SLM: First drill hole mineralisation visuals - “potential porphyry system”...

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 363,637 SLM Shares and 1,750,000 SLM Options and the Company’s staff own 235,294 SLM Shares and 117,647 Options at the time of publishing this article. The Company has been engaged by SLM to share our commentary on the progress of our Investment in SLM over time.

Our Investment Solis Minerals (ASX:SLM) just announced visual mineralisation from its very first drill hole:

(Source - today’s SLM Announcement)

SLM recently started drilling for gold and copper in Peru.

Today we got our first look at the first ever drill hole into a never before drilled target.

And while it's early days, it’s looking good.

SLM drilled through a ~134m section which could be the fringes of a big copper porphyry.

(their next drill hole 200m to the west will test this)

...and they even got some unexpected VISIBLE gold:

(Source - today’s SLM Announcement)

Today's announcement is a summary of on site visuals logged by SLM’s geologists.

In summary, it's better than expected visuals, but we now need to wait for the lab assay results to confirm grades - due in July/August.

In the meantime all eyes will be on what comes from the second drill hole.

The second hole will drill the same target but roughly 200m to the west:

(Source - SLM Announcement)

SLM has planned 2,500m for this drilling program before it moves to its priority target Ilo Este.

(we really like this Ilo Este target too, more on why later...)

We said in our last note that a good sign during drilling would be an announcement regarding positive visuals (Souce: our 22nd May 2025 SLM note).

Visual sulphides means SLM would have hit the right type of rocks for the potential for a larger discovery:

(Source - Next Investors Quick Take)

Chalcopyrite is a sulphide, and is the primary mineral in copper discoveries - and that's what the SLM team is observing on site.

To get visuals in the first hole is exactly what we could have hoped to see from this drill program.

And an unexpected positive that we weren’t expecting (or even hoping) to see was the visible gold:

(Source - SLM Announcement)

Well done to the onsite geo team for identifying this 2mm of gold via eyeball in a drill core of over 700m.

(gold mineralisation isn’t usually visible to the naked eye unless it's a big chunk of gold)

While it looks tiny, it's a sign there could be more hidden from view either in the core or more still underground...

While visuals are a great first sign, SLM will need to confirm the mineralisation seen in the drill core with laboratory assay results which are scheduled for July/August.

As with all early stage exploration, there is of course a risk that assays don’t meet the expectations set from the visuals - we will find out in the coming weeks.

We will be watching for SLM’s assay results next from today’s completed hole, and then the start of their second drill hole 200m to the west into the same target.

After that we want to see SLM put a drill hole into it’s #1 priority target at Ilo Este.

How might SLM’s results compare to AusQuest which rallied 700%+

Earlier this year AusQuest made a major copper discovery in Peru.

Both AusQuest and SLM are exploring for base metals in Peru’s “Coastal Belt”:

AusQuest is now capped at $89M post discovery - about 7 times SLM’s current market cap of ~$13.5M.

Since the discovery hole, AusQuest’s share price has also held its valuation, which is rare to see in this market.

AusQuest’s re-rate shows us the type of market reaction we could expect to new copper discoveries from tiny companies, especially when they are in proven copper jurisdictions like Peru.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Here is that announcement that triggered the AusQuest re-rate;

(Source - AusQuest)

The two discovery holes that AusQuest announced were: 348m at 0.26% copper and 188m at 0.28% copper.

Based on the visuals from SLM’s first hole, we think that SLM could be able to deliver a similar intercept thickness and grade to that second AusQuest hole.

SLM’s visuals for a “potential porphyry system” are over ~134m and the visual estimates of grades are up to 0.5% copper.

(assuming SLM’s assay results come back positive for copper - which may or may not happen - this what we find out when the assay results are announced in the coming weeks)

We do note that the hits AusQuest are shallower than where SLM is getting mineralisation, but remember, SLM has only drilled one hole on a never before drilled target.

SLM’s NEXT hole could be drilled right in the sweet spot based on where hole no.1 hit the right type of rocks.

(Source - SLM Announcement)

SLM has planned for 2,500m of drilling on this project, with a few more holes to go.

We think these are very promising signs for SLM, given that this target has never been drilled.

However, there is a risk that SLM doesn’t make a commercial discovery on this program. Mineral discoveries are rare, particularly with the kind of high-risk, high-reward exploration drilling that SLM is doing.

After this current target, SLM will go after its number 1 target at Ilo Este.

Ilo Este, SLM’s best target - final permits expected in coming weeks, then drilling to immediately begin

Ilo Este is the next project SLM expects to drill.

This project sits ~17km away from the project SLM where SLM announced its drill results today.

As soon as SLM is done drilling its first targets on Chancho Al Palo, we expect to see the rig move over to Ilo Este for a 5,000m drill program.

We also really like this target for the following reasons:

SLM is targeting a big porphyry discovery.

This project had previously been drilled, returning intercepts of ~472m at 0.11% copper with 0.09g/t gold grades.

That is already a giant intercept on its own (which we think the market would like if it was announced in isolation)...

BUT it turns out the old drilling just missed the main geophysical targets...

SLM ran an IP survey (geophysics) in 2022 which showed just how close that old drilling got:

(The bright purple is the centre of the geophysical anomaly, the old drilling is shown in red dots with the arrows showing which direction the drilling was done in)

We are looking forward to drilling at Ilo Este because:

1. The giant intercepts from all the old drilling (albeit at lowish grades).

AND

2. SLM will be the first company to drill into the guts of those NEW IP (geophysical) anomalies.

A reminder of why we are backing SLM:

SLM’s plan is to drill all four of its main targets in Peru back to back in 2025-2026.

Here is a brief overview of why we are backing SLM going into these drill programs:

1. SLM has the right team to have a crack at making a discovery - in our (see our deep dive into SLM’s team)
2. The market likes Peru - AusQuest has made a successful discovery, up over 700% since January this year.
3. We like Peru - in our last SLM note we cover the Peruvian Ambassador’s presentation at the Paydirt conference on why Peru means business for mining companies.
4. SLM will have four “shots on goal” - SLM has drilling planned over four different projects this year with the goal of making a copper-gold discovery. (We cover each project in detail here)
5. SLM funded and leveraged to a discovery - SLM is capped at just $13.5M, and raised $4.5M before drilling started.

As Investors in SLM we have also identified and accepted the potential risks around early stage exploration, commodity pricing, jurisdiction risk, funding risk and market risk - more on these risks here.

We hope that a combination of these reasons help SLM achieve our Big Bet which is as follows:

“SLM discovers and defines a large resource, leading to a long term re-rate in the company’s share price by >1,000%”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved such as exploration risk, commodity pricing risk and market risk - just some of which we list in our SLM Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

What’s next:

🔄 First drill assays

SLM has announced that assays for this first hole are scheduled for July/August.

We are hoping that the assays confirm (or improve upon) SLM’s visuals

🔄 Drilling First Project: Chancho Al Palo

SLM will continue its 2,500m drilling program at Chancho Al Palo with the second hole 200m west of where SLM announced mineralisation from today.

SLM will likely have a few more holes to drill at Chancho before moving to its number #1 project Ilo Este.

🔲 Drilling Second Project: Ilo Este

While SLM has secured the mining permit for Ilo Este, there are still some final approvals that SLM will need to secure before it can commence its 5,000m drilling program (source).

Once drilling has completed at Chancho, and assuming that the permits are in place, we expect SLM to move directly to Ilo Este.

🔲 Permitting

SLM will also look to secure permits to drill its two other targets later this year.

Here’s what's still to come:

• Drill permits for Cinto
• Drill permits for Chocolate

🔄 Results from IP surveys to firm up drill targets for Cinto

SLM has likely completed its IP surveys at its Cinto project (source).

Cinto neighbours the Toquepala copper-gold mine which has been in production since 1960 and just last year produced ~225,000 tonnes of copper.

Results from the IP survey are expected this month - we are hoping to see at least one big geophysical anomaly that warrants drilling at this project.

What are risks?

Now that drilling has commenced the biggest risk for SLM is “Exploration Risk”

There is no guarantee that SLM will make an economic discovery with its drill program.

There is also no guarantee that the visuals announced today return final assay results that are considered economic enough to declare any new discoveries.

SLM has committed to 7,500m of drilling and if nothing economically viable is found, the company’s share price could be re-rated lower.

Exploration risk

SLM’s projects are all considered early stage prospects. This means SLM is yet to make a discovery on the projects. Inherently there is a risk that drilling programs return results with no mineralisation and the projects are not considered valuable.

Source: “What could go wrong” - SLM Investment Memo 9 July 2024

While SLM raised $4.5M in February earlier this year, 7,500m of drilling in Peru will cost money and as SLM has no means to generate its own revenue, it may need to secure finance again from the market.

Funding risk

SLM is a very early stage exploration company with zero revenue and is reliant on continuous capital raises (or attracting a farm in partner) so it can undertake high-risk / high reward exploration programs. There is a risk that market conditions deteriorate and investors shun high-risk explorers like SLM, and SLM is unable to raise capital without significant dilution of existing shareholders.

Source: “What could go wrong” - SLM Investment Memo 9 July 2024

Another risk for SLM is permitting/delay risk.

Permitting takes time, and the company is yet to secure the final permit for the Ilo Este project.

If SLM is delayed in securing this permit it could delay the drilling program and cost the company valuable time and money while it has the drill rig secured.

We list more risks to our SLM Investment in our SLM Investment Memo here.

Our SLM Investment Memo

In our SLM Investment Memo, you can find the following:

• What does SLM do?
• The macro theme for SLM
• Our SLM Big Bet
• What we want to see SLM achieve
• Why we are Invested in SLM
• The key risks to our Investment Thesis
• Our Investment Plan