Aldebaran Resources (ALDE) - Copper Resource from Series of Porphyries

Aldebaran Resources is a mineral exploration company that was spun out of Regulus Resources in 2018, and has the same core management team. Aldebaran acquired the Rio Grande copper-gold project located in Salta Province, Argentina from Regulus along with several other early-stage projects in Argentina. Aldebaran also has the right to earn up to an 80% interest in the Altar copper-gold project in San Juan Province, Argentina from Sibanye Stillwater. Altar is the flagship project for the company and hosts a large porphyry copper-gold system with mineralization currently defined in 3 distinct zones. 

We caught up with John Black, CEO of Aldebaran Resources, for the first time since November 2019. It’s a good time to talk about Copper with current copper prices on the rise and the market starting to get excited about copper stories from exploration to production.

Company Overview

Aldebaran Resources is made up of a group of very seasoned explorationists that have a lot of experience in South America. They specialise in identifying large Copper or Copper-Gold projects that haven’t had their full potential revealed and drill them out, de-risk them, show their potential, and then ideally, sell that project to a major mining company. Aldebaran has a core project called Altar, hoping to reveal it’s full potential just as the Copper market is getting interesting.

Progress on Aldebaran Resources 

When we last spoke, Aldebaran Resources was very quiet on the Altar project which extraordinarily has had over 100,000m of drilling. It is known as a very large, but very low-grade deposit and over the past 2 years, they have produced the first geologic map of the project and the first extensive geophysical datasets. This year they have put out a series of press releases to describe that process that will help them recast the resource on the project.

They believe that there is a large, +2.5Bn tonnes of low-grade material, but within it there are distinct zones of much better grade that are much better points to start on in the projects. In the next few months, Aldebaran will put out an updated resource to reveal the better portions of the deposit as they move forward. The Altar project is a Porphyry Copper project, a series of porphyry Copper centres and within each of those centres, there are higher-grade cores.

Business Model Breakdown: Monetization, Financing, & Money Allocation

The skillsets of Aldebaran Resources are in the identification of opportunities followed by exploration to reveal the value of the resource, and after that they will pass the project onto a mining company to develop. It is not enough to simply make a discovery and spend money on exploration alone. The eventual developer will need to know all the technical characteristics of the deposit which extends much beyond the geology in the grades and tonnes. This includes working with local communities, understanding local and national government policies and finding out where the water comes from etc, which is all part of de-risking the project for the eventual developer. Aldebaran Resources works on showing the size and the potential of the project, the economic ability of the project, and de-risking the project to prepare it for going forward. Major companies are comfortable paying reasonably well for an asset like this if they have the confidence that they can develop it in the future.

Aldebaran Resources has grown since we last spoke and has also doubled their share price from CAD$0.31 to CAD$0.62, $0.63 and raised CAD$4.8M in September 2020. 

One of the major costs for the company is the upcoming drilling over the next few years at a cost of CAD$10M - $15M a year. Between drilling, they are also working to lay the pathway to go forward with social programmes for local communities and will have periodic raises to do that. They started at a relatively low market cap last year so didn’t want to raise all that money at one time. There are 2 very large shareholders in the company, with a group called Route One that owns almost 50% of the company and Sibanye Stillwater which owns 20% of the company. They want to be able to raise enough to be able to produce some good results and raise more at increasingly higher prices as they move along.

Interest Growing for Copper: Liquidity & New Investors

People are getting very excited about Copper at the moment and the first response to an increase in Copper prices is that producing companies have more cash. There have been some pretty spectacular gains in pure Copper companies, with a 2 or 3-fold increase over the past year alone. Producing companies have done well on that first wave of copper and that will start to move down the chain to mid-tier producers and then into exploration stories. Smart investors are looking for increased leverage and will be looking at exploration stories that have the potential such as the Aldebaran project.  The 2 big partners in Aldebaran do have pro-rata rights, but they understand that the other shareholders need consideration too.  

Peers & Comps for Low-Grade Bulk Projects: Misconceptions VS Reality

Argentina is not the first country you think of as a major Copper producer, but there are a lot of opportunities for Argentina to put itself on the map with a number of large projects that are partially defined or in the process of being revealed, for development in the Copper space. There are pro-mining provinces and others that are difficult or impossible to work in. Aldebaran Resources is in San Juan province which is one of the better ones and there are 5 large Copper projects in the province in the development stage almost ready to go forward. This is good for the country as international companies will start to pay more attention. 

The Focus: Expectations & Timeline for Data & Results in 2021

The basic datasets are nearly completed which has allowed Aldebaran to really understand the project. They’re missing one key dataset from last year, due to seasonality issues and Covid and weren’t able to complete a deep-looking 3D IPMT survey. It’s a technique that works well to image the targets at depth and is the last missing piece of the datasets and will be completed this year. They’ve completed the geologic models, which form the basis for the resource calculation which they plan to have out towards the end of March. There will be drill data from ongoing exploration with 2 drilling rigs which might extend to a 3rd. The geophysical survey dataset and the resource calculation will come out after which it will be easier to compare to other peer groups that have projects.

By the end of the year, there will be a Resource Update in April, the results from ongoing exploration and plans for an aggressive programme next field season. It is a high-Andes project where work can be carried out from about November to April. One of the neighbouring projects is cutting a new road in at low elevation so Aldebaran is optimistic they can be in by October, possibly next year, to start the drill campaign to test the new targets. Aldebaran also has a couple of other interesting projects, the Rio Grande project, and the Aguas Calientes project, which are in the northern part of the country and they can work on those during that period off-season at Altar. There will also be news flow coming out of those 2 projects as they evaluate the opportunities on how to move them forward.

Altar is the flagship project for Aldebaran and will be the main focus of their work, but the Rio Grande project is also an interesting one. It’s a large Copper-gold system and is immediately adjacent to a mine that’s just being put into production called Lindero. They have a resource defined on the upper portion of the Rio Grande project which is an oxide-Gold resource that’s partially oxidised, which means it could potentially be processed in conjunction with the mineralisation being processed next door. They’ll be exploring some opportunities there to see if they might be able to monetise part of that project in some way or leverage off of that project as they move forward. They are also very interested in exploring the potential for sulphide mineralisation at depth. Aguas Calientes is a really encouraging early-stage precious metal opportunity with a lot of potential and relatively low-cost to explore and will fill the gap when they’re snowed out on the Altar project.

Arsenic Levels: Concerns & Solutions

The Altar project had the stigma of being large but low-grade and also had a stigma of the arsenic associated with it. Many Porphyry-Coppers have Arsenic in some portion of the system. The arsenic is in the upper portion of the system predominantly, but it can be isolated in 2 zones. Now that they have the geologic controls and now understand how it occurs, they can model it so that it stays where it is. The previous approach to modelling was a geostatistical approach that blew the arsenic across boundaries where it naturally doesn’t cross. Much of that arsenic is in what’s called a leach cap, a barren cap over the top of the system and that arsenic no longer enters the equation. There is an upper enriched zone, one of the higher-grade zones that we’re interested in is what’s called a secondary enrichment blanket where Copper has been leached from the upper zone and redeposited and that still has quite a bit of arsenic associated. Good Copper grades, but a bit of arsenic associated with it but because it’s secondary sulphide mineralisation, that mineralisation can be processed by heap leach techniques. The arsenic becomes stabilised as scorodite and doesn’t produce a concentrate. 

If they approach the project as a low-Capex SX-EW opportunity for that upper portion, remove the arsenic portion in that area, the underlying primary mineralisation is much lower in arsenic and much more manageable. They believe the arsenic issue is not as bad as was thought to be overall in the project and this will be shown as they put out the resource.

ESG Considerations & Ensuring Transparency 

ESG is getting into every conversation, especially around the EV thematic. OEMs are demanding that there’s complete transparency, traceability and trackability around the supply of their product in the supply chain. The market and the potential acquirers of the project need to see that Aldebaran Resources has done the fundamental ESG work to set the project up for the future. They don’t always have to execute it but need to demonstrate that there are areas nearby and groups that are interested, and show examples, and set the pathways for the companies going forward. Fundamentally, they need to be working to make sure that the local communities are comfortable with the opportunity and in this part of the central Andes, nobody lives within 10Kms of the project. There is potential to add value with the ESG, or conversely, destroy the value which is why it’s such an important part of this work at the moment.

Aldebaran Resources is well set up and looking ahead to some exciting times over the next few years. The project has always had potential and was just a case of timing it right. We look forward to following the story this year. It will be an interesting year, especially in this Copper environment, to see how they get on.

To find out more, go to Aldebaran Resources' Website