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Hot Chili in strong Chilean copper position after securing formal option agreement

Cortadera and the company’s existing Productora project have potential to become a Tier 1 copper producer.

Core trays from Cortadera
Shares have risen from 1 cent at the start of February to 3.3 cents last week

Hot Chili Ltd (ASX:HCH) continues to advance the acquisition of a large copper-gold porphyry project in Chile that has potential to be a game changer for the long-time copper explorer.

The company has confirmed that a formal option agreement to acquire 100% of the privately-owned Cortadera project, which is just 14 kilometres from the company’s Productora project, has been secured.

Option agreement with SCM Carola

Following signing of an MOU early this month and completion of legal due diligence, Chilean mining group SCM Carola and Hot Chili’s 100%-subsidiary Frontera SpA have executed the option agreement.

Managing director Christian Easterman told Proactive Investors that the acquisition would provide the company with an opportunity to develop both bulk tonnage deposits with a central processing option.

Potential Tier 1 project

He said this was likely to see two Tier 2 projects combined into one with the potential to be a Tier 1 project and would create one of the premier ASX-listed copper developers.

This option agreement covers Carola’s Vallenar landholdings, including the Cortadera discovery, adjoining Hot Chili’s Productora and El Fuego copper projects on the Chilean coastal range.

Discovery intersections

Cortadera’s results are considered one of the most significant set of copper-gold porphyry discovery drilling intersections since the discovery of SolGold’s (LON:SOLG) Cascabel deposit in Ecuador.

Results from more than 23,000 metres of diamond drilling have never been publicly released and include:

- 90 metres at 1.0% copper and 0.4 g/t gold from 4 metres down-hole depth;
- 52 metres at 0.9% copper and 0.4 g/t gold from 6 metres;
- 864 metres at 0.4% copper and 0.1 g/t gold from 62 metres, including 348 metres at 0.6% copper and 0.2 g/t gold; and
- 406 metres at 0.4% copper and 0.2 g/t gold from 276 metres, including 146 metres at 0.6% copper and 0.2 g/t gold.

A surface sample from an outcropping porphyry at Cortadera.

Drilling preparations

Hot Chili is advancing preparations to begin initial confirmation drilling across Cortadera, once regulatory approvals have been confirmed.

Easterman said the deal had been several years in the making. “We have known about this since it got handed back to Carola from the previous option holder who did all the drilling but didn't exercise the option when copper hit $2 a pound.

“For Hot Chili, we had a missing piece of the puzzle and this is very much the piece that will make everything work.”

“Rabbit out of a hat”

He said Cortadera was “about the biggest rabbit you can pull out of a hat in this game”.

Putting a major porphyry discovery in the same basket as Productora, the managing director said, placed Hot Chili in a strong position.

The case was strengthened by the fact that all of the infrastructure had already been secured for Productora and that $100 million of investment was put into the ground there.

He said after Hot Chili put together Productora, the global financial crisis and falling copper prices took their toll and the project needed to double its mine life in order to become feasible.

“What we are now holding is something the like of which we haven't seen on the ASX since the Equinox was taken over by Barrick a number of years ago,” he stated.

The company said confirmation of significant surface chalcocite enrichment and wide, higher-grade, copper-gold sulphide mineralisation would be key to determining the potential magnitude of Cortadera.

Amenable to open pit mining

Results to date, already demonstrate potential for Cortadera to host a large copper-gold deposit that the company considers may be amenable to open pit mining.

Project-level funding discussions are advancing with key stakeholders and the company confirms that technical due diligence with potential funding partners is underway.

Blanket could be “icing on the cake”

As well as the porphyry discovery, Easterman said there was a chalcocite blanket sitting over the top running at 1% copper and 0.4 g/t gold from surface.

“That is one hell of a dollop of icing on the cake and could be transformational in itself.”

In describing copper’s fundamentals, Easterman said: “We really like where copper is heading and at this stage we would prefer if the copper price was to slowly pick up while we put all of this in place in the next 12 to 18 months.

“If the copper winds are behind our backs in 12-18 months, the leverage against this amount of metal is something that could provide a major uplift to the company's value.”

A copper ‘super-hub’

There are also other prospects that Easterman believes could contribute further to the creation of a copper super-hub in the region:

San Antonio Mine - Historical production of 2 million tonnes grading 2% copper and 0.3 g/t gold from surface; 4,600 metres of drilling completed in July 2018; pre-resource stage;

Valentina Mine - Drilling success from first three holes such as 12 metres grading 1.5% copper from 28 metres, including 6 metres at 2.7%;

New targets - Six large surface targets south of San Antonio have been defined; and

Further acquisitions - High-grade consolidation opportunities are being assessed within trucking distance of Productora.

Quick facts: Hot Chili Ltd

Price: 0.044 AUD

Market: ASX
Market Cap: $107.33 m

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