Regulus Resources (REG) - Copper Explorer Re-Igniting Investor Story

This is a copper story that has been journeying through a difficult period, but is there now a light at the end of the tunnel?

Regulus Resources is a Canadian exploration company that was formed in December 2010. It is led by the former management team of Antares Minerals (TSX-V: AMN): John E. Black, Dr. Kevin B. Heather and Mark Wayne.

Regulus Resources was originally conceived via a spin-out of the Rio Grande Copper Gold project in Argentina when Antares Minerals was sold to First Quantum Minerals for c. C$650M.

Today, the company's primary focus is on the development of its flagship 100%-owned AntaKori project in Northern Peru. Peru is an interesting mining jurisdiction, but the permitting procedures are some of the more favourable in Latin America. Regulus Resources drilled AntaKori continuously throughout 2018, with the Phase 1 drill programme totalling 33 diamond drill holes: 20,332m. Once this programme concluded in Octobter 2018, it was time for Phase 2. This phase was intended to better characterise and increase the size of the existing resource at AntaKori, culminating in an updated NI 43-101 resource estimate released on the 1st March, 2019:

Resource CategoryTonnes
(millions)Cu
(%)Au
(g/t)Ag
(g/t)CuEq
(%)Cu
(Blbs)  Au
(Moz)     Ag
(Moz)     CuEq
(Blbs)     AuEq
(Moz)     Indicated2500.480.297.50.742.62.3614.18.8Inferred2670.410.267.80.662.42.2673.98.2

This is a resource of around 500Mt of a "quite attractive" copper-gold grade. It is already large, but it is part of a district-scale ore body spread across multiple properties. Black hopes to oversee a consolidation of the district. Regulus currently owns around a third of the contained sulfide metals in the project. With its exploration permit in hand, Regulus Resources will be heading to the north of the land package, on the hunt for high-grade copper-gold.

In October 2018, the company also span out its Rio Grande project, Aguas Calientes project and remaining Argentinian assets to form a new mineral exploration vessel, Aldebaran Resources Inc. (TSX-V: ALDE). We have interview Alderberan before and you might want to check it out for a point of contact.

The aim now is to deliver a PEA by 2021 for AntaKori, leveraging rising copper prices that have finally broken past the US$3/lbs barrier for the first time since June 2018. Regulus Resources' share price has been steadily and consistently falling for the last 2.5-years, but there has been a mild rally since copper has received its boost. The boost is likely derived from industrial demand, with the biggest consumers of copper, China (c. 51%), currently focussing on a relation programme to revitalise its economy post-COVID with major investments in industry, construction and EV infrastructure.

Now copper is back in fashion, Regulus Resources no longer has any excuses. It simply has to deliver; investors will demand it. With the aftershocks of COVID-19 still reverberating, Regulus Resources is not yet back at full steam, but it is getting more workers on the ground by the day.

With around US$5M in the treasury right now, Regulus Resources has ample capital to get a drill programme started and accelerate towards a PEA. Drilling could commence by the end of August, and investors can expect a more transparent timeline to be issued in the coming weeks. The north of the property is the key to unlocking value, and many investors have become involved in this story because they want to see what sort of copper potential it could offer.

Expect another raise by the end of the year/start of next, but hopefully some encouraging, high-grade results from the area to the north will mean that Regulus can raise capital on better terms. Investors will not want to see more dilution before any meaningful accretive value has been added.

With a project that is already "very economically viable" already in hand, it appears to have given Black and his team licence to be a bit more adventurous with his drilling plans. He is targeting a drastic resource expansion at AntaKori, while also gathering data from the north that will perhaps be more sexy to the market.

It is clear that Black is trying to promote this copper turnaround story quite actively right now, and it is little wonder, regardless of its strong core shareholders. These large projects require a lot of drilling and a lot of engineering work to fully de-risk them and source social acceptance in the area. This will involve investment in improving social conditions in the area too. A figure of c. US$20M pa has been touted, which at Regulus' current share price might be very expensive indeed. Hopefully, some "critical" drill data, alongside continually evolving copper market dynamics, can change the picture for the better ahead of any potential financing.

To find out more, go to the Regulus Resources website.