ATEX Resources (ATX) - Blue Chip Copper Team Reboot in Chile

ATEX Resources is a Latin America-focused exploration company. ATEX’s flagship property is the Valeriano copper-gold project where it recently reported initial mineral resources for the near-surface oxide gold deposit as well as for the large copper-gold porphyry which underlies the oxide gold deposit. While the company’s immediate focus is on expanding the current oxide gold resource with the goal of commencing economic studies in the near future, the company is committed to realising the full potential of the Valeriano copper-gold porphyry. The company has also initiated a low-cost generative exploration program in northern Chile for high sulphidation precious metal deposits and has staked a number of properties for review.

Matt Gordon caught up with Raymond Jannas, CEO, and Director, ATEX Resources. Mr. Jannas has over 35 years of experience in mining geology, exploration, and business development in Latin America. He headed exploration teams that led to the discovery of Pascua-Lama, El Morro, and Johanna in Chile, and the Choco 10 Gold Deposit in Venezuela along with the acquisition of Cerro Corona in Peru. He has held senior positions with Gold Fields, Barrick Gold, LAC Minerals, Hochschild Mining, Metallica Resources, St. Joe Minerals, Rosario Resources, and Minera Fuego. He holds a Ph.D. from Harvard University. 

Company Overview

ATEX Resources is a Latin America-focused exploration company managed by a team of dedicated professionals with the goal of discovering economically viable mineral deposits through a disciplined approach to exploration. The company was founded in 2019 and is headquartered in Toronto, Canada. It is listed on the Toronto Stock Exchange (TSX-V: ATX). 

Company History

Raymond Jannas, ATEX Resources’ CEO and Director is a Chilean geologist. The company was formed in 2019 and Raymond joined as CEO in June 2020. The main focus of the company is the exploration of copper and gold in Chile. Its flagship asset is a Valeriano project with porphyry copper in a new belt. Following his departure from Barrick Gold, Mr. Jannas worked with Craig Nelsen, Chairman, ATEX Resources. They are responsible for discovering the La Fortuna Copper porphyry in Chile. 

Mr. Jannas has a history with the Valeriano project. During his time with Hochschild Mining PLC, Raymond, along with Craig sought a company-making asset, a single deposit that could produce similar output to all the mines in Hochschild. The Valeriano project was chosen as a potential target. Before Raymond left Hochschild, a deal was made on this project. The first drill holes at Valeriano discovered the porphyry at depth. 

During this time, the company lacked funds to advance the project. As a result, the management focused on developing a growth strategy. The strategy focused on a small gold resource that occurred 100m from the surface. The company focused on this resource as it had a significant drilling history, with up to 27,000m drilled. Half of this drill was reverse circulation and was carried out at a very shallow depth. 

Following this, the company hired SRK Consulting to develop a resource on both the near-surface copper and the deeper porphyry. During this time, the copper market had not yet experienced a boom. The company showcased the resource to raise funds which led to the interest in the gold side of the project back in early 2021. At this time, however, the company wasn’t able to drill enough holes as the drill rig broke down during the winter season. 

As a result, the drill program was incomplete with only 3,000m drilled. As the resource was in the inferred category,  the company did not have the QA/QC (Quality Assurance and Quality Control) of the asset on the pre-existing drilling. The company drilled a few infill holes along with twin holes to prove the asset’s potential. During this time, the company discovered a new area of interest called the GBR (Grey Banded Vein) zone, which contained gold. The company was at the last toll when its rig broke down. The rig was later employed at the gold zone but there was no follow-up. 

As a result, the company had a 600,000oz resource with under 0.6g/t gold. The company was aware of the porphyry where Hochschild previously drilled 16 holes. Here, 3 holes cut the porphyry system with 2 holes featuring porphyries in them and one on the wall rock number 9. Hole 14 gave the best results with 0.73% copper equivalent over 1,100m. The company used the 3 drill holes that were barely cut to put together a 300Mt resource with 0.77 copper equivalent. 

It was found that the 3 drill holes were along a section that had an extension. During this time, copper started picking up in the market and the company started the story back again on the copper side. During this promotional period, the company spoke with Pierre Lassonde who took interest in the 3 drill holes. These holes were each at a 1,000m depth and featured 0.5%, 0.56% and 0.64% copper equivalent grades. Several other investors took interest in the project, leading to an CAD$8M capital raise. The company is currently utilising the capital for deep drilling and exploration. It has plans to present 2 drill holes that are going to commence in the next couple of days. 

Historic Drill Data

When ATEX Resources took on the project, it put together a resource first. At the same time, the company started re-logging the historic drill data. Notably, this asset was previously drilled out in the late 90s by Phelps Dodge. At this time, the drill operation was focused on copper, but it also led to the discovery of gold. This was followed up by Barrick Gold and picked up by Hochschild in 2011. 

The latter started drilling on the porphyry side with discoveries in 2013 and 2014, leading to the generation of significant data. As ATEX Resources was building the resource model, it received help from in-house geologists that had previously been involved with the El Encierro project, located immediately north of the Valeriano project. The El Encierro project is a 51-49 joint venture between Antofagasta PLC and Barrick Gold. 

The geologists helped the company in the logging process. Based on the observations at the El Encierro project, comparisons were made that helped the company in the development of a project model. ATEX Resources understood that this would be a tough project to sell as it was originally thought to be too deep and lower grade. As the company gained a better insight into the project, it generated more interest and the project started to grow. The company understood that in conjunction with the El Encierro project, the deposit had a district-scale potential.

Over time, the company realised that though the porphyry may be deep, it’s not low grade and that the grade and size of the deposit will work in favour of making the project work. The company anticipates that the grade will either hold or increase. This is because when the porphyry is cut, very high grades were identified. 

Currently, ATEX Resources has 5 different porphyries that are labelled VP 1 to VP 5. These porphyries are fairly similar in type. VP 1 is the richest, featuring more than 1% copper equivalent, while VP 2 has between 0.75% to 0.1% copper equivalent. The company is currently drilling these porphyries. It anticipates that the type of grades and underground operations will make the project work. As the project is located at the high part of the hill, it has an elevation of 4,100m. Drilling down, the valley goes up to an elevation of 3,600m. This allows surface access through tunnels right into the system. 

Notably, the project is based on a hill with 2 deep valleys on each side. This allows access from either of the two valleys, ensuring that underground operations won’t pose a problem. The company anticipates that this is going to be a high-grade system. 

Underlying Geology

Based on third-party experience, the El Encierro project seems to carry similar grades as the Valeriano project, paving the way for a significant, large district in the future. The differentiating factor between this district and others in Chile is that the former has rhyolitic as the host rock. 

Rhyolitic rock isn’t a very reactive rock, and as a result, the mineralizing fluids do not react and drop into the wall rock. Instead, the mineralization stays very close to the porphyries, holding on to the grade. The Filo del Sol is a deposit with similar geology that lies on the same belt between El Indio and Maricunga belt. This deposit has seen some tremendous holes lately where high-sulphidation type mineralization was found within the porphyry system. 

During the porphyry evolution, chalcopyrite, bornite type copper mineralization is found at depth, while the upper part of the deposit hosts high sulphidation. The chalcocite and bornite mineralization are richer and have the possibility to host arsenic-bearing minerals in the upper part. This type of mineralization is often found to have the best grades. 

ATEX Resources has cut 2 holes on holes 14 and 16 that were known to feature high sulphide mineralization. This mineralization was found to be close to the surface. The company anticipates that it may have strong mineralization both at surface and at depth. 

Since the deposit only has 3 holes along one of the sections, the company is yet to determine the extension. As part of the company’s drill program, it is drilling hole 14, the best hole to the northeast. The company anticipates that the mineralization is extending in the north, north-east direction. It is expected that the extensions are 200m to the north and 200m to the south. 

The company recently completed a geophysical survey that shows that the deposit has a lot of potential further south. This is because the rock is highly non-resistible conductive rock and has a pre-existing charge-ability. It is looking to drill an additional hole 400m south. This will help the company in determining the extent of the high grades. 

Drill Operations

ATEX Resources is currently targeting the 3 original drill holes that are present in the longer section. These holes cut the porphyry system. The company is aware that the mineralization occurs at depth. It is targeting the north and south regions of this high-grade area to identify the extensions. The company has designed a 6,000m drill program where each hole will be drilled at a 2,000m depth. The drilling is targeted along the strike length of the high-grade system. This would enable the company to expand the high-grade area of the deposit and offer better insight into the system’s layout. 

This drill program is projected to cost around $1M for each hole, excluding the cab mobilisation expenses. The company is focused on running the drill program while following the covid protocols outlined by the Chilean government. 

The drilling will be carried out at depth, which makes it a significantly expensive program. The project is based in north-central Chile, close to the Argentinian border. It is located near the town of Vallenar which is 650km north of Santiago. The deposit’s location makes logistics complicated. As a result, the drilling costs are very high and the company would need to spend the entirety of the raised capital on drilling these 3 holes. 

On the porphyry side, the company is expecting a resource of at least 1Bn tonnes with significant grades. The current resource has a 0.77% copper equivalent and the company is chasing higher grades. The deposit is projected to have 2/3 copper and 1/3 gold equivalent resource. It plans to step out of the drill holes at 200m, 400m, and 600m intervals along the strike length. 

Based on the geophysics conducted on the entire property, the company found an interesting anomaly about 3km in diameter sub-circular. It anticipates that this anomaly has significant growth potential. It plans to bring this resource into the M&I (Measured and Indicated) category. It is expected that the indicated reserve might span across 70 holes at a depth of around 2,000m. This would have a projected drill cost of around $70M. The company anticipates that drilling the 3 holes at depth will provide an idea of the deposit’s general geometry. 

ATEX Resources anticipates that the drill program would enable it to demonstrate the deposit’s size and grade. It is looking to find a high-sulphidation area similar to Filo del Sol that features the same geology. In fact, the highest sulphidation discovery was found at the Filo del Sol project recently, taking the project evaluation from hundreds of millions of dollars to a billion dollars. 

ATEX Resources’ 3 drill holes have already hit mineralization. The company expects to find additional holes with similar or better mineralization. So far, the general grades found here are higher than all the average grades that were found in other porphyries in recent times. The company expects that the results of the drill program will make it an exciting project for investors. 

Based on these results, the company expects its share price to grow, which in turn, would allow it to raise capital through equity. Notably, the Valeriano project has a 2% NSR (Net Smelter Return) to the owner along with an additional 0.5% NSR, and a 10% Hochschild loan.

The $8.5M (CAD$8M) capital raised by ATEX Resources in December 2021 was carried out at $12.5c. Since then, the company has been trading higher and has received increased interest from the market. In addition, the company also has warrants at around $0.17c-$0.18c which are expected to bring in an additional $11M. 

Notably, post the capital raise, the warrants came in consistently at $0.20c-$0.30c which has provided additional funds for the company. A successful drill program is expected to bring in an additional $10M-$11M in capital. The warrants are owned in part by the company and its management group along with other entities. 

Targets 2022 and Beyond

In ideal weather conditions, each of the 3 holes is expected to take 2.5 months to drill. Since the project is based on a high elevation area in Chile, the ideal time to explore is between October and April. 

The company initiated the drill program in January this year. It is currently looking to complete drilling at the first hole by March-end or early April. The company plans to initiate drilling on the second and third holes by next week. The weather conditions will dictate the progress of the drill program. The company is hoping to drill all 3 holes on time, otherwise, it would need to pause the program and resume drilling next season. 

Notably, the drill season is expected to end by mid-May 2022. The assay turnaround time from the labs is around 70 days. The company is taking a very strict and technical approach to ensure the best results, for a highly-detailed QA/QC. It is also carrying out geotechnical logging to understand all the aspects of the porphyry. As a result, the sampling is taking longer to be sent out for testing. 

This process will be followed by core cutting, another time-consuming process. The first drill results are expected in the next 2 months. These results will provide significant detail on the deposit’s core. Based on the results, the company will look toward raising additional capital in May 2022.

ATEX Resources plans to start the next drill season by October. This would provide 6-7 months of drilling. The company is currently negotiating a camp for accommodation, to significantly cut down on the mobilisation times. The negotiations are being carried out with the surface owners to allow for an extended stay. 

Following the December 2021 capital raise, ATEX Resources’ Management holds 6% of the company, while Pierre Lassonde is the main shareholder with a 10% stake. 

To find out more, go to the ATEX Resources website