Panoro’s big dreams for Cotabambas

In the northern reaches of south-central Peru’s Andahuaylas-Yauri belt, 50 km southwest of Cusco, three drill rigs are turning at Panoro Minerals‘ (PMI-V) Cotabambas copper-gold porphyry project, where the company hopes to delineate the belt’s next big mineralized system and in the process attract the interest of a major. 

Fifty kilometres south of Panoro’s project, diversified global miner Xstrata (XTA-L) has gone ahead with construction of the US$4.2-billion Las Bambas copper mine, which contains 1.15 billion tonnes grading 0.65% copper plus gold, silver and molybdenum credits in measured and indicated resources. Adjacent to Las Bambas is First Quantum Minerals‘ (FM-T, FQM-L) promising Haquira copper deposit, on which the company spent $609 million late last year acquiring it from Antares Minerals. Haquira similarly hosts a near 1-billion-tonne resource across all categories but at slightly lower grades, averaging  0.6% copper or less. 

A little to the west, Southern Copper‘s (SCCO-N) feasibility-stage Los Chancas copper project contains 355 million tonnes grading 0.62% copper, while to the east, HudBay Minerals‘ (HBM-T, HMB-N) pre-construction-stage Constancia copper project boasts 480 million proven and probable tonnes at an average grade of 0.33% copper. HudBay spent $520 million earlier this year acquiring Norsemont Mining for the project.

At 90 million inferred tonnes grading 0.77% copper, Panoro’s Cotabambas project is still too small for the majors to take much notice. But the property has its upsides, not the least of which are the higher gold grades found there compared with the other major porphyry projects nearby. The 90-million-tonne resource at Cotabambas has an average gold grade of 0.42 gram per tonne using a 0.4% copper cut-off, whereas HudBay’s Constancia gold grade averages just 0.04 gram gold and Xstrata’s Las Bambas averages 0.05 gram gold.

An ongoing 24,400-metre drill program at Cotabambas also has the potential to increase the resource significantly, with the principal objective behind the program being to expand the main Ccalla deposit at depth and along strike. Drilling earlier this year confirmed the continuity of mineralization over a 500-metre strike length at Ccalla and extended it an additional 200 metres to depth where drilled. The deposit remains open to the north, south and at depth, and there is also potential to add resources within the current deposit limits with infill drilling. Current gaps in the geologic model resulting from the relatively wide 200-metre drill hole spacing of historical drilling are expected to be filled.

According to the company’s 2007 technical report for the project, the Cotabambas deposit consists of copper-gold stockwork veins hosted by a suite of porphyritic granodiorite dykes in a large, porphyritic diorite pluton. The report makes special note of a publication in the Society of Economic Geology in 2003, which states, “Originally known for its Fe-Cu skarn mineralization, the Andahuaylas-Yauri belt of southeastern Peru is rapidly emerging as an important porphyry-copper province.”

The copper-gold porphyry systems of the Andahuaylas-Yauri belt have the tendency to occur in clusters, such as those that occur at Las Bambas, and Cotabambas is no exception. The deposit is spread over three main centres: Ccalla, Azulccacca and Guacclle, but the existing resource model covers only the first two areas. These two areas occur at either end of a 2-by-0.5-km northeast-trending corridor, and are believed to be two separate mineralized trends.

In July, Panoro increased its drill program at the property from 5,000 metres to the current 24,400 metres in 39 holes. It hopes to complete the campaign over the next six months at a cost of $10 million, at which point it plans on releasing a new National Instrument 43-101-compliant resource estimate. The company is targeting a 100% increase to the inferred resource, and depending on results, could release it as early as first-quarter 2012. In August the junior had just over $10.3 million in working capital.

Panoro picked up the 99-sq.-km Cotabambas project as part of a package of 13 properties in 2007 from Chilean miner Antofagasta (ANTO-L), which had previously explored them in a joint venture with Vale (VALE-N). It paid US$12.5 million and 6 million shares for the portfolio, which included another half dozen grassroots-stage prospects in the Andahuaylas-Yauri belt as well as the more advanced Antilla copper project, which is also in the belt, but has been tied-up in arbitration proceedings this past year with an uncooperative Peruvian joint-venture partner. 

The company has 138 million shares outstanding, 164 million if fully diluted and a 52-week share price range of 27¢-81¢. Chairman William Boden is the company’s largest shareholder and the most active buyer of Panoro’s stock, adding just over 650,000 shares to his holdings this year. He owns 7.97 million shares and last bought 11,000 shares in the open market at 41¢ apiece on Oct. 11. President and CEO Luquman Shaheen owns just 112,470 shares according to insider trading
reports, but holds options to buy 2 million shares exercisable between 16¢ and 50¢. The company’s shares closed at 41¢ on Oct. 20.