Junior mining companies are adopting various strategies to help them through these tough times, but the most common remains the old standby of taking on projects robust enough to attract major partners.
Robert van Doorn and Teo Decheve of Loewen, Ondaatje, McCutcheon (LOM) recently issued a “speculative buy” recommendation for Inca Pacific, which has been advancing the Magistral copper-molybdenum project with the help of Chilean partner Antofagasta. The project is, in some ways, geologically similar to the huge Antamina copper-zinc project being developed by a Canadian-led consortium.
Glenn Brown of Haywood Securities issued a similar recommendation for Mansfield, which holds a land package in Argentina, including two early-stage, copper-gold discoveries and the more advanced Cerro Samenta copper porphyry target.
Brown recently visited Mansfield’s Rio Grande and Arizaro discoveries, as well as a newly found third one, called “Lindero.” He notes that preliminary sampling indicates values in the economic range for both copper and gold.
“Observed mineralization at Rio Grande consists of disseminated and veinlet chalcopyrite and magnetite centred in a zone of intense potassically altered volcanics,” he adds. “The most definitive results to date have come from five hand-excavated trenches, primarily sampled by saw-cut channels.”
A newly completed geochemical survey at Arizaro revealed a distinctive copper-gold anomaly centered on an area measuring 400 by 500 metres. Brown did not visit Lindero, but says “preliminary prospect sampling suggests economic values in copper and gold in a setting similar to Arizaro.”
At present, Arizaro and Lindero are wholly owned by Mansfield. Teck can earn up to 65% of Rio Grande by spending $4 million over four years and completing a feasibility study. A first round of drilling will begin early next year.
Brown cautions that Rio Grande, Arizaro and Lindero are still at the early stage of exploration and that much work remains to be done before a definitive assessment can be made of their potential. However, he describes them as “three projects of merit that bear close scrutiny as work proceeds.”
Mansfield has 21.7 million shares issued and $3.5 million in cash. It currently trades at about 70.
LOM’s Van Doorn and Decheve intend to keep a close eye on Inca Pacific, now that Antofagasta’s Peruvian subsidiary has agreed to fund the 2001 program, which will include US$2.9-million of infill and stepout drilling. The analysts view the project as “one of the more interesting copper-molybdenum discoveries in Peru.”
Antofagasta, which owns the Pelambres copper mine in Chile, can earn a 51% interest in Magistral by spending US$5.7 million over three years. This can be increased to 65% by completing a bankable feasibility study. At this point, Inca Pacific can choose to participate with a direct 35% interest, or dilute down to a 20% carried interest.
Previous work at Magistral focused on a small area within a larger target that will be explored in ongoing work programs. The analysts note that the higher-grade zone has 150 million tonnes grading about 1% copper to a depth of 350 metres. “The best mineralization has been found on the contact of the porphyry with grades of 1% copper over substantial widths.” On the metallurgical front, they expect excellent recoveries and no deleterious elements, based on results from metallurgical tests.
The analysts expect that, by the end of 2001, Magistral will be ready for a prefeasibility study.
Inca Pacific has 25.8 million shares outstanding, or 32.5 million fully diluted, and trades at about 54 within a 52-week range of 34-90.
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