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No.34 / January 2016
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A buyer’s market
Industry crisis creating opportunities for newcomers
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s mining companies rush to cut costs and deleverage straining balance sheets, they could be throwing the baby out with the bathwater. That is the hope of a new breed of investors in mining who are picking up assets at bargain prices which were not even up for sale at the peak of the commodity boom. Last year, Audley Capital acquired the Mantos Blancos and Mantoverde copper mines in Region III from Anglo American (LON: AAL) for an initial US$300M. Their bet is that they can squeeze more value and lower costs from the aging operations than a behemoth like AAL – they should have the right man in charge: as AALs head of copper from 2009 to 2013, John MacKenzie will know where the treasure is buried. Barrick Gold (TSX: ABX) recently sold its 70% stake in the Spring Valley project and the Ruby Hill mine to Waterton Previous Metals Fund II Cayman LP for US$110M. Another deal with Kinross Gold (TSX: K) should close in the coming weeks as ABX strives to cut its debts by US$3B. But smaller deals involving less advanced projects are also underway. Late last year Masglas Americas Corporation, a private firm backed by Peruvian capital, acquired nine exploration properties in Region III and VI from First Quantum Minerals (NYSE: FQM) for an undisclosed sum. FQM picked up the portfolio when it acquired Inmet Mining in 2013 for US$5B, largely for the giant Cobre Panama project, now in construction. With copper prices now at seven year lows, the firm is
© 2015 Chile Explore Report All Rights Reserved
Auryn Mining has options and claims covering 10,000h at the Altos de Lipangue project.
“We are acting completely counter-cyclically to everything that is happening in the world.” Maurizio Cordova, Masglas Americas selling assets to reduce debt. The nine projects are either too small or not sufficiently advanced to interest FQM. But they could offer opportunities to patient capital prepared to wait for the promised recovery. “We are acting completely counter-
cyclically to everything that is happening in the world,” says Masglas executive chairman Maurizio Cordova. Buying in the down-cycle has not only allowed Masglas to acquire assets cheaper but also to benefit from lower drilling and personnel costs compared to just a few years ago. In total, the projects (Platon, Mali, Poseidon, Aguilucho, Condor, San Jose, Fortuna, Deseo-Maite-Aquiles, and Llano) cover 30,000h, largely located near operating mines or significant projects in some of Chile’s top mining districts. “It’s no mean feat to access so many consolidated properties in important districts,” says Cordova. Critically given the current environment for metals prices, the projects are largely
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No.34 / January 2016
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located in Chile’s coastal range, closer to critical infrastructure and with potentially much lower capital costs than mines built high up in the Andes. “There is a total disconnect between projects that work now and projects which require much higher prices – the latter are going to disappear,” Cordova predicts. San Jose is typical. The 3,300h property near Vallenar in Region III has strong potential for an IOCG-type deposit and is well-placed between CAP’s (SSEV: CAP) Los Colorados iron ore mine and Antofagasta plc’s (LON: ANTO) Astillas projects. Inmet has already carried out 215km lineal of ground magnetics, 53.7km lineal of dipole IP geophysics and drilled 2,700m. “All together, quite an interesting project,” says Cordova. Masglas now plans to send its geologists to carry out preliminary field assessments over the coming
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weeks with the aim of determining potential drill targets for 2016. The team also has to work through an immense quantity of data for the portfolio. Cordova estimates that Inmet and predecessors invested in excess of US$15M exploring the projects, or several times the amount he agreed to pay for them. The Inmet portfolio is not the only pro-
“People are letting go of some really excellent opportunities.” Maurizio Cordova, Masglas America
ject on Masglas’s books. Working through 100%-owned subsidiary Auryn Mining Chile, the group is also assessing the mineral potential of the Altos de Lipangue property in the Metropolitan Region. Auryn already holds an option over 4,000h owned by Medinah Minerals, another for 2,400h through LDM Nuoco and a third for 600h with a related entity. Through the options and the acquisition of another 4,000h by Auryn, Cordova and his team have managed to consolidate ownership of the whole property. Although drilled only sporadically over the past 15 years – due to the divided ownership and disputes between partners – Auryn believes the project has the potential for a significant mineral discovery, with low capital costs given its proximity to Santiago. Led by principal geologist Luciano Bocanegra (ex-Hochschild Minerals), the firm is assessing a series of opportunities across the property, including high-grade epithermal gold veins, signs of a stratabound copper deposit and, further down the hill, tourmaline breccia. Bocanegra is leading the assessment of the Fortuna/Merlin sites at the center of the property, which includes the Fortuna de Lipangue mine that produced goldcopper concentrates during 1950s-1970s from ore grading up to @ 20g/t Au. Through mapping, trenching and systematic sampling, Auryn has extended
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“There is disseminated mineralization all over and we continue to find more – We could be begin talk about a porphyry system.” Luciano Bocanegra, Auryn Mining Chile Pegaso Negro, Altos de Lipangue
around 400m of known veins to over 5km. The focus is now on checking the continuity of these veins and the existence of blind veins through geophysics. Auryn recently acquired an adjacent property linked to a mining permit which could allow them to begin small-scale operation if sufficient ore is identified. Another priority is the Pegaso Negro site which contains significant evidence of a
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High grade veins in the Caren mine
porphyry copper mineralization, including a tourmaline breccia and disseminated chalcopyrite. Samples from an intrusive breccia at the site graded @ 0.4% Cu & 0.3g/t Au. “There is disseminated mineralization all over and we continue to find more – We could be begin talk about a porphyry system,” Bocanegra explained. Exploration is being overseen by consult-
ant geologist Aquiles Alegria (previously with ANTO), who recently sent rheniumbearing molibdenite at the site for chemical dating at a laboratory in Canada. If the molybdenite proves younger than other mineralization, as Alegria suspects, it could have important implications for the potential size of any deposit uncovered. Finally, work is continuing to identify mineralization at the Dos Marias site. Previous work concentrated on nearsurface veins but geologists now believe they are in the presence of a stratabound -type copper deposit similar to others in Central Chile’s coastal range. “Dos Marias has exactly the same mineralization as Lo Aguirre but development has been blocked for all this time by the ownership,” Bocanegra says. Although the Masglas group already has a significant work ahead of it during 2016, Cordova says their ambition is not sated. With dozens of small and mediumsized mines under threat of closure from the drop in metals prices, the team is looking for operations which could benefit from an injection or a new strategy. “People are letting go of some really excellent opportunities,” he notes. CER
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