Transcript: Marimaca Copper (MARI) - Things Just Got a Whole Lot Bigger

Morgan Leighton
October 19, 2021

Marimaca Copper is an exciting TSX-listed copper company which is developing the company’s flagship asset, the Marimaca Copper Project in Chile’s Antofagasta region. It is the only copper discovery globally in the last five years and is a low risk project, with substantial exploration potential.

Marimaca Copper has released an announcement showing large high grade extensions below the Marimaca Oxide Deposit. These results from the extensional drilling campaign at the Marimaca Oxide Deposit will change project dynamics significantly.

Following this press release, Marimaca Copper is planning to delay the forthcoming feasibility study as the company starts to plan in-fill drilling. The aim is to expand the resource which could be captured in an updated open pit to show the biggest scale possible with good mine life in the feasibility study. Marimaca Copper plans to release the updated resource by the end of Q1, 2022 and then will start work on the feasibility study.

The Marimaca Copper project is unique in that it has a low capital cost requirement and very competitive cash costs with outstanding returns on invested capital metrics. The project is low risk and could become a mine in a relatively short timeline as it has a clear path to development.

We Discuss:

0:00 – Company Overview

00:19 – Recent Progress, Grades & Feasibility Study

03:09 – Exploration Targets, Company Charts & Presentation

06:28 – Copper Company Future & Recommendations

10:51 – Outro

Hayden Locke: Hi, I’m Hayden Locke, I’m the President of Marimaca Copper. We’re developing the Marimaca oxide project in northern Chile. It's a very unique development stage Copper project, industry leading low capital cost, very competitive cash costs and really outstanding return on invested capital metrics.

Matthew Gordon: Hayden good to speak to you again, we only spoke a month ago, but pretty exciting headline came out this morning. I couldn't resist picking up the phone, how are you and you must be quite pleased with yourself?

Hayden Locke: Yeah, we’re really pleased. I think, I’m somewhat surprised, you are always happy when you're drilling where you think there's going to be mineralization to get pleasant surprise of broader widths and higher-grades than you were expecting. And so we're very excited about those drill results and what they potentially mean for the Marimaca project and the potential for us to change the scale. And I guess I addressed that one weakness that I've always referred to you, Matt, which is just that it's not the biggest Copper project in the world.

Matthew Gordon: Well, we need to talk about this and maybe talk about some of the numbers on, because that was the one criticism I had early days here. The intervals are large, they are well above average grade, high-grade in the context of Copper. It changes the dynamic of the economics significantly. What does that mean for the Feasibility Study, are you going to delay it?

Hayden Locke: Yeah, we're absolutely going to delay it. And I think the reason that we are, is because we have a view just eyeballing this, that this should be captured in an updated open-pit, we’ve obviously got some work to do to make sure that that's the case. But then we would ideally go straight into infill drilling and trying to get a resource, which would then be captured in an updated open-pit. Obviously, we would want to have the biggest scale project that we can to take into that Feasibility Study and based on these results, we see this as an important part of ensuring that we have that decent mine life at a potentially increased scale for the project.

Matthew Gordon: What does that actually mean? What does it convert to in terms of dollars, they're going to need to spend, how much infill drilling you need to do, and how long does that delay the Feasibility Study for?

Hayden Locke: So we haven't quantified yet how much drilling needs to be done there but the rough back of the envelope, we would target getting this into an Indicated category, which would require a 50 by 50m drill spacing. There's quite a few re-entry holes that we can go into there, but call it somewhere between 15 and 20,000m of drilling, that puts it somewhere in the area of $4M to $6M for that portion of it. I mean, these are very rough numbers, back of the envelope. We are going to continue to move the other aspects of the project forward so we're going to infill drill the mine, we're going to take the Inferred resource that's there up to the Indicated category in preparation for us kicking off that Feasibility Study. So we've got a lot of drilling to do in the next probably 4 or 5 months but I would be hoping that we can sort of have largely addressed this by the end of Q1 next year, going into Q2, and then that would be a logical point for us to start the Feasibility Study once we once we actually have this updated resource in our hands.

Matthew Gordon: Okay, well, while you've got the back of the envelope, what does that potentially mean, give me a range in terms of what you would like to be able to announce in terms of the resource and the potential scale of this?

Hayden Locke: Well, look, we are going to put out some exploration targets. So I won't say anything about it yet. We're doing that work internally and obviously Sergio is a very diligent geologist and so he wants to make sure that he's confident in the numbers that we put out. But we will put out an announcement to try and quantify these because we think it's important that the investors know why we're going to be spending more money on this and we've got to have an objective in mind. And I think those exploration targets, which are not resources, but we'll be able to quantify the size of the prize and the reason that we'll be doing more work on it. So I think watch this space, we'll put that out at some point in the next month or two once we've done this internal work to make sure that it actually will be captured in an updated open-pit.

Matthew Gordon: Can you give some sort of sense of how you're going to go about doing this? I saw a couple of charts in the announcement, are you able to maybe just talk us through what the significance of you know, why the charts are there, and more importantly the path forward as you envision it today?

Hayden Locke: Yeah, so look, I'll show you the diagrams that we put in the announcement, I love to share my screen. So really, we're focused on this sort of central southern area of the Marimaca oxide deposit. This red dotted line is the current pit outline. As you see, we've actually expanded the scale of the lower-grade halo around this model. There is a lot of material around here that we have the view will be at some point captured in some sort of mine plan in the future. But really, this is the area that we're going to be focusing on in that, analysis and sort of infill program assuming that we get confidence that this will be captured in an updated resource estimate. There is quite a lot of drilling to be done and quite a lot of work on the Met side to be done in order to get us to those high levels of confidence. So, a big work program coming up and I think, fortunately, we are fully funded for all of this work. So there's no issues with budget, we just got to make sure we spend it wisely.

Matthew Gordon: Okay and what was the other diagram?

Hayden Locke: Look, we showed a couple of sections just to really give an idea of how important these drill holes are, and why we're so excited about them. Because what you see here is this is the outline of the PEA open-pit and in this sort of brown orangey colour here is the extension, drill holes and in this one, we're hitting 80m at nearly 0.8%. But as you see, it's sort of 2/3rds of it is directly below the open pit but if you see this orange dotted line that is the previously interpreted a top of the sulphides and anything that was interpreted to be sulphides wouldn't have been captured in our previous resource. Now, what this drill hole shows us is a lot of this area that was previously defined as sulphide is now coming out as a mixed leachable material. And so, obviously work to be done, but just logically and eyeballing this, you would expect all of this to be captured in and updated so that's why we're so excited about it. We think it's really potentially high value rock for us and so we definitely want to spend the money to quantify how important it's going to be.

Matthew Gordon: It's interesting times in terms of the market, at the moment. We've had a bunch of Copper companies come on over a certain size small, not quite clear about how they kind of wind their way forward. I think, potentially, depending what you come back after with this infill program and with a sense of the scale here, you could start to differentiate yourself a little bit from those guys in what is a really positive bull environment for Copper. And in 12-months, we've not seen a story that looks capable of advancing meaningfully at scale and the markets well, obviously market is a little bit confused at the moment with investing in mining. But how do you see the future for Copper companies going forward? I mean, we talked about needing all the Copper we can find, but how do you move from discovery through to production or exploration through to production? Because no one seems to be able to tell that story well, at the moment?

Hayden Locke: Yeah, look, I think this project is very, very unique in the Copper development space. I mean, I constantly get this feedback from people who say, when we screened the industry, you screen incredibly favourably on just about every metric. I've said it multiple times with you, Matt, on your show that we are very low capital cost as a result of much lower financing risk than many of these big projects that require multiple billions of capital costs and therefore need a strategic partner in order to move the project forward, we don't need that. We know that we can finance this ourselves so we're unique on that perspective. Our location and the low cost of range in Chile means that our execution risk on all fronts is significantly lower than many of the other common development peers that you'll see. And so it really is a very unique project, in the sense that it can be a mine in a relatively short timeline. And as we know, the typical timelines from discovery to development can be 20-years. In this case, we have a very clear path what we need to do is this fine, a little bit of work to really lock down what scale of development we would like to build in the future. And then we can do the Feasibility Study based on that so with a much shorter development timeline, I think is the real unique selling point for this project.

Matthew Gordon: What do you mean by self-financed? Because obviously, you're going to need to raise some capital, but are you kind of sensing or you've having conversations which suggests that institutions are very keen to invest in Copper projects with the right economics but just no one's there at the moment, because we get requests all the time, recommendations for Copper companies.

Hayden Locke: Yeah, well, I think if you look at it, for many Copper companies, especially those with big porphyry developments, amazing big porphyry developments, but market caps of say $200M. It is it is a real stretch to believe that you can finance a billion dollar equity check from a $200M market cap. I mean, it can be done but it's very challenging. The dilution for your current shareholders is enormous. Ours is obviously the complete opposite of that we have a market cap of somewhere around $400M and we have an equity cheque, we believe of somewhere between $80M and $120M. So it's not a big amount of our company that we will be selling in order to finance this. We know that there's debt available, because there's a lot of groups that are approaching us to talk about this project. The metrics, when we run them internally show that this is very easily debt financeable. And we know that there are a lot of people who want exposure to Copper and they're finding it quite hard to find areas to play in. I think the obvious, I guess data point for how much interest there is in Copper is the Sandfire transaction on MATSA, where they raised $1.2Bn in equity. And it was from all accounts three times oversubscribed so there's definitely money available. I think the development stories that are out there have much longer timelines. And so the real appetite for that risk is still not as great as it is in the sort of producer landscape. But if we can present something that's going to go into production, where we're very confident that there'll be money available for us, meaning that we don't need a strategic partner, which is the real, I think trump card for us as a story.

To find out more, go to the Marimaca Copper website