Chakana Copper Corp. is a Canadian-based minerals exploration company and through its wholly-owned Peruvian subsidiary, Chakana Resources S.A.C. is currently advancing the Soledad project near Aija, in the Ancash region of the highly prolific Miocene mineral belt of Peru.
Matt Gordon caught up with David Kelley, President, CEO, and Director, Chakana Copper. David is an economic geologist, and an exploration geochemist with over 25 years of international exploration experience across the Americas, Central Asia, and Australasia. He previously worked for Oz Minerals, Zinifex, Newmont, WMC, BHP, West Mining, and Gold Standard. His educational credentials include a B.Sc. degree in geology from Colorado State University and an M.Sc. degree in geology/geochemistry from the Colorado School of Mines. He previously served as a President for both the Society of Economic Geologists Foundation and the Association of Applied Geochemists.
Company Overview
Chakana Copper is a minerals exploration company. The company was founded in 2016 and is headquartered in Vancouver, Canada. The company is listed on the Toronto Stock Exchange (TSX-V: PERU), the OTC Markets (OTCQX: CHKKF), and the Frankfurt Stock Exchange (FRA: 1ZX).
Chakana Copper recently released its initial resource estimate on the Soledad project in Peru. This project features very high-grade breccias that start at the surface. The company is looking to carry out additional exploration to demonstrate the scale of the project. This will lead to exceptional growth for the company.
The company has been working to develop a resource estimate for the past 4 years. The initial programs in 2017 and 2018 were focused on exploration to gain a better insight into the breccias. The company focused on understanding the shapes and morphologies of the breccias along with determining whether these could be mined. The company carried out additional drilling along with surface exploration and geophysics to develop a footprint of the system. It was determined that the size of the tourmaline breccia pipe field is 12 square kilometres. This enormous area required extensive exploration to understand the potential of the breccia pipes.
The Peruvian Mining Landscape
Peru has had an uncertain political climate following the previous year’s elections. Although the country has seen 7 Presidents in the past 13 years, there isn’t a noticeable impact on the country’s mining output. Its past production history in precious metals and copper has seen a steady increase over the years.
Chakana Copper believes that there won’t be any major changes in the mining industry as a result of the current administration. The headlines related to protests and blockades have led to temporary shutdowns, however, this isn’t something out of the ordinary for Peru. The company is bullish in Peru and believes that major global mining companies will continue to operate in the country.
According to the company, running operations in Peru this year isn’t different compared to the past 4 years. The company’s asset is based in an area that has over a 100-year-old mining history. The local communities have an understanding of the mining operations. The company has garnered extensive support from the local communities and it has given back to the community through significant investments in its ESG (Environmental, Social, and Governance) program.
Although the bureaucratic process in Peru has been challenging to navigate, the company believes that the situation has improved in recent times. The pandemic has led to the use of electronic documents and remote meetings for business, and the population has slowly adapted to the changes.
Chakana Copper had a meeting with Peru’s Ministry on December 28th that provided further assurance that the country is open for business. The company is currently working on the permitting process for the south side of its Soledad project.
The Soledad Project
Chakana Copper acquired a portion of Soledad project in February 2017 under a 100% purchase option agreement for 1,005 hectares with Condor Resources. The company completed two subsequent agreements and together with open ‘staking’ has expanded the project to over 5,000 hectares. This project is situated in the Ancash province of central Peru, around 260km northwest of Lima and 35km south of Barrick Gold’s Pierina mine. This project is part of the Ticapampa-Aija Mining District in the Cordillera Negra, a region with a long history of exploration and mining.
The project is advancing as per the company’s set targets. The company has a resource in place along with a deep understanding of the breccia pipes. It has a huge number of very high-quality targets that are planned for drill testing. Peru offers spectacular geology in terms of new discoveries and offers a lot of potential as a mining country.
The Soledad project features multiple high-grade breccia pipes starting at surface that are open at depth. The company has successfully demonstrated the high grades and the upside potential for these pipes. It has also shown that the resources have optimized starter pits on top of the breccia pipes.
Based on the topography, the company determined that high wall cuts can take out the top part of the breccia pipes. The project also features underground resources featuring high grades. In fact, the grades for the open pit resources and the underground resources are closely matched. The company anticipates that the grades are supportive of underground mining operations. These pipes feature a 50% mix of copper along with 50% precious metals. These findings provide both copper and precious metals exposure to the project. Furthermore, precious metals can help offset copper mining costs.
The project is a demonstration of concept. Based on the current resource, the breccia pipes are highly attractive targets from a continuity perspective. The breccia pipes feature highly predictable mineralization along with high variability within grades that range from extreme to very strong grades. The mineralization distribution within Breccia 1 demonstrates that the entire pipe is mineralized.
Resource Metrics
The breccia pipes feature a 6.7Mt resource with copper, gold, and silver. This comes out to 191,000oz gold along with 11.7Moz silver and 130Mlb copper. Taking reasonable recoveries into consideration, the gold equivalent resource is 620,000oz while the copper equivalent resource comes out to 270Mlbs. These numbers are based on the inferred resource from 7 breccia pipes.
Chakana Copper has drilled these surface outcropping breccia pipes and found that some of them appear small at the start, however, once drilling initiates, these tend to get bigger, while other pipes remain small but feature high grades.
The project features 3 high-prospect breccia pipes where Breccia Pipe 1 has a 2.6Mt inferred resource, while Breccia Pipe 5 and Huancarama have 1.6Mt and 1.5Mt inferred resources, respectively. The majority of the resource published by the company is based on these 3 breccia pipes.
The company has a very high discovery rate and is currently looking to preferentially discover larger breccia pipes with higher grades. The company seeks to improve the quality of its discoveries through a disciplined multidisciplinary approach in exploration utilizing the latest innovations in geophysics. This will enable it to expand and improve the resource over time.
Drill Operations
Chakana Copper has drilled 60,000m so far and has 7 breccia pipes in the initial inferred resource. It has a 6.7Mt collective resource of copper, gold, and silver with 620,000oz gold equivalent ounces. The company is currently focused on improving the efficiency of discovering the next round of targets.
The company can test each target with a 500m of drilling. Since the breccia pipes are vertically extensive, the initial drilling doesn’t require a lot of depth. Instead, the target testing is done to locate the top of the breccia pipe. These vertical targets can be drilled deeper at a later time. The company has plans to further improve the efficiency of testing the targets with 500m of average drilling assigned to each target. Although some targets might have multiple breccias while others may be simpler to test out.
The company has assessed the amount of drilling needed to obtain the initial inferred resource category on new discoveries. The company found that an inferred resource can be developed with around 2000m-5000m of drilling per breccia pipe, which is significantly lower than the drilling carried out by the company in past drill operations. By optimizing the amount of metres to drill test targets and drill out new discoveries, future exploration spending will go further in testing the upside potential of the Soledad project.
M&A Considerations
Chakana Copper is open to the possibility of an M&A (Mergers and Acquisitions). Gold Fields Nazca Holdings Inc. is the company’s largest shareholder with a 20% stake. Gold Fields is looking at the scale of the Soledad project. Notably, Gold Fields has operations in Peru through its Cerro Corona mine and has a strong drive to find another producing asset within the country.
The company is looking to test the maximum number of possible targets to understand the scale of the project. It is also working on metallurgy, engineering studies, and underground permitting. The company is currently working on gaining the permits for the south side of the project. This south side is highly advanced and features several very high-quality targets which are planned for testing in 2023.
It is important to note that although Gold Fields has a very strong position as a majority shareholder. The company is involved in the project and offers extensive support, however, it does not have a contractual right to the project. Gold Fields’ rights include the maintenance of its shareholding or equity position in future financings.
Chakana Copper’s Chairman, Doug Silver, is known for creating competitive tension in the industry and is credited with closing over 300 deals in the mining space. The company plans to continue delivering results at the Soledad Project. The company’s operations have gained attention from 2 of the top 7 largest gold producers in the world, namely Barrick Gold Corp. as the underlying concession owner on the south side of the project where Chakana has an option agreement, and Gold Fields as a shareholder.
Demonstrating Scale
According to Chakana Copper, the company has multiple financing options which are facilitated by the Chairman, Doug Silver's experience. The company now has a resource and is looking to evaluate all available options in a competitive capital market environment. In the end, the company will make a decision that is in the best interest of its shareholders while focusing on the best outcome for the project.
As the company has demonstrated the potential for the breccia pipes, it is now looking to test targets and tag other breccias to showcase the scale of the inventory. The company currently has 7 breccia pipes out of the 110 targets. It has tested 16 targets so far and is focusing on bigger breccia pipes. Since the breccia pipes are open at depth, the potential resource for each pipe can potentially be doubled at depth. Additionally, as the company continues to test more targets, it can double the number of high-prospect breccia pipes. This essentially can quadruple the existing 620,000oz gold equivalent ounces, leading to a 2.4Moz potential resource.
Chakana Copper is confident that this project has a multi-million ounce potential in terms of gold equivalent ounces. It anticipates that the project footprint will lead to a tier 1 asset. As the company has a much better understanding of the project, it expects that future advances will be significantly faster.
Guidance Metrics
Chakana Copper is looking to acquire project financing in Q1, 2022. It plans to start drill operation by mid-May, once the rainy season declines. This year, the company is looking to drill test 20 brand new targets at the fully-permitted north side of the Soledad project. It is looking to drill a total of 10,000m with 500m allocated to each of the 20 targets. The company’s goal is to have 8-10 new discoveries by the end of this year while advancing its knowledge of the deposit in terms of mineralogy, metallurgy, and engineering studies.
The company is also working towards gaining the permit at the south side of the property, which is expected this year. Once the permit is in place, the company plans to test 20 new targets on the south end of the property in 2023.
