SLM: Four “shots on goal” at a new copper discovery in Peru

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 363,637 SLM shares and 1,750,000 SLM 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. Shares, options and Initial Entry Price have been updated in accordance with contract amendment announcement

The copper price has been climbing over the last 12 months.

And we’re bullish on copper as it will form the backbone of the world’s electrification and decarbonisation efforts.

Quality copper projects are notoriously difficult to come by.

One of our Portfolio Companies now has FOUR exploration stage, copper assets.

Drilling will start in Q1 2025, which is just a few months away...

And the targets are shaping up very nicely.

Our $7M capped exploration Investment Solis Minerals (ASX:SLM) is consolidating one of the largest copper exploration tenement packages in Peru.

Peru is the second largest producer of copper in the world after Chile.

SLM has over 66,000ha of exploration ground over there.

Right now, SLM is “just” a package of highly prospective ground...

But SLM has conducted geophysics over ALL of the projects, as well as picking up some glowing blue copper grab samples like the one below:

(Source)

In 2025 the company is planning a big exploration program to drill test FOUR of its projects for copper:

2025 could be a significant year for SLM and we are hoping that it is able to deliver a copper discovery on one (or more) of its four “shots on goal”.

Today, we will take a look into the copper markets as well as Peru as a jurisdiction and where each of the 2025 projects sit for SLM.

For each project we will summarise why we think it's interesting, what is happening next and when SLM expects to drill it.

We’ll also introduce SLM’s Executive Director Mike Parker who has found not one, but TWO major copper discoveries that became producing copper mines.

Mike Parker held senior management positions at the $16BN capped First Quantum Minerals for 21 years until 2018, where he established First Quantum’s portfolio of exploration properties in Katanga, DRC.

He was deeply involved in two major discoveries, the Lonshi and Frontier Mines, both located in the DRC.

Can he do it a third time with SLM, this time in Peru?

Here’s more on “Copper” Mike...

SLM’s New Executive Director has found two mines, can he do it again?

In August of this year SLM appointed Michael “Mike” Parker as Executive Director who has an excellent knack for finding deposits that go on to become mines:

Mike Parker held senior management positions at the $16BN capped First Quantum Minerals for 21 years until 2018.

As before, First Quantum Minerals is a major Canadian copper company and Mike was deeply involved in two major discoveries, the Lonshi and Frontier Mines, both located in the DRC.

Mike Parker speaks fluent Spanish and has been working in South America since 2011, so we think he is well placed to try and repeat his African copper success, this time in Peru with SLM.

Parker is working in an excellent macro environment for copper as well...

The world needs lots of new copper mines - and BHP knows it

We are firm believers in the long term copper macro thematic, as it remains crucial to electrification and decarbonisation.

When we were at the PDAC mining convention in Toronto earlier this year, we were able to see famed Canadian mining billionaire and philanthropist Pierre Lassonde speak.

Lassonde said “copper is the only critical mineral” because all other critical minerals rely on copper to work - all the wiring and conductivity of batteries need copper to transmit the charge.

His words are still ringing in our ears.

We’ve also seen Australia’s largest mining company start to put serious amounts of money behind copper, as a means to ride the electrification and decarbonisation macro thematics.

In the last two years, we’ve seen BHP involved in ~$16.5BN worth of deals to acquire copper projects, including a 2023 acquisition of copper-gold producer OZ Minerals for $9.6BN and a ~$4.8BN acquisition of Filo Corp in conjunction with Lundin Mining.

Backing this up, BHP recently released an excellent copper report called “How copper will shape our future“.

Below you can see a chart from that report, which indicated that copper grades at mines around the world have declined 40% over the last three decades

(Source)

So, if SLM can define a high grade copper system at one or more of its Peruvian copper projects, we think this could lead to a sustained re-rate for the company.

And hopefully open up commercial discussions with majors, to bring the projects into development.

(Assuming Mike Parker and the SLM team can make a copper discovery across their large landholdings in Peru)

This leads to our SLM Big Bet, which represents the ultimate upside scenario for our Investment:

Our SLM Big Bet

“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 - some of which we refer to 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.

More on SLM’s FOUR copper projects in Peru...

Project 1: Cinto Project

Stage: Permitting / Geophysics

Why it is interesting: It is just 10km away from the Toquepala mine that produces 180,000 tonnes of copper each year.

What is next: follow up mapping & sampling targets, IP survey – Q1/2 2025

When does SLM expect to drill: Q3/4 2025

SLM’s Cinto project is just 10km away from the massive Toquepala mine owned by $133BN Southern Copper Corporation.

That mine produces around 180,000 tonnes of copper each year, and has been in operation since 1964:

(Source)

Earlier this week SLM published the results of its geophysical survey over the project.

The survey identified magnetic anomalies that coincide with alteration zones detected from previous remote sensing work, highlighting priority targets for follow-up exploration.

Included in the target zone was a vividly coloured copper rock with grades as high as 7.14%.

Next, SLM will follow up with some IP programs, further mapping and geophysics leading to some high priority drill targets selected.

SLM will then need to follow up with an Environment Impact Assessment to secure drilling permits over the area.

Project 2: Ilo Este

Stage: Drill Ready

Why it is interesting: Nice juicy target ready to drill, potential for gold

What’s next: Dill Permit

When does SLM expect to drill: Q1 2025

The Ilo Este project has multiple drill targets ready to be tested.

SLM will look to do a 5,000m drilling program over the project in the first quarter of 2025.

Geophysics has firmed up targets here, and the closest previous drilling (drilled away from a geophysics anomaly) have returned the best gold grades to date on the margin of the anomaly.

Project 3: Chancho Al Palo

Stage: Drill Ready

Why it is interesting: Significant geophysical targets, two styles of mineralisation,
What is next: Drill Permitting

When does SLM expect to drill: Q1 2025

This project has potential for two styles of mineralisation:

1. IOCG (Iron oxide copper gold) style mineralisation in the west
2. Porphyry potential to the east

Project 4: Chocolate (previously Guaneros)

Stage: Drill Ready

Why it is interesting: Tenement secured, IP Survey.

When does SLM expect to drill: Q4 2025

The Chocolate project sits between SLM’s two other main projects Chancho Al Palo and Ilo Este.

A drone magnetic survey conducted by SLM showed that the area was potentially prospective for gold and copper - similar to what was found at Ilo Este.

Chocolate’s geology is similar to Ilo Este and Chancho Al Palo and rock grab samples in the magnetic anomaly zone returned anomalous copper and gold values.

We see this as a promising early sign of the prospectivity of the Chocolate project.

What’s next for SLM?

🔄Additional exploration work to firm up drill targets

SLM plans to conduct further induced polarization (IP) surveys at Cinto (the project located close to Southern Copper’s Toquepala mine) to refine drill targets, with a first-pass drill program anticipated for 2025.

It will then start drilling across the four projects during 2025, noting that the order of the projects drilled could change depending on which projects have the best targets following this exploration work.

Previously, SLM released an outline of completed works at SLM’s copper projects in Peru with a timeline for drilling at each project on the right:

(Source)

Risks

The three main risks we are most conscious of for SLM right now are funding risk, exploration risk and jurisdiction risk/political risk.

Funding risk

SLM is a very early stage exploration company with zero revenue and is reliant on 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: 9 July 2024 SLM Investment Memo

SLM had $2.7M in the bank at 31 August 2024 and to complete all its drilling operations next year, SLM will likely need to raise at some point in the future.

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: 9 July 2024 SLM Investment Memo

SLM has been maturing its drill targets over the last six months in Peru, but will need to do more work to give the company the best chance possible to make a discovery with drilling. Drilling may not deliver mineralisation, or any mineralisation found may not be economic.

Jurisdiction risk/political risk

Despite its abundant resources and established mining industry, Peru has a reputation as having a more complicated permitting process than other countries in South America, despite efforts at reform. If SLM has delays in the drill permitting process this could impact the SLM share price negatively. Or alternatively, changes in the Peruvian political landscape could alter the attractiveness of Peru as a mining jurisdiction.

Source: 9 July 2024 SLM Investment Memo

In terms of this risk, permitting may take longer than expected, so we’ll be watching for the timings of drill permit grants.

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