Rio meets its match with Hot Chili’s ‘big copper’ project

Shares in copper-gold group Hot Chili Ltd (ASX:HCH) have increased three-fold in the last four months as the company unveiled its expansion strategy which includes the amalgamation of satellite deposits adjacent to its Productora Copper Development in a region close to infrastructure and ports in Chile.

The company has already done the hard yards at Productora, having completed a prefeasibility study which features a 10 year open pit mine life with an annual production of 66,000 tonnes of copper and 25,000 ounces of gold.

While this is impressive in its own right, the recent addition of the Cortadera assets which have subsequently yielded promising early stage drilling results positions Hot Chili to establish a super hub with a central processing facility that would be a game changer for the company.

Near-term catalysts include the establishment of an expanded resource and the completion of a revised prefeasibility study based on a much larger scale project with multiple ore feeds, as well as a central processing plant and infrastructure.

This is what the new look Hot Chili has to offer.

As is increasingly the case from a global perspective, the multinational miners are looking for big deposits that are going to deliver long life production by relatively simple economical means.

Bigger is better

Finfeed recently highlighted results from a drilling program at the Cortadera copper-gold porphyry discovery in Chile, suggesting that they supported management’s decision to pursue a large-scale project with multiple feed sources and relatively easy open pit mining.

Hot Chili’s chairman Murray Black was buoyed by early drilling results. In pointing to their strategic significance in terms of the company’s view of Cortadera as a major new copper-gold discovery Black said, “Results announced today are the first step in Hot Chili’s validation of Cortadera as a major copper-gold discovery, that has the potential to be transformative for the company.

“Under a combined development scenario, Cortadera and Productora look likely to underpin a globally significant new copper development on the coastal range of Chile, virtually unrivalled in size, location and infrastructure advantage by our peers.”

Importantly, Cortadera lies only 14 kilometres from Hot Chili’s large-scale Productora copper development and adjacent to the high grade El Fuego satellite copper projects.

Peer comparisons highlight potential scale

Endorsing Black’s comments and providing some context in terms of Hot Chili’s compelling investment prospects, managing director Christian Easterday highlighted some interesting peer comparisons in the ‘Big Copper’ space when he presented at the Latin America Downunder conference today.

Easterday weighed up Cortadera against Rio Tinto’s (ASX:RIO) relatively early stage Winu project in the Patterson province of Western Australia and SolGold’s advanced stage Cascabel project in the Andes region of Ecuador, with the latter also involving Newcrest Mining Ltd (ASX:NCM) and BHP Billiton (ASX:BHP) as major shareholders.

As outlined below, the top three copper-gold drill intersections from the three projects paints an interesting picture.

The three projects are all about establishing a ‘Big Copper’ operation, and central to that goal is the delineation of massive intersections with ore grades and depths instrumental in determining the commercial viability of the deposits.

On this basis, one needs to take into account the fact that Cortadera and Winu are both early stage, and perhaps working up to the impressive widths and grades identified at Cascabel.

Taking that into account, there is little between Cortadera and Winu in terms of width of intersections and copper ore grades with the former taking first place with 864 metres grading 0.4% copper.

However, Winu’s 741 metres grading 0.4% copper and 0.5 grams per tonne gold is also highly promising, given the significant gold credits that are implied.

Of significance is the fact that both ‘best width’ intersections were at a relatively shallow depth of approximately 60 metres, a level that is extremely amenable to low-cost production from open pit mining.

High gold-copper ratio

The addition of gold credits is likely to play a vital part in driving down costs of production at Cortadera and surrounding deposits.

While the drilling results referred to above only show low grade gold intercepts, the bigger picture suggests that these will improve with Black saying, “These results confirm the potential for Cortadera to host significant zones of higher grade copper associated with chalcocite enrichment in the near-surface profile of the deposit.

“Results from the four RC (reverse circulation) drill holes at Cuerpo 2 also highlighted very strong gold enrichment in the near-surface profile.

“The high gold-copper ratio of approximately 0.5 being recorded in previous drilling as well as Hot Chili’s confirmation drilling is very positive for the presence of a substantial gold credit in any early-stage development that may be considered.”

In 2019, Hot Chili anticipates delivering its first mineral resource estimate for Cortadera and high-grade satellite deposits into a combined resource base, a development that could provide significant share price momentum.

This will provide the foundation for a revised prefeasibility study due in less than 12 months, which will be based on a combined development of an enhanced and enlarged project with central processing and infrastructure.