#XTR – Xtract's Bushranger’s - First Class Exploration and Model

 #XTR – Xtract's Bushranger’s - First Class Exploration and Model

Xtract have released their initial findings from the open pit study, this has been backed up by a 30 min presentation from Vox Markets.

The study published today has used the existing JORC which was created before XTR took ownership of the licenses. It’s impossible to over-estimate the importance of the information given in the presentation. But it does require an understanding and an ability to see just how profitable the project might be.

At first glance the report gives a number of loss-making scenario’s given various variables of NPV, Cut Off, Copper Price and Mill capacity.

There is a single positive scenario with the following variables. NPV8, Cut Off .15%, Copper Price $5 lb and Mill capacity of 20M pounds a year. This gives an NPV8 figure of A$267m, with a LOM (length of mine) of 9 years.

At first glance the figures look bad. We have a breakeven copper price, at an NPV8 (8% discount rate)  of around $4.65 lb. Wow, there is no way I would invest in such a company, might well be the initial response.

However as with most AIM companies, if its shiny and cheap; it’s often fools gold. If it’s presented professionally, warts and all; it’s probably worth looking at in more depth.

So lets have a quick initial look at the variables.

NPV 8 is this reasonable? Yes is the simple answer. It represents the cost of capital. In a higher interest rate world pre 2010 NPV’s of 10% or even 12% were used. Nowadays NPV’s as low as 5% are routinely used by mining companies, although this is a little low in my opinion. An NPV of 8% is probably about right and has been used by the world’s major mining companies in the past 12 months.

Mill Rate: The Mill rate or process rate, is simply dictated by how much processing power the project will have. The higher the mill rate, the higher the initial capex, and the shorter it takes to process the material. It’s a simple economic balancing act.

Cut Off: People might think that a .15% copper cut off is bad because its so low. It’s certainly true that a low grade mine is rarer as it requires much higher tonnage. However, a low grade mine is a massive benefit. With a low economic cut off, it would indicate that any future exploration only needs to be above .15% to add to the profitability of the project. If additional exploration finds grades of .3%, then the extra tonnage would contain a huge amount of extra profit.

Copper Price: The current copper price is $4.6 lb (taken at 27/07/21). The copper price has risen considerably over the last 12 months, rising from $3 lb in just the last 12 months. So for bushranger to remain profitable we need the copper price to stay at this price for the next 9 years. To generate a positive net return we need the price to be above this level. Again, on the face of it, this seems like a tall order.

IRR: Connected to all the variables above is the IRR (internal rate of rate). The report doesn’t mention what the IRR is, however, it can be estimated given the figures quotes. Given a price of $5 lb the IRR is around 20% (it would take 5 years to get the money back you put in to build it). Personal I would never invest in a project with an IRR as low as 20%. I don’t think it would ever get built. If the breakeven copper price can be dropped to $3.6 lb and the copper price stays at $5, then the IRR jumps massively to 50% with an increased NPV to around A$1.3bn.

 

If the above figures were used in a fully explored PFS, I can honestly say I would run a marathon to escape investing in such a company. But and it’s a big BUT, this isn’t a finished project. It’s a starting point. It is very, very, rare for a company to produce preliminary figures like this before exploration. Companies don’t do it because the figures will certainly be bad. There is also not normally enough information to allow any meaningful study to take place. If you dig deeper into the figures, we can see that if you raise the tonnage in the mined area, increase the LOM, find mineralisation as far above .15% as possible you end up with, a lower break even copper price, increased NPV and higher IRR. You end up with a project which is incredibly desirable and highly profitable. It is for this reason that XTR brought the project and have already performed its initial phase 1 drill campaign at the start of the year, none of this has been included in the study.

So, let’s examine the proposed pit.

(Image taken from the VoxMarkets presentation)

The Pit design is approx. 600m deep, it encompasses nearly all of the existing JORC. It covers two small grazing areas and a few square km’s of planted, commercial woodland. The mineralisation is modelled, dipping from the SE to the NW from surface to pit depth at 600m.

(image taken from the VOXMarkets presentation)

The picture above shows the existing holes in blue, which have been used to create the JORC and so the basis of the existing model. The red dots represent the new drills from the just started second phase drill campaign. There is plenty of scope to add additional mineralisation,  particularly to the north and NW (which will be drilled). As an aside we can see that the first two drill pads, each have two holes, so they will have drilled very quickly.

(Taken from the VoxMarkets presentation)

The IP survey, when superimposed over the open pit, reinforces the extensions to the north and north-west. As well as this there looks to be a potential high grade intrusion branch to the east – the area in the red box, which has been missed by existing drilling, which will be drilled to hopefully provide further mineralisation within the open pit.

The phase 1 drilling has already added considerable mineralisation with a  .2% cut off, above the modelled .15%. Phase 2 drilling will add much more. All of the mineralisation will be free, as the material will need to be extracted regardless as it lies within the open pit design, it will directly increase the NPV and bring the copper breakeven price down. It is therefore a reasonable conclusion that the added material, higher grade mineralisation and further refining of the design and capex requirements will bring the copper price break even down to around $3.6 lb, with an NPV of 1.3bn with copper prices at between $4.6 and $5.

This alone would be a fantastic achievement, creating a profitable and desirable mine, however, the expectation is that considerably more mineralisation exists outside the open pit design.

As the above side view of the open pit shows, there is considerable mineralisation outside the open pit, for initial capex and operational reasons. Once the pit has been built and with the processing equipment still in place. There are expansion possibilities with easy and limited underground mining, adding a potential NPV of around A$1bn to a further post open pit phase.

The largest expansion comes from the areas to the SE of the open pit, the model output above shows the a potential new mineralisation area by looking at the recent IP mapping. It represents a 100-150% increase to the already modelled open pit. If this does represent mineralisation above a .15% cut off, then it would mean a further 9-14 years for the LOM and a potential A$1.5bn to 2.5bn NPV. With the mineralisation being near surface and the processing capability in place the profit margin would be substantial and the copper break even cost as low as $2 lb.

The red dots show that XTR will be putting some exploratory holes into this potential new resource area over this current drill campaign.

 

Conclusions: XTR have been brave showing warts and all for their starting position. It has shown where the exploration gains need to come from to add the most value. It determines the potential for the project. It allows the company to maximise its exploration drilling so that, each and every drill has a demonstrable impact on the NPV and profitability of the project and license area.

If you’ve been following my blogs, you will see that I’ve never really had any doubt with regards to the potential of the project. The figures below are mostly mine based on my understandings and information received. I hope they show the potential of the project. Majors will really like the ability to mine here for 30+ years. They will like the simplicity of the project, its location and low risk theme. If XTR can get the break even copper price down, which as has been shown is likely, they will be interested. As an XTR share investor I can look forward to every drill knowing it will add significant value.

 

			Copper breakeven price US$ lb	IRR	Potential NPV A$ at $5 lb	LOM
Current Pre XTR scenario			4.6	20%	260m	9 years
Further mineralisation Open Pit			3.6	50%	1300m	5 years
Underground Mining Ext			3	35%	1000m	5 years
Secondary Targets (SE)			2	60%	1500-2500m	9-14 years

 

Xtract Resources - XTR Bushranger IP anomaly release.

 

It's important to start with this picture. I am sorry for the rough nature of this post, It's literally been typed in about 15 mins.

For simplicity, in Blue we have a fault line (probably subduction). Its dipping pretty much east-west (going down at a 45 degree angle as you move west)

The yellow area is the area of possible mineralisation.

The brown area the area of more likely mineralisation - maybe heavier.

The most important thing about this map - imo, is the fault. This would have been evident within a week or two of the IP survey and was not evident prior.

Secondly we have the extent of the IP - mineralisation zone.

Thirdly we have the slightly unusual fact that the mineralisation seems to follow the IP anomaly completely. This includes the small open pit to the east of the JORC. - not common place for porphyry.

Conclusions:

The IP anomaly is far to big and doesn't in anyway resemble the finger porphyry intrusion anomalies of Boda or Northparkes.

The fault line is also a clear signal, as the IP anomaly shows the potential mineralisation dipping as the fault dips.

It's a give away that we are looking at a skarn/dyke deposit, with associated finger intrusion porphyries, providing the higher .4-.5 CU values.

It's no wonder that XTR are looking at open pit as this plays perfectly into open territory.

The IP mapping seems to push Bushranger from Boda/Northparkes to Winu/Copper version of Cadia.

The new geological understanding of finger intrusions within a dyke/skarn system would explain perfectly the large extent of the outer alteration zone, in comparison with the smaller size of the intrusion body.

Put simply, as the east side of the subduction zone travelled south, it would have pushed fluids up through smaller fracture zones, creating the tilt we see in the initial JORC finger intrusion. smaller fracture zones cooled more quickly providing the illusion of gold rich mineralised. The heavier mineralisation would have re-treated down, to the larger fractures closer to the intrusion, and possibly closer to the fault zone?...the slower cooling allowed for more copper rich formation.

A final word IF the assays come back with .1 to .3 cu within the outer alteration zone i.e the anomalies shown indicating the skarn/dyke mineralisation, then this is potentially at least as large as Rio's Winu..

Xtract Resources - XTR's Eureka maybe I was wrong!

 

It’s no secret that I have attributed very little value to the African assets that Xtract Resources hold. I am a huge proponent of Bushranger and the potential of the porphyry asset;  it’s model, its attractiveness to large companies and its ability to be commercialised.

The biggest problem with the African assets, are the general lack of information in the public domain. They tend to be complicated both in ownership and geology. Valuing assets in Africa is very tricky due to uncertain political situations, and often hidden and surprising costs. Trying to commercial African assets is very challenging. Lumping all the African countries together in a single basket is maybe not the best country risk approach, there is certainly considerable difference in the country risk between Gambia and Nigeria or Botswana and the Congo. Regardless, there is still an African risk factor associated with the long potential LOM (length of mine) that this industry has.

Now, lets turn our attention to Eureka. Eureka is your typical African-AIM project. It has been mined previously using labour intensive, older mining techniques. The easy to extract and higher-grade copper has already been extracted. There is without doubt still mineralisation on the license, but we immediately have questions. How much is there? Is it going to be patchy? What will the costs be? Is it worth the effort? Simply we do not know.

I don’t invest in these kinds of scenarios for all the reasons above, the risk reward just isn’t there. The risk is that we will only find bits of copper, that it will be a pain to extract, that the costs will just keep going up. The reward is limited, some profit can be made. Profits large enough to overcome the costs of director wages, AIM admission etc are tricky. For a private investor owning the resource, the risk might well be worth it; as a shareholder in an LSE listed company the answer is normally, no.

That doesn’t mean that the African assets that Xtract holds are a problem. They require minimal capital expenditure and if they do go on to be mined, will probably be neutral to the company overall. With luck they might contribute money to the company, not enough to sustain a large share price, but enough to be a welcome contribution.

To be a real driver of the share price, any of the African projects needs to become something it currently is not. It needs to be transformed. So, is Eureka on the verge of being transformed?

Eureka is not a porphyry like Bushranger, it does not have a central intrusion, with a quartz outer shell. With layers of onions and vast alteration zones. Eureka is a far more localised breccia, a fractured mineralisation of small veins, created by a rising magma outlet. Leaching of minerals then pushes it wider through a mish mash of small fractures. Grades can be anything from 0.1% to 20% copper. The biggest problem with these kinds of deposits is the consistency. It looks like the near surface breccia that existed in the nape of the fault was largely mined out. Around this was a layer of lower mineralisation, some of which is still intact.

The area for mining is roughly 150m long and up to 40m in width.

 

Open pit exploration has pushed the mineralisation in a thin band NW up through P3, giving a shallow 5m depth at 2.65% copper. In 2020 Xtract produced a small 3D model of the mineralisation.

 

The above is an IP anomaly map of the key license area. IP anomalies are NOT the be all and end of exploration. If only it were that easy! Mining exploration companies like to make out it is. They all put out the maps, as evidence that they have between 100-200 tier 1 mining assets…The truth is that IP anomaly maps by themselves are just geological guides, they show magnetised areas which 90% of the time are barren of any kind of valuable mineralisation. Even if they are loaded with copper or gold, they give no indication of how much. To make much sense you need trenching and sampling to find moly, copper, gold etc near surface (an indication that they are sourced from an anomaly). To make matters worse, porphyries might be in the centre surrounded by positive anomalies, whereas a breccia might exist on top of one. Without information to back up the IP anomaly maps, preferably drilling but at least very extensive trenching I tend to ignore them.

Eureka, certainly this far, is a simple breccia (magma event) oxide deposit sat atop a positive anomaly. An IOCG – an oxide and sulphate system would also tend to follow the positive IP anomaly.

Moving forward to the latest results. They show that to the SE of the main deposit, the mineralisation tails off. This is expected. The IP anomaly shows the highest gradient towards the SE and the shallowest gradient to the NW. This would indicate the mineralisation/magma rose up from the NW moving SE as it hit the surface. The natural conclusion would be that the mineralisation would therefore get deeper as we move from the deposit to the NW. At this point a standalone small breccia would see limited mineralisation to the NW. However, mineralisation – particularly at depth in the NW, would indicate the source flow that created the breccia is still in situ.

The diagram below, shows the IP anomaly and where the current open pit sits, at the top of the anomaly at surface. In my opinion the drilling results indicate a joint deeper flow rising up, topping out at surface with the current open pit. The green is the possible extent of the mineralisation, probably down to 300m depth if the IOCG is loaded. To my knowledge no exploration has explored this potential.

Conclusions. Drilling showed the original open pit to still contain high grade 3-20% copper, probably enough for 3-5 years, as it extends with 10-25m of overburden to the NW. Drilling to the NW seems to indicate that the source flow and subsequent breccia events do exist as hoped. Deeper drilling will be needed, but if sulphides are found and an IOCG is confirmed it would provide higher copper grades are turn Eureka into a potential strategic resource, with a LOM of 20-30 years (some 10-30 times its current size). A LOM of this size WILL attract majors even in Africa, particularly given Eureka would be a working mine and the IOCG would be a massive extension.

This update for Eureka, ticks off a couple of boxes. It is still Africa. It is still a risk. However, for a smallish company like Xtract it is looking far more likely to add considerable revenues, if they get the sample production flowing later this year. It has also ticked the beginning box of a much deeper, strategic IOCG. A deeper hole (probably to 150m or so) would prove this. IF and it’s still an IF, this is the case it could prove to add almost as much value to Xtract as Bushranger.

Xtract Resources XTR – Bushranger Progression

 

Exceptionally well funded.

“With this level of mineralisation, XTR should have no trouble increasing the JORC -after a planned infill program- to trigger the 2mt of Copper that requires Anglo American to buy 80% of the project. The company has talked about further IP surverys etc, but a second drill plan should complete a new, trigger JORC by the end of the year.

XTR has talked about finding new nearby porphyries that can attract an economy of scale in the same vein as the Cadia-Ridgeway grouping.

There is no doubt that further funding will be needed to complete the infill drilling and JORC creation of Bushranger to the 2mt mark. Whether that funding is created by the revenue streams of the African projects, via share issue or even by a partner coming on board for a cut of any sale price is largely immaterial for 2021.”

XTR have now announced the fundraising of a further £5m @5.6p to pay for the 16000-20000m of exploration that needs to be undertaken to complete phase 2 of Bushranger, this will complete the infill drilling and probably the outer margin exploration, to meet and exceed, the 2Mt CU EQ that will trigger the AA buy-out clause.

As I mentioned above, over a month ago above, this was fully expected by the market, the director buy, from Colin Bird @ 5.7p prior the fundraise put a likely floor in the placing price, at which the company would have been unlikely to have deviated much from. The placing also rose £1/4m through broker warrants at 5.6p and further warrants at 8.5p to raise an additional £4.2m if they are executed. Given the current buy price that would be over a 50% gain before they would be executed, giving a built in fundraise at a very attractive price for the future. The warrants do need to be voted on to take effect, but this is not a barrier to the placing funds being raised and spent, as the shares are to be tradable from the 10^th of May. To conclude the finance discussion Colin Bird again brought shares in the open market, post placing, 1m @ 5.7p. A pleasant display of Director confidence.

Xtract Resources– Bushranger – Hole 1 920m @0.3% Copper.

We still only have the single exploration assay result of 920m at 0.3% from XTR. Normally a degree of uncertainty would still exist in determining the success of the phase 1 drilling and its 5 holes. The financing that has been raised and the planned expansion of phase 2, to include 2 diamond drill rigs along with the much-needed building of an inhouse team.

Despite the importance of the assays of holes 2 to 6, to some extent it has already been superseded by the planning of the commencement of phase 2. -It is probably important to add here, that although 5 holes were completed hole 4 was stopped, as it was only really confirming what was already learnt in hole 3. The completed holes were 1,2,3,5 and 6, making 5 holes in total.

I fully expect the company to release assays this week, to help with the understanding of what we will be looking at it’s probably worth examining holes 2 and 3.

Hole 2 was drilled across the core intrusion, with an aim to intersect the down plunge. It was drilled at a close to vertical dip. It was not testing the extension of the near surface mineralisation, which was seen particularly in holes 5 and 6 and to a lesser extent in hole 3. Hole 2 was drilled to a greater depth than planned, as it was still finding mineralisation beyond its initial estimate. My expectation from hole 2 is of a zone of 60-80m containing .4 Cu eq at a depth of approx. 500m. A wider zone of mineralisation extending from 400m to 600-650m at .25% Cu Eq. The big unknown of hole 2 is how much mineralisation existed prior 400m, and beyond the 600-650m. If any of this is above cut off grade, then that will be a welcome bonus to the modelling of the Bushranger deposit.

Hole 3 was drilled across the width of the intrusion, at a far shallower angle to hole 2. In many regards it was a reformation drill of the existing Anglo American JORC drilling. The hope of hole 3 was really to extend the lower grade but above cut off mineralisation – in other words extending the commercial width of Bushranger.

A detail interpretation by the company is below:

0 - 119m Unaltered and unmineralised andesitic to basic volcanics interlayered with andesitic sandstone and siltstone

119 - 123m Shear/Breccia zone with quartz-pyrite alteration and minor sphalerite and chalcopyrite

123 - 188m Unaltered volcanics

188 - 198m Quartz-pyrite-pyrrhotite alteration zone with minor chalcopyrite

198 - 240m Unaltered volcanics

240 - 495m Volcanic rocks - outer alteration zone of porphyry copper system with pyrite and lesser chalcopyrite-sphalerite mineralisation as veinlets and stringers

495 - 570m Intermediate volcanic alteration zone with pyrite-pyrrhotite-chalcopyrite both disseminated and hosted in veinlets/stringers

570 - 598m Porphyritic intrusion - pyrite-pyrrhotite-chalcopyrite both disseminated and hosted in veinlets/stringers

598 - 825m Central volcanic (potassic) alteration zone with pyrite-pyrrhotite and stronger chalcopyrite mineralisation, both disseminated and hosted in veinlets/stringers

825 - 890m Intermediate to outer volcanic alteration zone with continuing pyrite-pyrrhotite-chalcopyrite, similar in style to the earlier zones

890 - 975.5m Outer porphyry alteration zone. Continuing pyrite-pyrrhotite-chalcopyrite, both disseminated and hosted in veinlets/stringers. Sphalerite-galena occurs in places, also hosted in veinlets/stringers. Mineralisation diminishes towards the base of the hole

The unaltered volcanics will not be mineralised, so we would expect low grade copper .1% to .25%  Cu eq. to extend from 250-500m. 500m to 650m to be >.25% Cu eq. 650m-850m should contain approx. 100-150m @.3-4% Cu eq. and 850-900, to be .25% Cu eq. This would give a headline figure of 400m at .25% Cu eq. with a core of 100-150m at >0.3% Cu eq.

As with hole 2 it will be interesting to see whether this 400m above cut off is expanded by the outer alteration.

Expectations.

I think its important to set realistic expectations with regards to the drill assays, in part so that they can be assessed correctly, but also to refute suggestions that the assays might not be commercial. The expectations I have laid out are to ensure that the Bushranger prospect remains on track to be both commercial and attractive for Anglo American or any other mid-sized or above miner.

There has been some discussion as to why Anglo might not want Bushranger or that its copper targets will be met by other copper targets such as Africa. This is a mistake. Any mid-cap miner will be able to easily raise funds in the current market. Copper production targets are largely driven by risk. There will be a desire to restrict the possibility of over extending themselves by taking on too much risk and thereby having an expensive failure. Every time a new project is taken on board, the key geo-political risks increase. Essentially it’s a balancing act. Bushranger, and to be fair almost any Australian project has minimal geo-political risk. It’s mostly geological and price risk. If Xtract can determine a JORC giving 2Mt of copper, the geological risk is largely removed, leaving mainly price risk for Bushranger. Price risk, is the risk that the price of copper will fall low enough as to make the project uncommercial. Price risk, is without doubt the biggest risk that will be attached to Bushranger. Personally, I am of the opinion, that the risk is small, due to the demand for copper over the next 20 years and the limitations of supply. I’ll leave it up to the reader to pick which of the many price forecasts they want to use, or the in-depth reports into how supply will increasingly come from lower cut off, bulk projects or risky geo-political gambles. The consensus is pretty clear.

Xtract and Bushranger Valuations.

In my opinion one of the reasons for the rather subdued share price is the inability to put any firm valuations on the company or its projects. There is simply too little firm information to put a valuation on the company’s African assets. Bushranger, with only a single new assay, also doesn’t have the solid information for a valuation target, yet!

Although an investor might view this as a negative, it is precisely this fact, which means that the share price has such strong potential for growth, as the future valuations are not priced in.

The key points going forward to achieve share price growth. 1. The African assets having enough information, firm dates and concrete actions to make a fair valuation possible. 2. Confidence in the Bushranger JORC expansion through phase 1 assay delivery. 3. Delivery of new resource model. 4. Phase 2 exploration results meeting or exceeding expectation. 5. Successful identification of secondary porphyry targets on surrounding licenses.

We have confirmation that phase 2 drilling will take place end of June-July. The assays for ALL phase 1 holes should be delivered by the beginning of June. The updated 3D model that will drive phase 2 drill targets will be available by the end of June.

To conclude this update, the speed of exploration at Bushranger has been incredible. At the start of the year Xtract Resources had not completed a single new hole, by the end of 2021, two drill campaigns will have taken place and, we hope, an JORC update will be delivered confirming a strategic copper resource for the mining giant that is Australia.

Xtract Resources – Bushranger – Hole 1 920m @0.3% Copper.

 

Xtract Resources– Bushranger – Hole 1 920m @0.3% Copper.

Well, we have the first assay results for Xtract Resources (XTR) on the Bushranger prospect in Australia.

Porphyries are not easily understood by the market and the response from XTR has unfortunately, not been the exception.

There is no doubt that Bushranger is a copper porphyry. What I mean by this is that this porphyry is dominated by the later, copper rich intrusions, which have overwritten the early barren or gold centric intrusions. There was much talk about mineralisation evidence of the kind of quick fluid cooling that leads to a gold rich, copper reduced porphyry. However, it is clear that this has been over-written by the later copper stages of intrusion action.

For simplicity sake, also for the cheaper capex, being just copper rather than a small copper and gold, is probably an advantage.

Moving onto the geology of the later section of the hole. We still find solid, if not spectacular copper grades. At first glance this might be concerning, we expect copper and gold to increase at depth. However, we know that the best mineralisation results are in the alteration zone next to the intrusion. Hole 1 was drilled to intersect this mineralisation, using the location of the intrusion from the existing JORC and to see if it continues. The problem is that a drill, operates in a straight line -near enough, therefore when the intrusion plunges or flatlines, as per fluid dynamics, it is impossible to remain in the sweet-mineralised area. Particularly if you are going to drill over 1km in length.

It looks like the mineralisation has travelled at a shallower dip from around the 500m mark, meaning that drill 1 passed through the outer mineralisation zone from about 500-600m to EOH. Hole 5 and 6 will be crucial in understanding this depth, particularly hole 6.

If we look more closely at the results, we can see that the top section 110m – 550m 400m is 0.42%. This is important, as any development or commercial decision of Bushranger, will be split. The common method of developing these systems in Australia, is to open pit down to the 500m level and then undertake targeted underground mining. With this known, the top section of mineralisation needs to be good, and 0.42% is more than good enough. A comparison to Rio Tinto’s Winu is useful here.

We know from an internal Anglo American Geology report, that more than a single porphyry exists at Bushranger. The below is a sample I’ve taken from that geology report that talks about Porphyry 2 at depth and in the outer northern edge of their Bushranger drill program in 2014-2015.

“"Porphyry 2: Kspar+Plagioclase+Biotite-phyric Dacite Porphyry
This distinctive porphyry unit is present in TBRC030 @ 315.8m in contact with volcaniclastic
sandstone, and @329.6m, and@335.2m), in BRC032 @ 221.8m and @217.65 where it clearly
intrudes the monzonite), and in BRC034 (@ 169.3m, and @224.4m where it occurs in contact
with Porphyry 1). It also occurs in hole RACED020 where it is clearly intruding a volcaniclastic
siltstone.

This porphyry is distinctive in having large (to almost 1cm long) blocky Kspar phenocrysts that
often include one or more small plagioclase phenocrysts."

Given this and the alteration, porphyry mineralisation observed from as little as 50m depth in holes 5 and 6, we can assume that the second porphyry intrusion has an outer alteration zone that extends near to surface. Later assays will need to support this, but a safe assumption is that the second porphyry is also copper rich and will add to a potentially 1km east to west and 2km north to south open pit potential to 500m depth.

With this level of mineralisation, XTR should have no trouble increasing the JORC -after a planned infill program- to trigger the 2mt of Copper that requires Anglo American to buy 80% of the project. The company has talked about further IP surverys etc, but a second drill plan should complete a new, trigger JORC by the end of the year.

XTR has talked about finding new nearby porphyries that can attract an economy of scale in the same vein as the Cadia-Ridgeway grouping.

There is no doubt that further funding will be needed to complete the infill drilling and JORC creation of Bushranger to the 2mt mark. Whether that funding is created by the revenue streams of the African projects, via share issue or even by a partner coming on board for a cut of any sale price is largely immaterial for 2021.

So, to conclude; Bushranger this year will -very likely- become the second largest single copper deposit in the Lachlan Fold, behind Cadia East. The Rockley-Gulgong sub arc belt within the Lachlan Fold, was the sub belt that formed last in the geological history of the Fold, and as such, looks like the intrusions in the area will be predominantly copper rich. Just as Cadia is the gold work horse of the Fold, so the license areas held by XTR – which is the majority area of the Rockley-Gulgong volcanic area- looks to be the copper workhorse of the Fold. The unique characteristics of the sub belt leaves Bushranger and XTR in a unique position in a copper demanding world. If I can recognise that sat here thousands of miles away, I have no doubt that the copper experts in Australia do too!

Xtract - Hole 5

 An estimated position, of hole 5. Given Sentinel Sat Information.

Xtract - Racecourse becoming a little clearer.

Since my last update below. We've had the XRF results for Drill 1.  Three XRF results were taken every metre, giving what should be quite a conservative, but realistic indication of the copper. It will of course give no indication of the gold content. One take away for me is that from about 750m to 1000m, drill 1 looks like it maybe missed the exact centre of the intrusion.. This could be a step down, but might be a increase in the width...it will be interesting to see drill 3, when it crosses further down.

Back to drill 2. If drill 1 was all about the intrusion, drill 2 is all about the alteration. We know the alteration gives the greatest mineralisation at the edge of theintrusion and reduces as it goes out. For drill 2, it's about increasing the size of the mineralisation/alteration envelope within the 0.15% copper cut off or above .2% CU EQ.

There are 3 layers of alteration, the key zone, which is directly next to intrusion. The inner zone, pretty much the zone mapped in the 3D JORC modelling. The outer zone, which to this point has not been included due to the high cut off used.

So far drill 2 picked up the outer zone at about 150m and carried it to about 400m. The inner zone started around 400m and will hopefully go to 550m or so, then the key zone. Then everything in reverse.

I've included a very poor mock up of what I think it might look like and how this compares to the existing 3D model.

I've extended the inner alteration in a simple manner(green hash area), personally I think it might be wider, but would like that to be shown by drill 3.

The patchy green spray in the extent of the outer alteration zone, which will decline in mineralisation as it travels further from the blue centre. 

The yellow is there to represent the higher gold content as you go down, in what I believe is the first of several intrusion events. The first event is the gold and pyrrhotite event, the second etc the copper ones.

The important take away, is how much bigger the new mineralised system is to the old geological model that Xtract inherited.

Xtract Resources Bushranger - Racecourse Prospect

 

Bushranger – Racecourse Prospect.

   The aim of this very quick piece of research, is to understand the implications of both the Market update in the week commencing the 25^th of Jan 2021 – which is a geological interpretation of the visual core findings and the later assays, which should be available between the 8^th -19^th of February for part 1, if they are split in two. Or the 22^nd of February to the 5^th of March, for part 2, or the entire core length.

   This report is not, and could never be, exhaustive. Hundreds of pages and at least 30 scientific studies have been written concerning the geology involved and the individual prospects that have been Identified. Some of the science is still disputed. It would take many weeks and months to produce a concise report. I would encourage anybody interested to research in more detail any aspects which they think are too lightly touched. I’ve tried to stick to details which are relevant, in favour of comprehensive histories.

   From experience the market often doesn’t pick up on and or understand porphyry geology or results straight away. As an investor, being able to determine results and the geological indicators, gives you a heads up, before the market either heavily buys or sells the explorers share.

    I am not an expert in the Xtract Resources company. I don’t pretend to be. What I do have is 10-15 years investing in porphyry exploration companies. I am a new investor in Xtract Resources and I have invested based purely on the drilling of Bushranger. To further caveat this piece of work, Xtract Resources (XTR), have been very poor at giving out core information to date. We have very limited visuals and descriptions of the mineralisation. The stockwork has not been described, we don’t have visual estimates of percentages or even vein counts. We do thankfully have a few snipets such as the heavy feldspar presence, some of the existing older drill results and nearby similarities with extensive geological exploration. As you would expect we have been told about the extensive chalcopyrite findings, but little on mineralisation such as bornite, or primary and secondary source events. It has been, and continues to be my belief that XTR, are still coming to terms with the drill results. To my knowledge they have a single geologist overseeing operations who is not a porphyry expert. To remedy this XTR are in the process of hiring and appointing a local porphyry expert.

   All porphyry systems share similar characteristics, they are intrusions of magma, which undergo hydrothermal alterations. The mineral composition tends to be driven by how many alterations and often the speed of the alteration. For example, faster or slower cooling of the intrusion will provide more or less copper and inversely gold. So, porphyries tend to be either gold heavy or copper heavy. There is a sweet spot, with just the right speed of cooling, where both exist in moderate levels. To complicate matters, geology doesn’t just happen and then stop; so, you will often have two or more incursions of hydrothermal alteration. This provides a mixture of stockwork. For example, the older -primary- incursion with associated stockwork, tend to be gold heavy in this region, later incursions are normally more coppercentric, which is supported by local geology studies. Obviously, other factors will be in play and I am simplifying this greatly, not least that this region probably saw as many as 6, maybe 10 intrusions, in various stages of hydrothermal maturation. Alteration plays the key role in extracting, creating the mineralised halo. By far the highest mineralisation is based directly around the intrusion in the alteration layer. Some intrusions will exist that are completely barren of gold, copper and silver.

   Before we go much further, it’s important to identify similar localities within the geological system, that the Bushranger license lies. These are Boda, Northparkes and Ridgeway. Although, the much larger Cadia system of deposits is within the geological footprint, it’s characteristics are too different to the Bushranger prospect to be a much use currently, this might change with new drill results.

Boda: This is a predominantly gold primary; with copper secondary. Monzonite Porphyry pipes extend 1000m in length horizontally. Boda has an unusually large alteration zone, extending 400m across. The alteration zone is fed from several porphyry pipes of various but mainly early intrusions. Mineralisation has a similar spread to all of these porphyry types, being much stronger directly next to the intrusion, drill intercepts of 19m @0.82g/t Au. Compared to 152m @0.18g/t Au as you move 100-150m away from the intrusion, into the edge of the alteration.

Northparkes: Is a collection currently of five, Length of mine, (LOM); fingerstyle pipe porphyry systems. Mainly copper but some gold dependent on the pipe system. “Deposits are typical porphyry copper-gold systems, in that the mineralisation and alteration are zoned around multiphase porphyritic intrusions, which are of monzonitic composition. The monzonite porphyries form narrow (typically less than 50 m in diameter), but vertically extensive (greater than 1,000 m) pipes. As the copper grade increases (approximately > 1.2 per cent copper), the content of covellite, digenite and chalcocite associated with the bornite mineralisation also increases.

 * Taken from the Northparkes.com Nov 2020 disclosure report.

   Highest copper grades are generally associated with the margins of the syn mineral monzonite porphyries, in areas of intense stockwork veining.

   Gold normally occurs as fine inclusions within the bornite; due to the intimate relationship with bornite, visible gold tends to occur within the highest-grade zones of the central portion of the deposit.

   The magmatic-hydrothermal fluids responsible for mineralisation circulated in intricate fracture networks to produce K-feldspar-quartz-sulphate-sulphide veinlets and quartz sulphide stockwork veins, surrounded by K-feldspar–dominated alteration. Ore grade copper and gold mineralisation is exclusively located within the potassic alteration zones, with localised sericitic alteration overprinting.

   Importantly the percentage of vein coverage is 2-15%.

 

Ridgeway: The geology of Ridgeway is very similar to Northparkes; a collection of fingerstyle pipe systems. Ridgeway differs slightly as the vertical intrusions are dominated by earlier intrusion events, these provide a gold rich source. The gold rich mineralisation is mainly in Bornite, which is an abundant sulphide. The later intrusions are more biotite and magnetite, with chalcopyrite, hence being copper heavy.

   Gold mineralised quartz veins surround 50-100m pencil/finger porphyries, they extend 1000m and sit several hundred metres below the surface. Both copper and gold mineralisation is seen in heavy stockwork and sheet arrays. Like Boda and Northparkes, mineralisation is highest next to the monzonite intrusion core.

   Current Jorc 150M/t @ 0.52g/t =  2.4m oz gold and 0.33% copper = 0.48m/t

   The current JORC is lower than might be expected as open pit mining has already extracted a significant portion of the mineralisation. The copper and gold still it situ is thought to be underground mining only.

The above diagram shows the depth of Ridgeway, also the very high grades around the edge of the slanted porphyry.

   Importantly, It is also very uncertain whether any geophysical technique would have detected the deposit in the absence of the Miocene cover. It is debatable whether the 1994 IP survey really detected the deposit and further investigation into this is warranted. The deposit is not a conductor and was not detected by post-discovery downhole EM, even in a hole through the ore. The magnetic response at surface from the magnetite in the deposit veins is lost in the noise caused by stronger, nearer surface magnetic sources, which include the primary and alteration magnetite in the host volcanics and the monzodiorite. * Taken from John Holliday, Colin McMillan and Ian Tedder, at Newcrest Mining.

Bushranger; Racecourse Prospect In Detail:

   The Bushranger license area is located in the Lachlan Belt, just below the main Transverse Zone. It’s to the south in the Rockley Gulgong Volcanic sub zone. All the main sub zone’s are thought to be part of the same arc system, which experienced 3 distinct periods of activity. There is still some debate whether the Rockley zone has undergone all 3 (early, as well as the second and third which occurred near the same timeframe). There is growing evidence that it experienced the early activity, but probably to a lesser degree. Most of the mineralisation occurred in a 30-40m year period towards the end of the Arc activity.

 

   Racecourse has had several JORC updates. It’s a shame that not all of the data is available, the commonly used, PropectOre map above is very simplistic in nature and does not include drill data such as:

RCJ2 - 65m @ 0.60% copper · BRC013 - 52m @ 0.72% copper · BRC025 - 49m @ 0.70% copper · BRC014 - 2m @ 8.07g/t gold

   The prospect has been explored by various companies over the past 30 years. Anglo American being the most well known owner, where they increased the JORC estimate from 27.6 M/t @ 0.45 copper to a copper gold mineral resource of 71 M/t @ 0.44% copper and 0.064g/t gold.

   The Racecourse Prospect covers a significant copper (and minor gold) mineralised zone of 1000 metres strike length. The tabular mineralised zone varies from 30 to 130m in width.

   The descriptions, particularly of Northparkes and Ridgeway are very similar to the expected 3D mapping of the Racecourse prospect. We should add the caveat, that 3D mapping, is not the same as good quality geological data. The Racecourse drill information, has been sporadic and shallow to date. However, we can only go with the data we have at present.

   The depth of Racecourse has been increased to around 1000m. Known mineralisation has a width and pipe like nature, at Racecourse. The mineralisation and mineral composition is very similar to date to that of Northparkes and Ridgeway.

   This report has not been written to try and evaluate the Racecourse Prospect. The purpose of this report is to ask the questions that we hope will be answered by detailed geological core date and assays. The first drill - that Xtract Resources has undertaken – has been to run parallel within the mineralisation of the intrusion. Nearly 1000m of “mineralisation” has been recorded, according to the company. It will be impossible to draw any conclusions as to potential resource increases from this drill.

   A common component of both Northparkes and Ridgeway is the varied pipe intrusions, although it might be easier to represent the mineralisation as a single homogenous finger. The multiple intrusions are more like, twisted roots, rising up. Now imagine a different root, growing up the side of it, sometimes wrapping around, sometimes a little farther away. Now imagine, roots of different sizes, growing up again and again in the same place. Some of the roots will be  non mineralised  intrusions. Hopefully this explains how the mineralisation will be a patchy; the copper and gold varying.

   The finger/pencil/pipe intrusions themselves are sourced from deeper, often much deeper areas of rising mantle.

   We can - by looking at the mineralisation present- determine which of these intrusions are dominant. The Racecourse prospect, will contain barren and mineralised events. It seems obvious, but the smaller the barren or lower grade prospects, the smaller the effects of the barren intrusions. We can understand whether there is a single mineralisation event, by the stockwork. Ideally we want to see different stockwork present.

   It will be very difficult to see gold or estimate gold mineralisation. As per the already released statement, Chalcopyrite is seen in a fine grain dispersed form due to intense alteration. As per all the regional mines discussed here, if Bornite is seen in a moderate to strong percentage, then it’s a good indicator of reasonable gold grades 0.3-0.7 g/t. It is unusual to see the gold visually due to the fine mineralisation. If the visual reports of the drill indicate the presence of gold, then I would expect some very good gold grades.

   It would be good to get veining and Chalcopyrite percentages from the visuals. Evidence from Northparkes, is that a percentage of 2-15% would give Northparke type mineralisation.

What evidence is there, that the width of the intrusion is wider at depth? The position of the follow up drill will likely give an idea of the updated 3D modelling, the greater the dip the more likely the width.

It is unfortunate that we don’t and I assume Xtract don’t, have access to Anglo American’s data. They will obviously see the data points of the JORC. However just as important will be the unsuccessful drilling and the extent drilling that was not in the JORC. Anglo, will – I have no doubt- be following the drilling closely and plugging the numbers into their own private model.

I am now going to outline a few possibilities, none of which will be proven by drill 1. There are a couple of key aspects. The first is the mistake that Newcrest made with Ridgeway. They have been open that the IP survey didn’t, maybe couldn’t, pick up the anomaly at depth. Secondly, these intrusions are rarely singlular. Even the Northparke finger porphyries have multiple intrusion nodes.

Scenario 1: A Singular finger porphyry, a continuation of the current width and grade down to 1000m. This is unlikely given the evidence of the nearby geology. Even so, it would greatly increase the current copper and gold content.

Scenario 2: Slightly early intrusions could be evident down the underside of the main porphyry target. All, of the higher gold grades are on this side. A test for this could be to drill another longer hole that starts on the underside, crosses the main body and then goes out on the top side from 700m or so onwards. It would hopefully, be able to test the width at depth, and prove or disprove mineral continuation on the topside. It might also increase the gold mineralisation for any future JORC.

 

Scenario 3: It is still possible that this is not a uniformed width, finger type porphyry, but instead has far more, wider sheet mineralisation. The upper section of the porphyry is not as uniform as we would expect. This might be due to the action that has given it an almost 45 degree dip from source. However, it is then highly lucky and or unusual that they have managed to drill to 1000m and stay in the moderate to strong mineralisation. This provides significant evidence that the porphyry widens down hole. The intrusion core, is often thicker lower down, as numerous intrusion attempts will not reach the height of the highest one. For example, an intrusion episode might reach 700m below ground, the next 100m below ground, then a third 500m below ground. Thickness might then increase at 700m below surface, 500m below surface and 100m below surface, in steps.

   I’ve drawn a drill, on the diagram below, that would intersect the width at approximately 700m down dip. If you decrease the dip it will intersect closer to the surface, if you increase the dip it will intersect at 800-900m. The dip that the geologist choose, might well indicate how much they think it widens.

 

 

Scenario 4: The final possibility, at least that I will discuss here, is that - similar to Ridgeway, there is a deeper mineralised system underneath the average mineralisation we’ve seen to date. Many of the reasons for this, are the same as Scenario 3 and I will not repeat them here. It will be interesting to see how much the stockwork increases at depth, whether there is a suitable change in mineralisation. My expectation, is that this would dip at a similar angle to the already known porphyry mineralisation. I’ve tried to show in purple where additional core intrusions could push up, a much larger one to the right of the known body and a smaller one to the left. There is no way to currently know whether this is the case, or how big it would be. But the mineralisation to 1000m would indicate, a likely reasonable chance of this and its likely size.

 

   These are what I consider - for whatever it’s worth, to be the four most likely scenario’s. The key points to take are: The presence of bornite for gold; the presence of gold for strong gold mineralisation. The amount of stockwork (2-15%) and the amount of Chalcopyrite is also important (Chalcopyrite normally contains 20-30% copper). The mineralisation will vary, depending on how far away from the intrusion - how far into the alteration – the drill travels. It will be impossible to say how much mineralisation there is with a single drill, even with assay results. If you buy an uncommercial prospect – which is what it was- you are taking a big risk that you can commercialise it. Uncommercial, it’s worth virtually nothing. Xtract, have done very well, either by luck or skill, the big increase in depth will greatly change the tonnage, probably moving it into the commercial category. It will also, probably, increase the chance that it now matches many of the similar prospects that extend to depth, also that the wider Bushranger license area contains additional prospects. That is of course if the new mineralisation is as described. At a £30m market cap, I am not of the opinion, that any of the scenarios are priced in.

SOLG and the The Battle of Five Armies or How to train your Mining Major Dragons and the defeat of BHP

 

In the end it was a nail biting conclusion, but the highly anticipated AGM for SolGold was a success for the Board of SolGold (SOLG) and particularly Nick Mather as he entered battle against the combined forces of Newcrest, Cornerstone and the might of BHP the worlds fifth largest mining company by Revenue.

SOLG with friendly companies including Blackrock and DGR, along with many smaller investors who answered a call from the company voted for all the normal resolutions that the company put forward. This included keeping Nick Mather as a director and CEO and the allocation of over 50% of the current share capital to potential new investors.

SOLG is the largest explorer in the highly thought after Gold and Copper frontier of Ecuador. They have built up a successful partnership with the Ecuadorian Government and the peoples of Ecuador by investing heavily in local employment, local sustainability schemes and the careful stewardship of licenses. SOLG currently sits on a mountain of copper and gold. Literally and figuratively. With projects ranging from the advanced Alpala to the new sleeping giants of Porvenir. Only today it has announced 500m of further mineralisation on a new deposit 3 km away from Alpala, which had never been drilled before this month, which will likely add world class gold and copper mineralisation to an already embarrassing about of reserves. SOLG currently has the largest amounts of combined copper and gold reserves and potential reserves in the world, not currently owned by the world’s major mining companies. A single project such as Alpala when in production would be the worlds largest silver block cave mine, one of the top 10 copper mines and one of the largest gold mines in the world.

It is no wonder then that over the last few years, Newcrest and BHP have both invested heavily in SOLG with the aim of taking these reserves for themselves. BHP have already made an offer for the company and has been rejected. For the first time in it’s investment relationship with SOLG it is out of a standstill agreement and no longer has to vote with the Board of SOLG.

For what is still a small company, under one billion dollars Market Cap. Keeping the wolves at bay, when combined Newcrest, BHP and the small Canadian company Cornerstone own over 30% between them, was never going to be easy and so it proved.

SOLG faced an almost impossible task and hired Citibank to advise them on strategy, to prevent the company from being controlled by hostile forces.

The AGM itself was a rather dry affair like many AGM’s, however the resolution to keep Nick Mather in place was passed by 55% to 45%, with nearly 80% of all shareholders voting, quite an extraordinary turnout for a smaller Market Cap company. Also passed was a resolution allowing the Board of SOLG to place over 50% of the company through new share issues to interested parties to allow for both further exploration and the potential high Capex costs associated with projects such as Alpala.

The strategy to force out Nick and take control of the company was without doubt a monumental failure for Cornerstone, Newcrest and particularly BHP. SOLG recently launched a failed hostile bid for Cornerstone, which is heavily indebted to SOLG due to their arrangement. Newcrest has been openly disapproving of SOLG’s strategy to involve Franco Nevada on financing terms for Alpala, instead of further dilution of shares (primarily to them). For BHP through it was high risk strategy that ultimately failed.

BHP has long been the favourite to obtain SOLG and its world class mineral wealth. Since the ending of its standstill agreement, BHP had the choice of two strategies to either work with SOLG as a valued partner in the same way that Franco Nevada is now or become hostile and try to obtain control of SOLG by forcing its will on the smaller company.

Major mining companies thrive and increase their reserves often by working in a friendly manner with smaller explorers. It was therefore surprising that BHP was willing to risk it’s reputation in an all or nothing bully tactic to grab control of SOLG in a hostile fashion. It was certainly an indication of how much they want and are even relying on SOLG as its main contributor of Copper and Gold for the next 10-15 years. Such a tactic was high risk, high reward for BHP, but it has failed.

BHP now has three choices, either give up on SOLG and it’s copper and gold with it’s tail between it’s legs. Whisper sweet things to SOLG to try and reinstate it’s friendly relationship or continue it’s hostile approach and make a quick bid for SOLG.

Any bid from BHP has to be quick as the next defensive move from SOLG, now that it has permission to place shares, will undoubtably be an allocation of shares to another Major, maybe Franco or Chinese interest of around 10% with a standstill agreement, possibly tied into an offtake preference agreement. Such a move would give SOLG and it’s board further protection from anything but a premium hostile bid.

It is rare for an explorer to escape the grasps of a single major mining company, rarer still to escape two, but SOLG’s expert understanding of its share register and a high stake gamble has delivered the battle and an embarrassing defeat for BHP and Newcrest. Normally a CEO would not survive 45% of the shareholders voting against them, however this is not a normal situation and the remaining 55% of SOLG shareholders have no interest in giving their riches away cheaply.

Understanding SolGold’s Porvenir

 

After a change in how often regional exploration news is released, we have the first update on Porvenir for nearly a month. In that time and since my last update, SOLG have produced assays for the first 750m or so of hole 1. It has finished hole 2 to 1300m, observing mineralisation to 1200m. It has produced assay results for the first 500m of hole 2 and SOLG has started hole 3, drilling to 450m.

SOLG has deployed a second rig to drill pad 2 (250m WNW of hole 1) and started drilling hole 4 to 50m. It has also deployed rig 3 to drill pad 3 (200m S of hole 1) which is due to start hole 5 very shortly. In conclusion there has been considerable activity in the last month all with the aim of understanding Porvenir.

In the near future a forth rig is due to be deployed. Assays are likely to take a little longer. Ecuadorian exploration companies are currently looking at 5-6 weeks for assay results due to the impact of Covid and the amount of drilling currently under way.

 

Unfortunately for investors the aim of the exploration isn’t about finding the most gold and copper, at least not directly. Porphyry Copper Deposits (PCD’s) all share similar characteristics, each characteristic has a similar mineralisation theme, so understand this and you understand where the best grades are. You will almost certainly sample the best grades if all components are found.

As per the diagram above, the major components are:

The low grade core.

The side mineralisation stacks, sometimes breccia’s etc, high grade (normally the best grade, often called the mineralisation core)

The inner pyrite shell or high pyrite content shell

The outer pyrite shell or lower pyrite content shell – both components, inner and outer shell can be present or just one, they are sometimes referred to as a mineralisation halo around the core intrusion.

The peripheral zone or alteration zone, which is a leached zone of low-moderate or good mineralisation.

The PCD is a bubble of mantle which rises up to near the surface, the mineralisation is then pushed through veins away from the source intrusion, as the pressure subsides and it cools the mineralisation is left behind. The rate of cooling helps to determine the mineralisation present, hence the outer shell of quartz pyrite etc.

Porvenir hole 1, showed evidence of reworking (at least 2 major re workings), so you need to picture the cooling and retreat, then a fresh wave of mantle intrusion changing it all a second time (new veins, extra shell formation in different places etc), alteration of the structure etc. Then possibly a third.

So SOLG needs to find the intrusion, the shell and the alteration zone. It needs to understand how far down these extend and importantly how far out the alteration zone extends. To find the best grades it needs to discover the vertical edge of the intrusion.

Hole 1: Intersected a small portion of the Shell and some of the alteration zone. It also seems to have intersected smaller portions of the intrusion core, thiner tendrils, that are low grade.

Hole 2: Initially went through surface alteration, then the PCD high quartz shell, before entering the low grade intrusion core. We don’t yet know whether the drill has come out the other side of the core, as assays are down to 500m. However assays have clearly identified the core characteristic of a PCD.

Hole 3: Has one job, to sample and confirm the spread and extension of the alteration zone. It looks like it will be drilled to 900m or until mineralisation ends. The shallow dip of the hole is such that adding even 100m to the alteration zone, provides a large extension of the resource area. CUEQ% of .3 or .4% would be more than adequate to if it extends beyond 450m. The full 900m would be high end tier 1.

Hole 4: This has a more complicated job. It’s trying to find the WNW extension of the alteration zone for 200-400m. Then sample the thinner, higher quartz/pyrite shell on the edge of the intrusion 100-150m. Hopefully it will then sample the bonanza, top grades of the mineralisation zone 200-400m. Finally entering the intrusion core, potentially coming out from that.

Hole 5: Not much detail on this, but it looks to expand the alteration to the south, possibly looking to hit the main structure from a southerly angle.

There is more than a little guess work in the above, as very limited information has been given so far. What we can confirm is the presence of a PCD, we can confirm the .4% to .8% CUEQ% in some of the lesser mineralisation zones, which is exceptional and we can confirm a substantial structure of tier 1 potential. Holes 2-5 have been chosen to provide firm evidence of all the PCD components, with indicative grades along with a 1km by 1km by 1km footprint.

It is important to understand what each hole is trying to prove when assessing the success or failure of the results as they are released. Hole 1 and 2 have proved everything that has been asked of them so far, showing strong evidence of a substantial open pit, good grade PCD. This is the kind of project that Major’s will happily mine all day, lots of reserves on the balance sheet, steady predictable return and LOM measured in generations.

So the future looks bright copper and golden for Porvenir.

SolGold's Porvenir #solg

It’s been awhile again since I wrote one of these, but there has been more misunderstanding by the Market of the significance of SolGold’s second discovery Porvenir. For the avoidance of doubt, I hold SOLG shares and have done continuously since last year, sporadically before then.

Alpala is not a new story, The world of mining knows the story of Alpala, the worlds largest Tier 1 Copper/Gold project that is currently not in the hands of majors, although both BHP and Newcrest, now also Franco, all have finger tips caressing it. The core is quite far down, so block cave extraction is the answer. This is going to require considerable Capex, but will be worth it. The story of SolGold has been the story of Alpala.

For me though an untold story was what led me to invest into SolGold, the story of the regionals. SolGold has the largest amount of exploration licenses in Ecuador, the most undeveloped mineral area in the world, something the Market was ignoring -maybe for the obvious reasons of the world’s number one…..resource-.

However for the last two weeks a different story of SolGold has been unleashed, due to the first drilling of the none Cascabel/Blanca region (Alpala’s larger area). The first of these was at La Hueca (pending), now Porvenir and then by month end Rio.

Porvenir has just completed its first drill and already the term Discovery has been used. 900m of mineralisation has been logged, which is considerable in anybody’s book and assays should come around the 5-10^th November. The drill has exceeded all expectations and already laid the groundwork for a Tier 1 project, which is current 100% owned by SolGold.

Most of this is known in the Market, but it’s the release on the 13^th of October that people haven’t grasped as it demonstrates the size and bulk of Porvenir. I think it’s worth comparing it with Alpala and how much it has grown just during the few weeks of this single drill.

Figure 1. Taken for the SolGold RNS, shows the initial size of the core and mineralisation area. Drill 1 was planned to intersect the core and the dispersed alteration zone, shown by IP, along with depth of mineralisation. The first drill often tries to sample both core and alteration boundaries to understand the geology and dispersal of the mineralisation, as well as the presence of A,B and C stockwork. The first drill was expected to reached around 500-600m with low mineralisation at depth. If the drill showed the core near the surface then Porvenir had a much cheaper Capex route to extraction, smaller than Alpala, but still a large and very profitable Tier 2 project.

Logging from drill 1 provided some very high 11% by volume Quartz veining and 6% Chalcopyrite. An excellent shallow core, comparable to Alpala at its best, It also showed, A,B and C Stockwork indicating extensive mineralisation episodes. So a very, very happy team of geologists continued drilling, but the mineralisation instead of taping off, continued..It continued and it continued. A further higher core was observed at 400-600m and still it continued, well beyond the IP anomaly, Again A,B and C rework was observed, where B stockwork was seen, mineralisation was in large, thick veins. This has continued all the way to 900m. See Figure 2.

Now this would have been amazing, in and of itself -900m of gold, moly and copper mineralisation is Tier 1- but it’s what it has meant to the larger mineralisation system that matters.

Now lets skip to Alpala, if we ignore the NW zone, which is pretty low grade and only likely to be mined after 20-40 years, then Alpala is 1500m deep and 1000m across at a slight dip. See figure 3. The core is obvious and sits around 500-700m below the surface.

Now a switch back to Porvenir(see figure 4), The core here is from surface to approx. 500-700m according to modelling and drill 1 intercepts(the red line), which intercepted the core. Figure 4 also shows Purple, the zone of the very highest grades, along with Yellow the zone of none core but still high grade. Caveat – mapped using the figure 1, drill 1 visuals and descriptions and my own estimation. But this still compares well with the companies own green area of now expected mineralisation.

Moving back to Figure 2, we have the companies further expectation, drill 2 which will be down to 50m or so by the time this is published (14^th), it will tell us all about the core, its characteristics and when the assay comes, its grades. It should go to 1400-1500m, intersect all aspects of the core, help to define the extent of mineralisation width and at a deeper depth of 500-800m a secondary core, finishing with a third zone of high mineralisation near the bottom. The hope is that like drill 1, it will continue to find moderate mineralisation throughout.

The really big hole will be drill 1, from pad 2. As per figure 2, this should intersect 1600-1800m of high to very high mineralisation. This should be drilling in 10-15 days time.

Grades are of course as yet unknown, but the prevalence of Chalcopyrite, along with the abundance of Quartz vein, along with a gold signal shown by pyrite, all mean that grades should be within the range of 1 to 1.5x that of Alpala, with a potentially higher core.

Conclusion:

The market has failed to recognise that the news release on the 13^th, increased by a factor of 4 the size of Porvenir. It shows SolGold has the expectation that Porvenir will be a similar size to Alpala, with a potential for a greater length and a higher certainty of better grades. The company for obvious legal reasons can’t say that out right without the drill intercept, but the ramping up of rigs confirms this.

With the added grades, we are probably looking at something 1 to 1.5x the grade of Alpala.

Without Alpala’s need for two years of digging prior to commercial extract, Porvenir will be producing quicker and more cheaply. High grade ore will be commercially available after a few months of preparation work, once mining complex, tailings has been constructed.

By the middle of Nov, Drill 1 Assays will be available, Drill 2 will reach depth and drill 1 from pad 2 will have passed through much of the core. The assays from drill 1 will give much greater confidence of grade ratio’s and particularly gold content. Combined the middle of Nov will be call time for the likely size and grade of Porvenir.

SolGold will be the only company in the world with two tier 1 projects, not in the hands of Majors.

By the middle of Nov Rio, which is expected to contain one or two further potential 1 projects, will have shown visuals and the process of determination.

No none major mining company in the history of mining has ever been in pre production majority ownership of 3 or more Tier 1 projects.