Global Copper Developer Hot Chili Ltd (ASX:HCH, TSXV:HCH, OTC:HHLKF) released their quarterly update for the period ending September 30th, 2023. Highlights include the filing of their Preliminary Economic Assessment for their Costa Fuego Copper Project, unique water rights, drilling program update and the closing of the US$15 million investment agreement with Osisko Gold Royalties.
Highlights for the Quarter
- The filing of the NI 43-101 Technical Report for the Costa Fuego Copper-Gold
Project in Chile showing robust economics. At an 8% discount rate Costa Fuego has a post tax Net Present Value of $1.10 billion, and an internal rate of return of 21%. - Unique access to water rights have cut $1 billion off startup capital for the project making Costa Fuego one of the most efficient copper projects under development in the world.
Source: Hot Chili PEA Slide Deck • Initiated a study of how the company can best monetize its water assets. Hot Chili’s license covers extraction of 2,000 litres per second of water, while only 600 litres per second is expected to be used at Costa Fuego. The license is expandable and transferrable opening up the potential for Hot Chili to become a large water supplier in the Huasco Valley of Chile.
- The company sees a path to potentially funding a large portion of the startup capital needed for Costa Fuego, estimated at a modest $1.05 billion, by monetizing unused water rights.
- Development and exploration drilling recommenced in July and is progressing at a rate of 6,500 meters per quarter currently, out of a total program of 30,000 meters. Hot Chili will be using this data to provide a mineral resource update by the end of the year.
- Signed a gold royalty agreement in late July with Osisko Gold Royalties Ltd, which raised US$15 million of non-dilutive financing and is an endorsement for the validity of the project from a premier royalty investor.
- Hot Chili has a cash position of A$21.8 million as of September 30th with no debt, which would fund over 2.5 years of operational expenses based on last quarter’s cashflow spending rate.
Hot Chili Costa Del Fuego Copper Project Roadmap
Further Regional Consolidation
In late August, the Hot Chili executed a binding letter of intent (“LOI”) with Bastion Minerals Limited (ASX: BMO) (“Bastion”) for the grant to Hot Chili of an Option to acquire 100% of Bastion’s Cometa Project in Chile (“Cometa”), located near Costa Fuego (see announcement dated 28th August).
Cometa consists of exploration and mining concessions covering an area of approximately 56km2, located almost 15km SE of Costa Fuego’s planned operating centre and contiguous with Hot Chili’s landholdings in the region.
The material terms of the LOI are as follows:
• Exclusivity period of 60 days for Hot Chili to conduct due diligence and for Hot Chili’s subsidiary Sociedad Minera La Frontera SpA (“Frontera”) to enter into a definitive Option agreement with Bastion’s subsidiary SCM Cornet Constelación, the holder of a 100% interest in the concessions comprising Cometa, for the grant to Frontera of an option to acquire a 100% interest in the Cometa concessions (“Option”).
• Non-refundable cash payment of US$100,000 to Bastion upon grant of the Option.
• Non-refundable cash payment of US$200,000 within 12 months from the grant of the Option to keep the Option in good standing.
• Option may be exercised within 30 months of the date of grant.
If the Option is exercised, the consideration payable to Bastion to purchase the Cometa
concessions is:
- US$2,400,000 if the Option is exercised by Hot Chili within 18 months from the date of grant of the Option; or
- US$3,000,000 if the Option is exercised by Hot Chili within 30 months from the date of grant of the Option. Hot Chili may elect to satisfy the purchase consideration in cash (100%), or in cash (50%) and ordinary shares of Hot Chili (50%) issued at a price per share equal to the 15-day VWAP at the date of exercise of the Option, subject to applicable regulatory approvals, including the approval of the TSX Venture Exchange (“TSXV”).
The Company has recently agreed to an extension of the Exclusivity period by 45 days to allow for completion of due diligence in advance of exercise of the Option, expected by mid-December 2023. Further opportunities are being pursued to expand the scale of the Costa Fuego copper hub, with multiple discussions underway on prospective exploration targets in the area
Exploration Drilling Update at Costa Fuego
Drilling re-commenced at Costa Fuego in late July 2023 with one Reverse Circulation (RC) drill rig in operation for the majority of the quarter.
In addition, four diamond drill holes were completed over a four-week period (two completed during the quarter). Drilling expenditure is being prudently managed to maximize the impact of invested dollars, with only one RC drill rig planned to be operating for the remainder of this year.
A total of 26 holes for 6,442m of drilling was completed during the quarter with numerous low-grade significant intersections recorded.
Tables 1 summarises details of drilling undertaken during the quarter and significant drill results received to date.
Drilling initially focused on satisfying the Company’s remaining 3,000m drill commitment with Antofagasta Minerals (see announcement dated 28th November 2022) to acquire key leases lying along the western extension of Cortadera.
In addition, numerous drill holes have been completed across extensional targets to the Cortadera resource, peripheral to Cuerpo 2 and Cuerpo 3.
Drill holes CRP0220 and CRP0222 have confirmed extensions to the south and east of Cuerpo 2, and drill hole CRP0217D has confirmed further extensions to the east at Cuerpo 3.
Cortadera Drill Target Map
These new results will add to other potential additions to the Cortadera Mineral Resource Estimate from drilling undertaken since March 2022. Further drill results from drilling undertaken during the quarter at Cortadera are pending.
Following completion of a limited hydrogeology drilling programme (11 RC holes for 557m) during October, RC drilling operations commenced at the large-scale Corroteo exploration target, located approximately 5km SE of Cortadera.
A total of seven deep RC holes for approximately 2,000m are planned in the current firstpass exploration drill programme at Corroteo.
Corroteo Asset Map
Corroteo features a surface alteration footprint measuring approximately 2km in strike length by 500m in width and has never previously been drilled.
Detailed mapping and surface geochemical programmes confirm some similarities to the deposit style and footprint of the Company’s Productora copper-gold resource. Corroteo is one of several exploration targets being advanced toward first drill testing over the coming year.
Costa Fuego has a current measured, indicated and inferred copper resource of 7.4 billion pounds grading between 0.30% and 0.38% copper.
Costa Fuego Mineral Resource as of March 2022
The project has a planned mine life of 16 years and is expected to produce US$3.28 billion of free cashflow over that period.
To read the full quarterly report please visit https://www.hotchili.net.au/investors/reports/
About Hot Chili Ltd
Hot Chili Ltd (ASX/TSXV: HCH, OTCQX: HHLKF) is well positioned to benefit from the looming structural shortfall in the most critical commodity of them all – copper.
The Company aims to build shareholder value through the growth and development of its high-quality Costa Fuego copper project, located in a low elevation and accessible region of northern Chile.
Costa Fuego is rated by S&P Global Market Intelligence (2022) as one of the top 10 “low risk” undeveloped copper projects globally.
With substantial mineral resources already defined and an active drill program testing new targets underway, Hot Chili provides substantial leverage to the copper price due to the size, quality and low economic hurdle location of its resource base.
Costa Fuego has an Indicated Resource of 2.8 Mt Copper, 2.6 Moz Gold and 67 Kt of Molybdenum (within 725Mt) and Inferred Resource of 0.6 Mt Copper, 0.4 Moz Gold and 13 Kt Molybdenum (within 202 Mt).
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