The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Really liked the aerial magnetics and Molybdenum slides of the larger areas of the Porvenir concessions that have been mapped to date. Shows that there is a high chance that the Cacharposa porphyry they are drilling at the moment will not been the only porphyry on the license. Chances are there could be 3 or 4 porphyries, wonder when they will be able to spare a rig to put a drill into any of these other targets - particularly Bartolo .
I'm surprised by the muted reaction today - but the wider market isn't helping at the moment.
They have basically said that this hole has proved that
1) the porphyry they predicted is there
2) It is mineralised
3) It has significantly higher grades then Alpala
4) It is at surface
5) And now because the mineralisation runs so much deeper and wider than originally expected they can say it is huge - over 1000m deep and up to 1000m wide.
Now just have to prove the grades in the core - drill 2 (started)
Show the width of the core - drill 3 (starts end of the month)
Show the length of the porphyry - drill rigs 3 and 4 mobilised in November
Next 2 months are going to be very interesting
Check out the latest MD&A document from SOLG it makes it very clear that SOLG and CGP each hold an equity stake in the company ENSA - Solg is funding it till DFS then joint funded from then on. As such can sell there shares in ENSA as a share transfer to realise the asset.
Having fulfilled its earn-in requirements SolGold is a registered shareholder with an unencumbered legal and beneficial 85% interest in Exploraciones Novomining S.A. ("ENSA") and approximately 4.81% (excluding share options and warrants) of TSX-V-listed Cornerstone Capital Resources Inc. ("Cornerstone"), which holds the remaining 15% of ENSA, the Ecuadorean registered company which holds 100% of the Cascabel concession, that includes the Alpala deposit.
On this basis has to be a share transfer if they sell their shares in ENSA that amount to 85% of ENSA
Rio looks like it might be huge, 1.5km deep according to the magnetic survey and up to 12 km long by 3km wide porphyry anomaly. If only a small potion of that is highly mineralised this would be a gigantic resource. First rock saw of 25m at 0.58% Cu eq and 85ppm Mo suggest that it will be mineralised.
Beyond that the access couldn't be better the main highway (E10 from Ibarra to the port at San Lorrenzo) runs through the concession. Actually it runs over one of the target areas top right of figure 4.
Bring over a track mounted rig , put the hazards on and start drilling.
Mondays RNS regarding Porvenir was at 1.50pm - given Ecuador is 6 hours behind us that means it gave the exploration team time to report back to the UK on current progress 7.50 local time. Last night, if they kept up the drilling rates of about 35m/day, they will have hit the planned 750m depth of drill hole 1.
Will might get a similar update - either still in mineralisation and carrying on (great news over 700m of ore body and some more pretty pictures) or out of mineralisation and now drilling hole 2 (could be at 200m+ by the 14th and give us an update on visuals for hole 2 before bid closes for CGP (also pretty good news)
Ted you are right it is an underground mine - but only approx 150m deep and using standard room and pillar mining - unlikely to be applicable to Porvenir as the ore body will go much deeper . At Porvenir open cast would be a possibility followed by underground block cave mining. The point is more about the ability to define and mine a small high grade section of the deposit really quickly and with relatively low upfront costs. This then allows you to fund the development of a much bigger mine with the profits of the initial mine.
Still got to say the next couple of months will be all about Porvenir –it has the ability to be totally transformational for the company. Take a look at the Kamoa Kakula project run by Ivanhoe, also a surface deposit, huge and high grade. Building an initial 10,000Tpd mine for about $1b to start operation within 18months of the completion of the PEA.
The advantage a high grade surface deposit gives you is you don’t have to start huge with the mine – only 10.000Tpd (0k quite big - 3.6MTpy) 40% of the size of Alpala 25,000 tpd initial capacity for an initial $1.2b - again 40% of $3b. This gets you off and running and the profits pays for the rest of the development.
For a deep mine you have to build an 8km decline so to fund this you need a 1bT resource to pay back build costs. For a surface mine you only need a resource to feed it for 15 years initially. At 3.6Mt/y that something like an initial 50Mt at high grade – or a 320m diameter sphere of high grade material that is easily accessible. You could define that at Porvenir with 10-15 drills (4 to 5 months) and prove up and generate a PEA in 18 months. Plus another 18 months to build your mine - similar to Ivanhoe.
On this basis which is to be fair an extreme timeline you could be processing ore at Porvenir by end 2023 so 2 years before Alpala and it would cost you $1.2b to develop compared to $3b.
Miagi you need to work on your volume calcs 4/3 pi r3 and density of 3000kg/m3 you need a radius of 322m to give you 420mT. Still means on hole 1 we are already may be looking at something slightly bigger than Alpala.
Plus the ground soil anomolies extend over nearly 1700m in length so this will be huge however you look at it.
Have to agree earthling - will get a small additional funding in 6 months time
At Alpala when the where using just the small rigs cost pre meter for drilling and assay ran at $500 to $800 so for 50,000m it would be a spend of $25 to $40m plus the geo physics, study costs and general manpower. So the next 15 months at Porvenir will cost between $40 and $55m plus whatever they spend elsewhere on the regional program. The $40m they raised will see us through at least the next 6 to 9 months - no worries.
This link below is to an article by the company who supplies the drill rig - Hubbard - you get a good idea of what is involved get the rigs into place in the Ecuadorean jungle.
https://coringmagazine.com/article/remote-site-drilling-hubbard-perforaciones/
The Alpala resource was generally 1% Cu to 1g/T gold. The exception to this was the high grade core such as hole 23R - RNS dated 29/6/17 - Here the ration of gold to Cu increased to 2 to 3 times that of Cu - Lets see what assays bring.
Ø Hole 23R (Rig 1) assay results:
- 1030m @ 1.16 % copper equivalent (0.59 % Cu, 0.90 g/t Au) from 490m;
- 770m @ 1.44 % copper equivalent (0.71 % Cu, 1.16 g/t Au) from 540m;
- 474m @ 1.88 % copper equivalent (0.89 % Cu, 1.57 g/t Au) from 830m;
- 216m @ 3.08 % copper equivalent (1.29 % Cu, 2.84 g/t Au) from 970m
In terms of drill costs I have worked on a historic figure of $50/m drilled and assayed. For Alpala MRE1 they drilled 57000m over 39 holes to give a 1bT resource.
At Porvenir the drill holes will be shorter 750 - 1000m rather than 1500m plus. If we say 50 drilled holes at 750m depth taking 3 to 4 weeks each. That's 37500m which for 6 rigs will take up to 8 months plus 3 to 4 months to get them in place on site and cost in the region of $18m. Study costs, more geophysics and further magnetic surveys etc would take this to in the region of $30m over the next 12 to 15 months. All a best guess at this stage.
When a company commits so much so fast you have to ask why?
They would have been hoping for something similar to Alpala – huge resource and good grades. But they have found something better – grades are expected to be 2 to 3 times that of that at Alpala. This will have a huge impact on the value of the project up by a factor of 3 to 5 times.
Can’t wait for the assays on hole 1 and the visuals on hole 2.
Have to I really impressed by how quickly Nick and the team have increased the focus on Porvenir. After only 3 weeks of drilling, with no assay results they have gone from a 1 rig exploration costing $5m to and 6 rig exploration costing $30m+ with the aim of getting to a first mineral resource estimate as soon as possible. Benn Whistler quote ‘The work program will comprise multiple parallel work streams, employing the exploration blueprint used at Alpala and well as pre-emptively launching first stage geotechnical and metallurgical data capture programs’.
I can’t imagine that if this was being drilled by BHP that a decision by the board to multiply the budget by a factor of six would have been taken based on some nice pictures of drill cores.
The other end of the scale is how Solgold started at Alpala, drill 5 when they discovered the deposit was released 14/1/14 when SOLG had 600m shares in issue. By 29/6/17 (3.5 years later) they still only had 4 drills in operation. It took till 3/1/18 (4 years) to get out MRE1 and by this point they had 1.7b shares issued. As a small firm funding takes forever and costs in terms of dilution. Even so I think Solgold did really well to limit dilution as they have – many other firms have found that by the time the resource is proved up the original shareholders own barely any of the resource.
This time with Porvenir they have just raised $40m for exploration, they have already said the drill fleet will go up to 6 rigs (by start of 2021?) and will be working towards an MRE1 from day 1. If they focus on a small area round the initial discovery and as the mineralisation starts from surface, and they use all the learning from Alpala they could have MRE1 out the door before the end of 2021 (less than 15 months). They could also achieve this without any dilution!
At the same time the will issue of PFS and DFS and finance their other tier one discovery!
I have to say that the pace with which they have moved to get 6 rigs on the way to Porvenir is like a huge beacon saying to the world look what we have found. That’s fine because 6 years ago they did what a BHP would be doing now – land grabbing around Porvenir. But they did it in a huge way – they took out 72 concessions over the whole of Ecuador. What can I say but thanks to Nick and the team.
Note 1
Grades from visual inspection Solg have been doing for years – in one of their old presentations Ben Whistler bragged that they could get with 0.1% of the final assay based on a visual inspection before they sent it to the lab.
The info they gave in the RNS was this:
‘The dominant copper sulphide mineral observed to date is chalcopyrite, an important ore-forming copper sulphide mineral containing 34.5% copper. Chalcopyrite mineralisation has been observed from 15.9m to the current depth of 525.3m. Detailed core logging, to a depth of 491.0m, shows chalcopyrite percentages of up to an estimated 6.0 % by volume with associated porphyry style total quartz vein abundance of up to a measured 11.7 % by volume.’
‘The assay results (announced 7 May 2019) exhibit an approximate 1:1 copper (%) to gold (g/t) ratio as 147.8m @ 0.69% CuEq (0.43 g/t Au, 0.37% Cu) including, 82.63m @ 1.08% CuEq (0.71 g/t Au, 0.55% Cu). An approximate 1:1 copper to gold ratio is also expected from drill core assays.’
The pretty pictures on the RNS yesterday gave us some info on 200m of the core.
250-290m - visual estimate 3% Chalcopyrite - Expected analysis grade ~ 1.8% Cu eq
290-320m - visual estimate 2.5% Chalcopyrite - Expected analysis grade ~ 1.5% Cu eq
320-400m - visual Chalcopyrite in 1.5cm wide veins - Expected analysis grade more than 2% Cu eq
400-450m - visual estimate 2.5% Chalcopyrite - Expected analysis grade ~ 1.5% Cu eq
Maximum visible Chalcopyrite 6% - Expected analysis grade ~ 3.5% Cu eq
This gives 200m of drill at over 1.5% Cu eq on a drill that missed or just grazed the core of the porphyry.
Expected grade based on 1% Chalcopyrite = 0.345% Cu
and a 1%Cu to 1g/t gold ratio and 0.34g/t gold
at a 0.75 conversion factor (see page 22 of RNS) 0.345g/T gold = 0.26% Cu eq
So each 1% Chalcopyrite is equal to approx. 0.6% Cu eq
However the RNS did also say ‘Whilst mineralisation measured from PDH-20-001 is highly encouraging, the observations are of a preliminary nature. The visual mineralization observed has not yet been assayed, and the intensity of visual mineralisation should not be used to estimate grade or commercial viability at this stage. Assay results are expected to take not less than 3 weeks from submission.’
Note 2
RNS 10/11/2014 ‘Assays received for drill hole CSD-14-008 ("Hole 8"), 914.45m intersection from 396m to 1310.45m; Ø A bulk intersection of 914.45m grading 0.41% Cu and 0.44 g/t Au from 396m depth, which equates to 0.67% Cu Eq’
Porvenir
The last RNS a real blockbuster for three reasons:
1) It is at surface – mineralisation starts from 17m and carries on for at least another 500m. In terms of NPV for a project will be 30 to 50% higher as it costs less to build, you can prove it up and build it much quicker and costs less to mine.
2) It’s huge – Alpala is big (plan 50,000 t/d) but this could be bigger, figure 2 shows a 1.7km long North/South strike length and a 1km wide soil anomalies. Steve Garwin has always talked about porphyrys as like fingers sticking up from a hand and the molybdenum shows the edge of those fingers. Based on figure 2 we have two or three fingers in the defined strike plus maybe one at the Vino target. Put this together with 500m of mineralisation from surface level and an open cast mine and throughput of a min at Porvenir could be 2 or 3 times that at Alpala and so NPV could be 2 to 3 times bigger.
3) Finally and the big one the grades here could be 2 to 3 times that of Alpala which would make the NPV 3 to 5 times higher. The first drill just grazed the edge of the core ‘The geology team interpret that the combined presence of visual epidote veining, molybdenum mineralisation and potassic K-feldspar-biotite-magnetite alteration indicate that PDH-20-001 hole is drilling across the upper periphery of the core of this porphyry copper-gold system. These are characteristic features of the upper periphery of the core of SolGold’s Alpala Deposit and many porphyry copper-gold systems globally’. But we still got grades (predicted from visuals) of 200m at over 1.5% Cu eq with a peak of 3.5% Cu eq, see Note 1. At Alpala the grades for the halo around the core where about 0.5% to 0.75%Cu eq, see Note 2, whereas the core is 442mT at 1.47%Cu eq. So about two to three times higher (fairly typical for a porphyry). That would suggest the core at Porvenir could be 3 to 4.5% Cu equivalent.
In summary the NPV for Porvenir could be from 3 to 12 times that of Alpala so we are not just talking about doubling the share price. Makes it obvious why the shares have responded over the last two days
How many times – well we will get a good idea in the next 4 weeks when we get assays on hole 1 and visuals on hole 2. Confirm a 200m segment at over 1.5% Cu for hole 1 and over 500m of visuals from hole 2 at similar or better grades and the share price will go bananas.
Next drill is the key - in four weeks time will have the analysis on the first and the visuals on the second. Second is aimed at the core and should give 500m+ at these grades or higher -visuals are very good estimate - SOLG reckon they can get with 0.1% of the analysis grade based on the visuals at Alpala.
If they get 500m of greater than 1.5% Cu eq - we have a deposit size that will have a core of similar size and may be higher grade than Alpala but is located within 100-150m of the surface. Assuming the core is a 500m sphere gives them 65 million m3 or 200 million tonnes. At 50,000 T/d (alpala planned mine size) gives 11 years of operation in the core.
Will be much quicker to drill - MRE 1 drilling could be completed in 9 months from now
Much quicker to PEA/PFS/DFS - no complicated underground mine
Much quicker to build - no complicated underground mine
And all owned by SOLG
The pretty pictures on the RNS yesterday gave us some info on 200m of the core.
250-290m - visual estimate 3% Chalcopyrite - Expected analysis grade ~ 1.8% Cu eq
290-320m - visual estimate 2.5% Chalcopyrite - Expected analysis grade ~ 1.5% Cu eq
320-400m - visual Chalcopyrite in 1.5cm wide veins - Expected analysis grade more than 2% Cu eq
400-450m - visual estimate 2.5% Chalcopyrite - Expected analysis grade ~ 1.5% Cu eq
This gives 200m of drill at over 1.5% Cu eq on a drill that missed or just grazed the core of the porphyry.
Expected grade based on 1% Chalcopyrite = 0.34% Cu and a 1%Cu to 1g/t gold and 0.34g/t gold = 0.26 % Cu eq (0.75 conversion factor)
The RNS gives a maximum chalcopyrite concentration by volume (visual only) of 6% with both pyrite and molybdenite present but no estimate of concentration. As Chalcopyrite is 34.5% Cu this gives us over 2% Cu, plus they expect a 1% Cu to 1 g/T gold ratio so also over 2 g/T gold at maximum. The last Porvenir RNS gave a conversion ratio of 0.751 to convert g/T gold to Cu equivalent. So they are looking at over 3.5% Cu equivalent as the maximum predicted grade in this drill core.
Amazing grade for a section of the first drill hole which they think missed the porphyry core.
Drilling at about 35m per day, can't wait to see how far the visual ore continues for, and then analysis for the first 500m in 3 weeks time.