building high-grade and bulk-tonnage resources to feed its production hub.
The company says both the old Marsellesa and Cordillera areas have been historically mined for copper oxide and sulphide ores, but have never been drilled. Its decision to enter into option agreements to acquire the two areas makes good on its healthy $21.8 million cash position.
The old mines sit just 10km south/south-west of Hot Chili’s Costa Fuego copper-gold resource project and about 22km south-west of its Cortadera and San Antonio deposits within Chile’s coastal range in the Atacama Desert.
Hot Chili says the Marsellesa mine workings expose multiple zones of shallow-dipping, strata-bound copper mineralisation in an area measuring about 400m long and 200m wide. The smaller Cordillera mine workings lie just 2km west of Marsellesa and expose outcropping porphyry copper mineralisation with well-developed stockwork and sheeted porphyry veining.
Importantly, the company says both mine areas have been privately held and historically mined for shallow copper oxide and copper sulphide material, but are crying out to be tested at depth by the drillbit.
And that is something it has well within its sights, with a scout reverse-circulation (RC) drilling program scheduled to start in the coming week after the rig has completed its current program at the company’s Corroteo exploration target, 5km south-east of the Cortadera porphyry copper-gold deposit.
Management says its latest ground acquisitions, including the Cometa project just 23km south-east of Costa Fuego, provide a pipeline of opportunities and additional resource potential for its evolving copper hub. It fits in nicely with its intent to build up to a 150,000-tonne per annum copper production profile ahead of its Costa Fuego prefeasibility study (PFS).
Through a recent preliminary economic assessment (PEA), the company outlined Costa Fuego as a low-risk, long-life copper project with low start-up capital and a high annual copper equivalent metal production profile. It predicted more than 100,000 tonnes per annum over a 16-year mine life for 95,000 tonnes of copper and 49,000 ounces of gold during its primary production in the first 14 years.
Under the terms of the executed Marsellesa option agreement, Hot Chili’s subsidiary Frontera can acquire a 100 percent interest in return for three non-refundable, staged cash payments totalling US$350,000 (AU$538,130) in two years from the date of option grant. A final non-refundable cash payment of US$1 million (AU$1.54) million) is to be exercised within 36 months.
Additionally, the vendor will be granted a 1 per cent net smelter royalty (NSR) for the Marsellesa concession and Frontera will have the first right of refusal to buy it back.
In line with the Cordillera deal, Frontera will have to make two staged, non-refundable cash payments of US$300,000 (AU$461,260) in two years from date of the grant to nab a 100 per cent interest. Another final non-refundable cash payment of US$3.7 million (AU$5.69 million) will need to be exercised within 48 months.
The vendor will be granted a 1 per cent NSR for any material extracted from underground operations and a 1.5 per cent net NSR for any material extracted from open-pit operations. Frontera will again have a first right of refusal to buy the royalties back.
With 100,000 tonnes per annum under its PEA belt and a stash of cash and new projects to play in with its drill rigs, Hot Chili is about two thirds of the way to its target of 150,000 tonnes per annum before its upcoming PFS – and it seems a good chance to achieve the objective.
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