AQM happy to increase stake in Zafranal

The latest drill results from the Zafranal copper-gold porphyry project in Peru indicate that AQM Copper (AQM-V) made a good move by ensuring it would keep a significant stake in the project.

The company currently has a 50-50 joint venture with Teck Resources (TCK. B-T, TCK-N) on the project, with AQM Copper serving as operator until a production decision is made. But until this past July, Teck had the right to dilute AQM’s interest down to 40%.

When AQM began to get stellar results as part of its 40,000-metre drill program earlier this year, however, it decided to find a way to maintain an equal interest in Zafranal.

To get it done, AQM agreed to issue Teck 5 million of its shares, spend US$7.5 million on initial work and then fund the next $10.7 million in expenditures. After that time, both companies will share costs equally.

The renegotiation took away Teck’s back-in right and also removed certain cash payments and a net smelter return royalty payable to Teck.

The original deal was signed in May 2009 after AQM came out on top in a bidding process.

While the original deal gave AQM a 51% interest with an option to move up to a 100% stake, it could only do so after Teck passed on its right to take 60% of the project for itself.

With long copper intercepts coming in, AQM didn’t want to take any chances and hence a new deal was hashed out.

The most recent assay results bolster the wisdom of that decision.

Three holes, in particular, point to the large-scale potential of the project with hole 76 returning 201 metres grading 0.68% copper and 0.08 gram gold; hole 80 cut 196 metres of 0.58% copper and hole 77 hit 130 metres of 0.43% copper.

All three holes build on strong results from recent drilling.

Hole 76, for instance, was drilled on a different angle from the same pad as a previously drilled hole that returned 112 metres grading 0.79% copper. Hole 77 was drilled 80 metres south of a hole that returned 163.5 metres of 0.36% copper while hole 80 was drilled 60 metres south of a hole that returned 188 metres grading 0.73% copper.

The most recent drilling focused on a 3.1-km-long segment of what is known as the Main zone, which is one of six porphyry copper-gold targets within the project.

Zafranal is situated in the northwestern extension of Peru’s Southern Porphyry copper belt near the city of Arequipa.

AQM finished a 40,000-metre drill program in June with the aim of putting together a resource estimate by the third quarter of this year. It expects to have a scoping study done on the project by the fourth quarter and currently has US$28 million in the kitty.

Teck discovered the Main zone at Zafranal in 2003. While the company outlined a conceptual resource through 11,805 metres of drilling, at the time, it didn’t believe the project had the kind of tonnage that it needs to build a mine. In Toronto on Aug. 25 — the day the drill results were released — AQM’s shares were off 3¢ or 4% to 77¢ on 104,200 shares traded.

The company has a 52-week trading range of 58¢-$1.10 and 97.4 million shares outstanding.