Chariot on the fast track in Peru

Chariot Resources (CHD-T) is aiming to build itself into the next mid-tier copper producer — and it’s planning to do it on the shoulders of its Marcona copper project in Peru.

No small task for any junior, let alone one that is trying to do it at the pace Chariot has set for itself.

The company is pushing ahead with its feasibility study, environmental impact assessment and financing all in conjunction with each other. It plans to have its feasibility and environmental impact studies completed by the end of second quarter next year and financing finished by year end 2007.

If successful the Toronto-based company will be in a position to start mine construction at the beginning of 2008, and go into production in the third quarter of 2009.

And while company president and chief executive Ulli Rath admits that the pace has been furious he says the three-pronged approach gives the company significant advantages.

“We want to catch as much of the US$3/lb. copper as we can,” he says with a laugh. “And it allows us to have an inter-active process where all three disciplines can be co-ordinated to meet the demands of one another. We don’t want to have to go back and re-do technical aspects of the feasibility once we bring it to the banks.”

Chariot has some strong people on board to help get it there. Rath has 40 years of experience with Anglo American (AAUK-Q, AAL-L) and Rio Algom where he helped bring three mines into production; Chairman Ed Thompson is a geologist formerly with Anglo American and onetime president of the PDAC. David Bell, the founder of the Hemlo gold deposit sits as a director, as does Fernando Porcile who has 40 years of experience in the mining industry. Most recently Porcile managed Falconbridge‘s copper assets in South America.

Chariot holds a 70% interest in Marcona while its South Korean Partners State controlled Korea Resources and LS-Nikko Copper hold the remaining 30%.

Marcona was bought from Rio Tinto for roughly US$33.5 million US$20 million of which has been paid, with the second US$13.5 million payment due in January of 2007. Chariot has roughly US$18 million in the bank in preparation for that payment.

Rath says the South Korean partnership is a big plus for Chariot as having the security of an end-market buyer as a partner reduces risks and has made financing with banks much easier.

The agreement gives LS-Nikko the right to buy 70% of cathode and 90% of concentrate production for 10 years and that is at market prices.

The cathode and concentrate that they will be buying will be coming from the Mina Justa deposit which has a measured and indicated resource of 346 million tonnes with an average grade of 0.71% copper for 5.4 billion lbs copper.

The Mina Justa deposit is the copper-enriched portion of Marcona’s 2.4 billion tonne iron oxide-copper-gold (IOCG) system.

Mina Justa’s copper oxide mineralization is in the upper 200 meters of the orebody, which while lower grade, will get the copper cathode operation up and running.

Cashflow from the cathode can then be used to develop the deeper sulphides where intersects have been as high as 42 metres grading 10.54% copper. The sulphide mineralization is open at depth.

And while it is stating to the obvious to say that without a solid orebody there would be no mine, where many robust deposits in the developing world run into problems is on the infrastructure side.

But Chariot, it appears, is in an ideal location. Its project sits within 25-km of the paved Pan American Highway, a national power grid, water supply, a labour pool and two deep water sea ports.

As an added bonus, workers don’t have to contend with the high altitudes that many of Peru’s other high Andes projects have, as it sits on a flat terrain at relatively low altitudes.

And with no nearby farming communities or environmentally sensitive areas, the project has not been burdened with some of the community protests that have been known to erupt in the country.

Not that its location is lulling the company into not taking its social responsibility seriously.

Rath recounts how money was put into community relations before a drill ever broke into the ground.

The company will spend roughly UU$350,000 this year on social programs in the nearest city of San Juan de Marcona.

“Our philosophy is to develop trust with the community,” Rath says. “People who come in early and just write cheques without understanding only end up making half of the population mad. We integrate into the community so we better understand their concerns.”

The approach fed into Chariots creation of a two year program, whereby in the first year youths in San Juan will be brought up to high school level of reading and math and in the second year will be taught a skill that will help them secure a job in the area. The approach was developed to help stem the exodus of youth into the capital of Lima.

In Toronto on Dec. 15, Chariot’s shares were trading at 64, off 2 on roughly 380,000 shares.