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.