SLM: Set to drill two copper-gold targets in Peru at Chanco Al Palo and Ilo Este. Drill results in ~8 weeks?

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.

Two shots at a big, new copper-gold discovery.

...inside the next 8 weeks.

Our micro cap Investment Solis Minerals (ASX:SLM) will be drilling the first of two targets “over the next few days”.

And then drilling the second target a few weeks later.

It’s been a long wait but we are now finally at the “fun part”.

The drill permits have been secured.

The cash has been raised ($4.5M in February).

Bets have been placed.

Now to spin the drill and then shortly after... drill results.

And hopefully some positive share price action in the lead up to results.

Maybe ~$10M market cap SLM makes a new copper-gold discovery?

AusQuest drilled its project to the north of SLM in Peru and has more than 7 bagged off the back of good drill results 5 months ago - and has remained up at its highs.

Ausquest is still capped at $68M.

(The past performance of Ausquest is not and should not be taken as an indication of future performance of SLM).

All will be revealed for SLM within the next ~8 weeks...

We have seen SLM deliver big “pre-drill” share price runs in the past.

(Remember when SLM ran from ~20c to $1.20/share prior to its Brazil lithium drill results back in July 2024?)

The macro backdrop is in SLM’s favour - It’s not often you see copper and gold trading at all time highs at the same time - these are the commodities SLM is targeting with the drill bit.

SLM’s projects are also in the right place - Peru.

Peru is the world’s second biggest producer of copper in the world and the biggest producer of gold in Latin America.

Discoveries in this part of the world, IF big enough, come to market.

And so we think SLM is highly leveraged to exploration success given its current valuation.

SLM is trading at a market cap of $10.8M and raised $4.5M in February to drill test its assets.

Meaning SLM’s enterprise value is only ~$6M - going into a period where the company has two near term shots at a copper-gold discovery...

We participated in that February raise, alongside the directors who tipped in $205k too.

As we mentioned above, there is also a recent precedent set for how the ASX is willing to reward exploration success in Peru.

One recent runner off good exploration results in Peru was AusQuest.

AusQuest drilled its project to the north of SLM in Peru and has more than 7 bagged off the back of good drill results.

Ausquest is currently capped at $68M.

At its peak post drill results, AusQuest hit a market cap of $91M:

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.

We are Invested in SLM to see it hopefully deliver something similar - an outsized, unexpected copper discovery.

Here is where SLM’s two targets sit relative to Ausquest:

We are hoping SLM can deliver as good (and we hope even better?) results as Ausquest did.

In summary, SLM is now:

• Leveraged to exploration success with a market cap of ~$10.8M ✅
• Drilling starting in the next few days on the first of four copper targets in Peru - SLM will be drilling two targets back to back over the next ~two months.
• Chasing big copper-gold targets - similar to (and hopefully bigger) than the one ASX-listed Ausquest found and re-rated by over 700% off the back of targets ✅

What we are looking forward to with the upcoming drill program

SLM is running two drill programs:

1. A 2,500m diamond drill program at Chanco Al Palo, and
2. A 5,000m diamond drill program Ilo Este.

Diamond drilling means SLM will be pulling out cores that are fairly easy to understand visually (to the eyes of a geologist).

It should mean SLM has a fairly good idea of what they are drilling into as the geologists are logging the core that comes out of the hole.

There was no mention of this in today’s announcement, but SLM could also have an XRF gun on site that they put up against the drill core to get an indicative idea of mineralisation.

Given SLM is using a diamond drill rig, we will be on the lookout for any news on the following during the drill program:

• Visual sulphides - SLM could announce sulphides that are visible to the geologists logging the core. Thick sulphide mineralisation could be an indication SLM is hitting a specific type of potential discovery.
• XRF results - this would go one better and put grades around whatever SLM is hitting. This would be like finding the smoke of a fire...

Regardless of what comes during drilling, before we know anything for sure, we will need to see the final assay results.

We would typically set targets for bull/bear/base case expectations on drill programs, but SLM is going for two different types of copper discoveries at the same time so it's difficult to set a single set of expectations.

Instead, we will set expectations if we see any of the above.

Why we are backing the SLM team

A big part of exploration investing is about backing the right people.

We think SLM has the right team to get the most out of SLM’s projects.

As is often the case with exploration, it is a bet on a geological thesis and the team behind the company doing the drilling.

We think SLM’s team has the right mix of expertise to get the most out of SLM’s projects.

If there is a discovery to be made, then we back this team to deliver it:

• SLM’s Chairman is Chris Gale - Chris was Managing Director of Latin Resources and led the team that made a lithium discovery in Brazil, which was one of our best ever Investments and at its peak was up 2,332% from our Initial Entry Price. Latin was taken over by lithium producer Pilbara Minerals in a ~ $0.6BN takeover deal.
• SLM’s Managing Director is Mitch Thomas (Latin’s former CFO) - Mitch has a solid background in Peru and in copper having spent 3 years at Rio Tinto’s 4.32BN tonne La Granja Peruvian copper project.
• SLM’s technical director is Mike Parker - Generally going by the name “Copper Mike”, Mike was the senior country manager for (the now $15BN) First Quantum, where he was responsible for two major copper discoveries (Lonshi and Frontier Mines). Then, between 2011 and 2017 he was First Quantum’s country manager in Peru. Guess that’s where his nickname came from.

Why we like SLM’s first two drill targets

SLM has a total of four different targets it plans to drill this year. In our last note we wrote about all four of those targets.

Today, we are focusing on the two that will be the focus of the drilling over the coming weeks.

Project #1: Chancho Al Palo - Drilling in the coming days

SLM’s plan is to drill 2,500m across several holes on this project.

Why we like this project:

Here SLM has two different targets - one is an IOCG target, the other a porphyry target.

Both targets were ranked highest after SLM ran geophysical surveys (IP survey) on the project.

Both targets also sit inside Peru’s “Coastal Belt” - which is where ASX listed AusQuest made its discovery and re-rated by ~700%.

The coastal belt targets are lower altitude and a lot easier to access than up in a mountainous region, so any major discovery here could be valuable from an economic perspective.

Project #2: Ilo Este - Permitted today, drilling next...

This is the project that was permitted today.

This project sits ~17km away from the project SLM is drilling first.

Drilling on this target is expected to start next month.

Why we like this project:

The target here is a big porphyry discovery.

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

(those grades are pretty strong already)

BUT the drillholes just missed the main targets...

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

SLM will be the first company to drill the big geophysical (IP) targets properly, which we are looking forward to seeing the results from:

In a presentation at the RIU conference a few weeks ago, CEO Mitch Thomas actually talked about how Ilo Este was the priority target going into this round of drilling.

Mitch starts talking about Ilo Este at ~6:19 into the presentation (click here to skip to that section).

(Watch the full presentation here)

Why we like Peru

Another conference that SLM presented at recently was the Paydirt Critical Minerals conference.

At the same conference, the Peruvian Ambassador - His Excellency Vitaliano Gallardo held a presentation about why Peru means business when it comes to mining.

A few things stood out to us from that presentation:

1. Free trade agreement with the USA, a deal signed in 2006, makes Peruvian materials a lot more attractive. It could also mean US capital flows into Peru if the opportunities present themselves.
2. The Ambassador kept talking about exploration and how the country wants to attract more junior explorers into the region. He even mentioned that the government was considering some sort of tax break that makes it easier/more tax effective to explore in Peru.
3. The following slide from the presentation was also pretty interesting. Showing how Peru is the second biggest producer of silver, copper and zinc in the world and first in Latin America for gold/tin/lead/molybdenum. So Peru is serious about its mining industry.

The presentation overall gives us confidence in knowing that IF SLM finds something big, the jurisdiction is safe and stable enough for a large part of that value to be realised at the company level...

You can watch the full presentation here.

What’s Next for SLM?

🔄 Drilling

After today’s announcement, the main news we will be looking out for over the coming two months will be drilling on Ilo Este and Chancho Al Palo.

🔄 Permitting

We are still waiting for permitting on SLM’s other two targets for the year.

Here’s what's still to come:

• Drill permits for Cinto
• Drill permits for Chocolate

🔄 Additional exploration work to firm up drill targets

SLM is about to complete IP surveys at its Cinto project.

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 in June 2025 - we are hoping to see at least one big geophysical anomaly that warrants drilling at this project.

What are the risks?

With drilling about to start, the main risk for SLM in the short term is “exploration risk”.

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

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

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