Coro options more copper ground in Chile

Coro Mining (COP-T) has signed an option agreement with a local Chilean company to acquire El Desesperado — a 7-sq.-km property hosting porphyry copper-style mineralization 16 km southwest of Codelco’s Chuquicamata copper mine in Chile’s Region II, and immediately east of where Codelco is exploring the Toki Cluster porphyry copper deposits.

Coro’s management believes the El Desesperado property has potential for discovering a new member of the Toki Cluster deposits, which include the major Toki, Quetena, Genoveva and Opache centres of porphyry copper mineralization, each containing several hundred million tonnes of copper oxide resources with copper grades between 0.4% and 0.5% that are covered by gravels. 

The rim of a planned open pit at Genoveva is 1 km east of the El Desesperado property, while the Opache deposit is 2 km to the east-southeast.

Coro scored a major coup in its Chilean strategy last November when it hired Sergio Rivera as its vice-president of exploration. Prior to joining Coro, Rivera had worked at Codelco, the world’s largest copper producer. As Codelco’s general manager of exploration, he was responsible for directing the company’s exploration activities in Chile. During his 17-year tenure there, he led or played a major part in exploration programs that resulted in discovering several world-class deposits that together contain resources topping 35 million tonnes of copper.

Rivera’s team discovered the La Americana and Cerro Negro orebodies and the giant Toki Cluster of porphyry copper deposits. Greenfields exploration by his group culminated in discovering the Inca de Oro porphyry copper and the Casualidad iron ore-copper-gold deposits. And while working for Gold Fields in the 1980s, Rivera was involved in the discovery and evaluation of the La Coipa epithermal gold-silver deposit.

“It’s fair to say he’s one of the most knowledgeable geologists in Chile,” says Mike Philpot, Coro’s co-founder and executive vice-president. “It’s so critical to have these types of people working for your company. If you have the general manager of exploration at Codelco and your mandate is to look for copper porphyries in Chile, it’s a bet on human resources. We tried to hire him a couple of years ago . . . if he can do a fraction of what he’s done for Codelco for us, we’ll be very happy.”

El Desesperado is the latest project in Coro’s growing portfolio of Chilean porphyry copper properties, which consists of: an option on 100% of the Berta project, 20 km west of PanAust and Codelco’s Inca de Oro project, where the company expects to soon start a second drilling campaign; its fully owned Chacay project, 12 km southeast of Teck Resources’ (TCK-T, TCK-N) Relincho property, where Coro has identified a “significant” chalcocite enrichment blanket; and Llancahue, where it plans additional drilling later this year. It also has the Celeste property and says it expects to add to this portfolio in 2012.

Under the terms of the option agreement on El Desesperado, Coro will pay a total of US$13 million, of which US$200,000 was paid at closing and the rest will be paid in four installments, with US$500,000 paid one year from signing, US$1.3 million paid two years from signing, US$3 million paid three years from signing and US$8 million paid four years from signing. In addition, Coro will pay a 1.9% sales royalty on any production from the property over which Coro has a first right of refusal.

“It’s not a cheap deal but it’s an option deal — payments are staged or staggered, and obviously within the latter years, they’re the bigger payments,” Philpot says. “If Coro thinks it can find a portion of a Toki cluster, which are several hundreds of million tonnes, the payment would be inconsequential. But we’re not a Teck or an Antofagasta, which have large treasuries. We have a reasonable treasury of about $12 million, so all the projects we don’t own are success contingent.”

Mining analyst Tom Meyer of Scotiabank in Toronto raised his one-year target price on the stock from 40¢ to 50¢ a share “after incorporating the project in our net asset value and increasing our price-to-NAV target multiple to 0.30 times from 0.25 times, which reflects the recent trading multiple expansion of the sector. Coro shares trade at a price-to-NAV ratio of 0.25 times, versus the adjusted peer group average of 0.36 times.”

At presstime Coro’s shares traded at 43¢ within a 52-week range of 18¢–$1.60. The junior has 138 million shares outstanding.

Based on outcropping alteration, lithologies and copper oxides, Coro believes there is good potential that the the El Desesperado property’s untested northern portion hosts similar mineralization to the adjacent Genoveva and Quetena deposits. These are associated with swarms of northeast-oriented Eocene porphyry dykes and stocks, intruded into both Paleozoic volcanics and precursor Tertiary plutons.

Low-grade copper mineralization zones associated with potassic alteration are related to the porphyries, and higher copper grades occur where this has been overprinted sericite alteration, or where later veining is present.

The Toki Cluster deposits have been oxidized to depths in excess of 100 metres beneath the gravel cover, and host major copper oxide resources as well as significant underlying primary sulphide mineralization.

In December, Codelco initiated the permitting process for cathode copper production from the combined Quetena and Genoveva deposits. According to its environmental impact study (EIS), this will involve an open pit at each of the deposits, trucking 30,000 tonnes per day of higher grade ore to the existing solvent-extraction and electrowinning facilities at Chuquicamata and 60,000 tonnes per day of run-of-mine dump leaching at the project site, followed by solution pumping to Chuquicamata.

Planned production is 528,000 tonnes of cathode copper over the 10-year project life, with an average production of 62,000 tonnes of copper per year in the first five years. Capital investment is estimated to be US$244 million.

Outside Chile, Coro owns the advanced-stage San Jorge porphyry copper-gold project in northwestern Argentina. In February 2011 Coro received its EIS permit for San Jorge from the Mendoza state government, but the state legislature failed to ratify the permit. “It was an election year and the ratification got caught up in the political process, and for purely political reasons it was denied,” Philpot says. The company is investigating an alternative development plan that Philpot says will be unveiled “in the very near future.”  If that fails, Philpot says, Coro will look for legal recourse.