Lundin’s NGEx targets copper and gold in Chile

NGEx Resources (NGQ-T) looks to have a promising collection of copper-gold porphyry properties in Chile’s prolific Region III, but considering the company comes under the umbrella of the serially successful Lundin Group of Companies, that may not be too surprising.

The property package is part of a larger portfolio of Chilean-Argentinean copper-gold and other base-metal properties, as well as a joint-venture copper-gold project with Teck Resources (TCK-T, TCK-N) in northwest B.C.

 “My background is porphyry copper-gold in South America. I actually spent a lot time down there when I worked with Teck,” says NGEx president and chief executive officer Wojtek Wodzicki in an interview at Lundin’s Vancouver office. “And this portfolio we have right now is better than anything we had then. Copper-gold deposits like these are good because it’s a market sweet spot, and it’s a deposit type that’s of interest to a lot of different people. And that’s a real benefit for a company like us.”

In Chile at its Vicuna area projects southeast of Copiapo, NGEx signed a joint-venture agreement with Japan Oil, Gas and Metals National to give three projects — Los Helados, Josemaria and Filo del Sol — another strong financial backer. Ownership in the three projects is split 60–40 between operator NGEx and Jogmec, respectively.

The most advanced target is Los Helados, a large porphyry copper-gold system that extends 1,000 metres north–south and 700 metres east–west, and remains open to the south, west, east and at depth. NGEx is currently following up on a 2011 drill program that hit mineralization at depths exceeding 900 metres.

“We’re drilling there right now at significant depths, and the idea is to take that to resource by the end of 2012, but keep in mind Los Helados is still pretty much wide open in every direction, so it really depends on how the stepout program goes.” Wodzicki says. “It’ll be a great problem to have if it just keeps growing. It’ll generate strong continuous value. How soon we run into the deposit’s limits will determine how much drilling we’ll continue to do.”

Highlights from NGEx’s 2011 drill program at Los Helados include: 711 metres grading 0.54% copper and 0.3 gram per tonne gold starting from 40 metres; 438 metres of 0.7% copper and 0.31 gram gold from 208 metres; 575 metres carrying 0.6% copper and 0.33 gram gold from 186 metres; and 46 metres of 0.4% copper and 0.1 gram gold from 892 metres. 

“We’re definitely not done with Los Helados,” Wodzicki says. “There is still a lot of value to be added from that project, and that shareholder value is what it’s all about. We’ve got plenty of capital and we’re not doing anything until we fully understand the deposit’s nature, and we’re nowhere near that yet.”

NGEx is running a parallel program at Josemaria 15 km to the east. The deposit has a previously reported resource totalling 460 million tonnes grading 0.39% copper and 0.3 gram gold at a 0.3% copper equivalent cut-off, for 4 million contained lbs. copper and 4.4 million contained oz. gold.

NGEx has just released results from the first 10 holes of a 19,200-metre drill program at Josemaria, with highlights including 520 metres of 0.83% copper equivalent at 0.54% copper and 0.42 gram per tonne gold, 404 metres carrying 0.79% copper equivalent at 0.51% copper and 0.41 gram gold and 404 metres of 0.8% copper equivalent at 0.54% copper and 0.39 gram gold.  

“The results are in-line with what we expected,” Wodzicki says. “What they did was follow-up on those hints of higher grades at the core of the deposit we saw in the inferred resource, and some of those holes have good numbers. If things continue this way it will be very good for us.”

NGEx plans to release results from the twin drill programs over the remainder of 2012, culminating with year-end resource estimates on Los Helados and Josemaria. 

With US$18 million cash-in-hand to end February and financial commitments from Jogmec, NGEx is well positioned to complete a planned 40,000 metres of drilling this year.

“We have some great catalysts in the Josemaria and Los Helados resource updates, so I expect the share price today to be a distant memory,” Wodzicki comments. “What we’re exploring at Los Helados has a good chance at being a major discovery, and as we start with the drill results in the next few months, it will generate some momentum.”

NGEx’s share price has sagged over the past six months from a high of $3.51 to a presstime close of $2.50 on average trade volumes of 106,000 shares per day. A drop-off in news over the fourth quarter, combined with a softening in metal markets based on slowing Chinese growth and questionable industrial-sector demand, have not helped.

“If we have a bit of a downtime like we are having at the moment, we have the backing to get through that, and it’s a major benefit to our shareholders,” Wodzicki argues. “We won’t get stuck needing financing at an inopportune time. And I think a lot of people appreciate that angle. There are a lot of people familiar with the Lundin Group that have made money with its investments, and have done it with multiple companies. These people are really aware of that.”

NGEx also expects further progress in 2012 at the GJ-Kinaskan copper-gold porphyry project in northwest B.C. 

The company has a staged option agreement under which Teck can earn up to a 75% stake in GJ-Kinaskan through exploration and developmental expenditures totalling US$44 million.

“That’s a good example of our strategy . . . as a junior company, you have to focus on a couple of projects,” Wodzicki says. “You can’t do everything. GJ was a significant resource, but with the way the company evolved, we didn’t have a lot of expertise in Canada. It was just sort of sitting there, and we didn’t have the staffing resources. I’d worked with Teck before, and they definitely have a northern B.C. strategy with assets like Galore Creek and other things, so it was a really good fit in a lot of ways.”

GJ-Kinaskan has measured and indicated resources of 153.3 million tonnes grading 0.321% copper and 0.369 gram gold at a 0.20% copper cut-off, or 1.09 billion contained lbs. copper and 1.82 million oz. gold. 

Teck earned a 51% stake in the GJ project in 2011 by spending US$2.5 million on exploration.  The second stage of the option requires US$12 million in spending by 2017, with minimum annual expenditures of US$2 million. Teck has installed a 40-person camp at the project, and is expected to proceed with further exploration during the 2012 field season.

It’s a model NGEx hopes to follow with its copper-gold properties on the Chilean-Argentinean border. Along with Los Helados and Josemaria, the company is drilling at an earlier-stage Filo del Sol target, located 12 km south of Los Helados.

“It’s basically one big land package across the border,” Wodzicki says, pointing it out on a map. “We have a joint agreement with the two governments.” 

The region hosts a series of large copper-gold operations including BHP Billiton’s (BHP-N) and Rio Tinto’s (RIO-N) Escondida copper-gold mine, and Anglo American’s Los Bronces-Andina coppe
r-gold mine.

“[Our deposits] are likely to be concentrate producers, so you have all the Asian smelter opportunities, and we already have the joint-venture agreements with Japan, which could end up with a company like Sumitomo or any number of larger Japanese mining corporations,” Wodzicki explains. 

“So you’ve got that market and you’ve got the gold market — with companies like Goldcorp, who are our neighbours to the south — and you have Barrick and even Newmont looking at these copper-gold deposits, because it’s a relatively easy way for them to expand.”