Hot Chili Increases Copper Footprint by 25% with New Land Acquisition

Hot Chili Limited (ASX: HCH) (TSXV: HCH) (OTCQX: HHLKF) announced another significant step in the Company’s consolidation efforts at its Costa Fuego Copper-Gold Project (“Costa Fuego” or “the Project”) in the coastal range of the Atacama Region, Chile.

The Company has secured an option to acquire concessions known as the “Domeyko cluster” or “Domeyko” within the historical Domekyo copper-gold mining centre, located approximately 30km south of Hot Chili’s planned central processing location (at Productora) for Costa Fuego.

Highlights

  • Domeyko is the largest land consolidation undertaken by Hot Chili since Cortadera was added to Costa Fuego in 2019.
  • Domeyko covers an area of 141 km2 and represents a 25% lift in Hot Chili’s total landholding area at Costa Fuego.
  • Domeyko hosts several significant historical copper-gold mines with limited exploration
  • Pre Feasibility Study on Costa Fuego expected before year end.

The Domeyko landholding comprises several new tenement applications in addition to an Option Agreement to acquire 100% interests in several key tenements covering a highly prospective, 10km long copper-gold mineralization corridor.

Further discussions for consolidation are underway on additional advanced opportunities within the area.

Figure 1: Domeyko Consolidation Signficantly Boosts Exploration Pipeline

The Domeyko mining centre hosts several significant historical copper-gold mines, which were principally exploited for oxide mineralization with very limited exploration undertaken for copper sulphide mineralization within the area.

Both porphyry and structurally hosted styles of mineralization are present.

Historical exploration datasets are being compiled and reviewed across several highly prospective targets previously identified but never drill tested. The Company’s exploration team have commenced site visits and regional exploration campaigns (mapping and surface geochemistry) are planned to commence in the coming weeks.

This new landholding significantly strengthens the Company’s pipeline of opportunities for the discovery of new mineral resources to further enhance the potential scale of Costa Fuego.

Costa Fuego Copper-Gold Project – Near-Term, Meaningful, Copper Supply

The Company’s recently published technical report entitled “Costa Fuego Copper Project NI 43–101 Technical Report Mineral Resource Estimate Update” and dated 8 April 2024 with an effective date of February 26, 2024 1 (“the Technical Report”) confirms Costa Fuego as a low-risk, long life copper project benefiting from a low capital intensity per pound of copper produced and a high annual copper equivalent2 metal production profile of over 100 kt for a 16-year mine life, including 95 kt copper and 49 koz gold during primary production (first 14 years) at C1 Cash Cost3 of US$1.33/lb (estimated net of by-product credits).

Hot Chili is on-track to deliver of the Costa Fuego Pre-Feasibility Study (“PFS”) in 2H 2024 and is one of a limited number of globally significant copper developments, not owned by a major mining company, that could deliver meaningful new copper supply this decade.

Material Terms of the Executed Domeyko Option Agreement

• Hot Chili’s subsidiary Sociedad Minera La Frontera Spa (“La Frontera”), has executed an Option Agreement (“Option Agreement”) with a private Chilean syndicate holding 100% interests in 12 Exploration and 14 Exploitation concessions for the grant to Frontera of an option to acquire a 100% interest in the concessions (“Domeyko Option” or “Option”).

• The other parties to the Option Agreement are Sociedad Legal Minera Unes Una de la Quebrada San Antonio (SLMQ); Compania Minera Algarrobo Limitada) (“CMAL”) and John Arturo Hunter Flores (“JHF”), collectively “Owners”.

• The Option Agreement also includes any water rights that may correspond to the properties, mining easements and rights of any kind over the corresponding surface lands and all other rights and permits that are legally annexed to the properties.

¹ The Technical Report is preliminary in nature and includes 3% inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the economics in the Technical Report will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability. See Page 6 for additional cautionary language.
²CuEq considers assumed commodity prices and average metallurgical recoveries from testwork. See page 9 for complete mineral resource disclosure of Costa Fuego.
³See page 7 for full non-IFRS measures discussion.

• The total price to acquire the Domeyko Project if the Option is exercised is US$4,000,000 payable as follows:

    • Non-refundable cash payment of US$120,000 within 60 days of execution of the Option Agreement, subject to due diligence by La Frontera
    • Non-refundable cash payment of US$100,000 within 12 months of the date of the Option Agreement to maintain the Option
    • Non-refundable cash payment of US$100,000 within 24 months of the date of the Option Agreement to maintain the Option
    • Non-refundable cash payment of US$200,000 within 36 months of the date of the Option Agreement to maintain the Option
    • Option may be exercised within 48 months of the date of the Option Agreement by a final non-refundable cash payment of US$3,480,000
  • La Frontera is required to pay all annual patent costs for the Domeyko concessions for the 2024 period.
  • The Owners will also be granted a 1% NSR royalty over the Option concessions on exercise of the Domeyko Option. La Frontera will have a right of first refusal to buy-back the NSR royalty.

The Company looks forward to providing further updates on drilling, exploration and development study workstreams across the Company’s Costa Fuego copper-gold project. Further updates on progress of the Company’s regional water supply Business Case Study are also expected.

Figure 2. Location of the Domeyko landholding in relation to third party, significant copper-gold mines, 30km south of Costa Fuego’s planned central processing

Figure 3. Location of the Domeyko landholding in relation to initial exploration targets

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Duane Hope is a Partner at Capital 10X, he brings over 15 years of communications and research experience to the firm. His research and writing have appeared in publications for North American, European and Asian audiences.

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