Next Investors logo grey

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


Published 15-MAY-2019 14:19 P.M.


4 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.

Click Here to View Latest Articles

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.

Next Investors Image

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.

Next Investors Image

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.

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.