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 10th 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.
