Global Copper unearths a giant

SITE VISIT

VALLENAR, CHILE — “This is the biggest project in Chile right now, and it’s the biggest project in the world being worked by a junior,” says David Strang. “It has the potential to be a very large operation.”

Strang is the president and CEO of Global Copper (GLQ-T, GOCPF-O), a Vancouver-based junior exploration company spun out of Lumina Copper, now part of Western Copper (WRN-T, WCPCF-O), in 2003 to hold the Relincho project. The copper-molybdenum project is in the desert of Region III, in Chile.

It’s big. And investors seem to be noticing.

In the last five months, Global Copper’s share price has more than doubled, rising from the $3 range in September to around $7 recently. The company has more on the go than just Relincho, but the mega copper- molybdenum project is certainly its main focus.

A day trip into Relincho from the closest main town, Vallenar, requires a pre-dawn departure. During the two-hour drive into the site, through rolling desert with the occasional, startling, lush green oasis, the sun rises and dissipates the chill in the air. At a hill crest, suddenly the project comes into view– all 203 sq. km of it. Its size is impressive even from a distance.

The porphyry-style mineralization at Relincho is a typical Andean copper-molybdenum deposit. The main zone, Relincho, is at the northwest end of the 5-km-long project.

Just to the southeast, separated by a fault, is the Las Guias zone. East of Las Guias is another fault, followed by the Marja zone.

Mineralization occurs primarily as chalcopyrite, with bornite sometimes bumping the copper grade up, and molybdenite. All three are found as disseminations and veinlets related to brecciated contacts between porphyritic intrusive and the host volcanic rocks. In the upper portion of the deposit, to a depth of 50 metres on average, the minerals are oxidized; in some places leaching has led to supergene enrichment.

Global Copper has only been at Relincho since 2006, but there are signs of small-scale mining activity in the area around the project dating back as far as the early 1900s. Small-scale mines exploited several high-grade veins, a testament to the region’s potential.

In 1993, the Chilean subsidiary of Finnish metals giant Outokumpu acquired the rights to Relincho. Over the next four years the major conducted an extensive exploration program on the Relincho zone, including mapping, geophysics, surface sampling, and drilling. After a resource estimate and conceptual studies, Outokumpu decided in 1997 that the project was not feasible, given the metal prices of the time.

Lumina Copper signed an option agreement for Relincho in late 2003 and laid down an initial $1-million payment. In mid-2006, the option agreement was transferred to Min-era Relincho Copper, a wholly owned subsidiary of Global Copper, as part of the move to break Lumina Copper into four companies. In early 2007, Global Copper exercised the option, completing the Relincho purchase with a $5-million payment.

When Global Copper began working on the site, a review of the existing data combined with resampling and relogging of the available core led to a drilling program with two separate objectives. The first was to better define the oxide zone copper resource; the second was to confirm and expand the sulphide resource on the property. The sulphide resource, in particular, showed potential for expansion as little exploration had been conducted at depth or in the areas near the main Relincho deposit.

“One of the reasons we found this project so intriguing is that Outokumpo hit mineralization in every hole they drilled except for one, but they only drilled at Relincho,” Strang says. “We figured we could expand laterally, and it turned out we were right.”

Not only has the lateral exploration identified added mineralization, but it has revealed a high-grade contact zone. Leo Hathaway, Global Copper’s vice-president of exploration, says that after two years on the project his group is pretty confident in their geological model.

“As we moved over to Las Guias, the grades got better and better,” he says. “It’s deeper, but stronger. So now we think the deposit is down-blocked to the east.”

What Hathaway means is that the mineralized porphyry is shifted down at each fault. At the west end –at Relincho — the porphyry is exposed. That is why Outokumpo focused in that area. Cross the fault east of Relincho and the porphyry is shifted down. The same shift happens crossing the fault on the eastern edge of Las Guias — in the Marja zone, the porphyry is deeper again.

The model means more mineralized tonnage. In addition, the contact zones between the porphyry and the host rock demonstrate better grades and longer mineralized intercepts, some from surface.

The first hole to hit the so-called “hidden porphyry” at Las Guias was hole 189. That drill hole hit 255 metres grading 0.67% copper and 0.057% molybdenum from 364 metres depth, validating for the first time that the Relincho zone porphyry was not an isolated occurrence. Hole 47 was another strong hit into the down-shifted porphyry at Las Guias, returning 348 metres of 0.7% copper and 0.056% molybdenum from 462 metres depth. Similarly, hole 133 intersected 544 metres grading 0.7% copper and 0.084% molybdenum from 224 metres down-hole.

Then hole 206 showed that mineralization in the contact zone could be both deep and long. That hole returned 572 metres grading 0.52% copper and 0.074% molybdenum from just 12 metres below surface.

As well as better defining the resource at Las Guias, Hathaway and his team are working to prove up the model for Marja. To date, drilling at Marja has not punched sufficiently deep to test for the down-shifted porphyry, though shallower drilling has demonstrated mineralization closer to surface. Hole 211 cut 298 metres from surface grading 0.5% copper and 0.016% molybdenum in a stepout to the east of the zone. Hole 52, designed to test for mineralization in the zone between Las Guias and Marja, returned 26 metres of oxide mineralization from surface grading 0.75% copper and 0.007% molybdenum, followed by 132 metres of sulphide grading 0.54% copper and 0.016% molybdenum.

While there is still considerable work to do at Relincho, given that none of the zones are closed off, Global Copper’s work so far has paid off in a new resource estimate that cemented Relincho’s position as one of the largest copper projects in the world.

The December 2007 resource estimate incorporated the results of 17 holes drilled into Las Guias as well as infill holes at Relincho. The new estimate puts indicated sulphide resources at 498 million tonnes grading 0.47% copper and 0.023% molybdenum, at a 0.4% copper-equivalent cutoff, for 5.1 billion contained pounds copper and 250 million lbs. molybdenum. Inferred sulphide resources add another 378 million tonnes grading 0.43% copper and 0.023% molybdenum.

Indicated oxide resources stand at 114 million tonnes grading 0.32% copper and 0.009% molybdenum; 11 million inferred tonnes grading 0.27% copper and 0.008% molybdenum add to the oxide count.

Strang is pleased with the estimate, but hastens to point out that exploration is far from over.

“We still have four drill rigs at work,” he says. “The resource is great, but I’m even more excited about the results we’re getting from the higher-grade zone at Las Guias.”

Alongside exploration, in early 2008 the team is planning to conduct comprehensive metallurgical testing for both the sulphide and oxide ores and complete a scoping study. A prefeasibility study is scheduled to begin in the middle of the year.

And Global Copper’s management makes no secret of the fact that their plan is to divest the company to a major in the near future. Divesting exploration companies to majors is something that Global Copper’s chairman, Ross Beaty, is well practised at. Beaty, who is also chairman of Pan American Silver (PAA-T, PAAS-Q), has founded, built
, and sold three other exploration companies since 1985.

Hecla Mining (HL-N) paid $107 million for Beaty’s first company, Equinox Resources. Using many of his employees from Equinox, Beaty then founded Da Capo Resources, which merged with Granges Mining in a $57-million deal to form Vista Gold (VGZ-T, VGZ-X), and Pan American Silver, which is now one of the largest primary silver producers in the world. He also founded Altoro Gold, which was acquired by Solitario Resources (SLR-T, XPL-X) for $30 million.

Indeed, during a meeting in October, Beaty and Strang announced their intention to option Global Copper’s other main project, a copper-gold porphyry near Antofagasta, Chile, called Taca Taca, by the end of 2007. On Jan. 3 came news that Rio Tinto (RTP-N, RIO-L) signed an $80-million option agreement to earn up to 75% of the project.

Beaty says one of his key strategies in mining is to look for size.He’s found it in Relincho.