Kaizen to buy Pinaya in Peru

Kaizen Discovery

 (TSXV: KZD; US-OTC: CCNCF) is acquiring a 100% interest in the Pinaya copper-gold project from AM Gold (TSXV: AMG; US-OTC: ACERF) for $4.5 million.

This will be the junior’s second acquisition attempt this year, after it ended an all-share takeover of Tower Resources (TSXV: TWR) in March. (Tower’s main asset is the Rabbit North copper-gold project, near Kaizen’s Aspen Grove project in B.C.)

The junior’s CEO Matthew Hornor says the Pinaya acquisition moves the company closer to amassing a “diversified portfolio of high-quality mineral projects in the Americas and the Pacific Rim.”

“We feel this is another excellent example of our stated mission to acquire high-value and very prospective assets at attractive valuations at this low point in the cycle,” Kimberly Lim, the company’s manager of investor relations, said in an emailed response to questions.

Kaizen’s current assets include the Aspen Grove and Tanzilla copper-gold projects in B.C., the Coppermine copper-silver deposit in Nunavut, the Fairholme copper-gold asset in Australia and the Ebende nickel-copper and platinum group element deposit in the Democratic Republic of the Congo.

The junior also looks to expand in the Pacific Rim — and it has the financial support and connections to do so.

Kaizen’s largest shareholder at 67% is HPX TechCo, a subsidiary of High Power Exploration — a private exploration firm controlled indirectly by mining mogul Robert Friedland. Japanese trading house Itochu and leading copper producer Freeport-McMoRan (NYSE: FCX) are solely funding the Aspen Grove and Tanzilla projects, respectively.

For the Pinaya acquisition, Kaizen will provide AM Gold with 15.4 million shares and $500,000. It will also reimburse AM for property and maintenance fees incurred between April and the transaction’s close, expected in early September. (Once completed, AM Gold will hold an 8.8% undiluted interest in Kaizen.)

The junior also signed a concurrent agreement with Rokmaster Resources (TSXV: RKR) to end its arbitration proceedings with AM Gold over a 2012 option agreement dispute for Pinaya, among other things. In turn, Kaizen will fork over 2 million shares and $300,000.

“Our priorities for Pinaya are to close the deal, firm up plans for subsequent exploration work — which could include HPX’s Typhoon exploration technology — and secure additional funding through our Japanese partners,” Lim notes.

The 192 sq. km Pinaya project sits in the prolific Andahuaylas-Yauri porphyry copper-gold belt in southern Peru. This belt hosts several large copper assets, including Las Bambas, Constancia and Haquira.

Pinaya’s existing resource lies within three zones that are contiguous over a 1.7 km strike. The Western and Northwestern porphyry zones contain 32.3 million measured and indicated tonnes at 0.4% copper and 0.44 gram gold per tonne for 280 million lb. copper and 452,000 oz. gold. These zones also have 35.4 million inferred tonnes grading 0.4% copper and 0.27 gram gold.

Pinaya’s gold oxide skarn zone has 6.4 million measured and indicated tonnes at 0.80 gram gold and 0.1% copper, for 164,000 oz. gold and 13 million lb. copper. The zone has another 2.4 million inferred tonnes at 0.6 gram gold and 0.1% copper.

Previous drilling at Pinaya defined the current resource instead of conducting systematic regional exploration, Kaizen says, noting that regional soil geochemical and geophysical surveys have found several untested targets along strike and across strike of the current resource. The company says there could be other mineralized systems at Pinaya.

Given the exploration upside and the existing resource, Hornor says the company’s Japanese partners will likely support the project, and help Kaizen reach its goal of “delivering key minerals to Japan’s industrial sector.”

AM Gold shares doubled since the Pinaya acquisition to finish July 7 at 6¢. Kaizen finished at 24¢ per share, up 14% from its previous close. The junior exited the first quarter with $6.2 million in cash.