Latin Resources (ASX:LRS) is set to begin drilling imminently at its Ilo Este copper porphyry project in Peru, where a joint venture with a local explorer is targeting a region known to host 125 billion pounds of contained copper.
Camp construction is complete and contractors are finalising accesses and drilling platforms, which will allow two drill rigs already mobilised on site to begin the much anticipated campaign.
The work to be carried out by earn-in operator Compania Minera Zahena will include a minimum of 5,000 metres of diamond drilling within 6 months, 3,000 metres more within 12 months and a further 3,000 metres for a total of 11,000 metres within 18 months.
If the drilling is completed early, option payments totalling A$1 million under the earn-in deal established in July can also be made early to exercise the option. The assignment of rights and earn-in option was granted over mining concessions totalling 6,200 hectares at the site.
Latin’s Peruvian subsidiary PLR will also receive an “exploration success” payment of US$5 million in the event that a successful definitive feasibility study is produced to exploit resources from Ilo Este. This will be paid either during the option period or following the formation of a “newco” JV whereby PLR will retain 30% ownership of the project.
The upcoming drilling at Ilo Este will probe an area of southern Peru’s Andes Mountains known to host more than 125 billion pounds of contained copper in published reserves and resources – all within 100 kilometres of Latin’s concession areas.
Ilo Este is the more advanced of ten target areas generated in Latin’s 100,000 hectares of 100% owned concessions and has produced evidence porphyry copper-gold-molybdenum mineralisation.
The Jurassic volcanics in this area may also have the potential to host skarn replacement or IOCG-style mineralisation proximal to a Cretaceous age intrusive complex. A similar porphyry deposit is located less than 90 kilometres along strike at Tia Maria, which contains 640 million tonnes at 0.39% copper and 0.19 g/t gold.
Previous exploration
Latin recently completed three diamond drill holes for a total of 2073.3 metres drilling over 1.1 kilometres of strike within one of two striking intrusive porphyry belts that make up Ilo Este’s overall 3-square-kilometre mineralised system.
Each hole hosted porphyry copper mineralisation.
The first hole was consistently mineralised from surface to 200 metres down-hole depth, with uncut average grades of 200 metres at 0.14% copper, 0.1g/t gold, 22ppm molybdenum and 0.8g/t silver (with maximum grades of 0.34% copper, 1.4g/t gold, 251ppm molybdenum and 5.4g/t silver).
The second hole was also consistently mineralised from surface to 318 metres down-hole depth, with uncut average grades of 318 metres at 0.13% copper, 0.1g/t gold, 14ppm molybdenum and 0.9g/t silver (with maximum grades of 0.46% copper, 3.1g/t gold, 86ppm molybdenum and 3.2g/t silver).
The third drill hole was completed to 697.9 metres depth and was also consistently mineralised from surface to 472 metres down-hole depth, the longest mineralised intersection to date at Ilo Este, with uncut average grades of 472 metres at 0.11% copper, 0.09g/t gold, 11ppm molybdenum and 1.6g/t silver (with maximum grades of 0.33% copper, 1.5g/t gold, 68ppm molybdenum and 41g/t silver).
The mineralisation observed in this third hole clearly verifies the importance of the porphyry system as mapped over more than 3 square kilometres as a large and significantly mineralised system with substantial scope for improved grades within the overall envelope of alteration and mineralisation mapped to date.
Key partnership
Latin’s partnership with Zahena secured earlier this year provides for cash payments to Latin while allowing the company to maintain exposure to exploration upside at Ilo Este.
Latin assigned the rights and an earn-in option to transfer 70% ownership of Ilo Este to Zahena for a total consideration of US$1 million cash and minimum exploration work commitments totalling 11,000 metres of diamond drilling valued at about US$3 million.
PLR is to receive the staged payments over a period of three years as well as an “exploration success” payment of US$5 million in the event of a successful definitive feasibility study.
Under the contract, registered in October 2015 PLR will receive $1 million in the following cash payments:
US$ 75,000 – 12 April 2016 or the completion of four exploratory holes
US$ 75,000 – 12 October 2016
US$ 150,000 – 12 April 2017
US$ 150,000 – 12 October 2017
US$ 200,000 – 12 April 2018
US$ 350,000 – 12 October 2018
Analysis
The signing of an earn-in deal with Zahena and its subsequent drilling program mark a major step forward in realising the potential of Latin’s highly prospective Ilo properties, which are proximal to some massive copper endowments.
Ilo Este benefits from first-class infrastructure on its doorstep, right in the heart of a major copper producing region, which includes the Cuajone, Toquepala and Cerro Verde copper mines.
Based on Zahena’s past performance at Ilo Norte, the local operator is expected to rapidly advance the drill program at Ilo Este with the two rigs already committed to the drilling campaign.
Porphyry copper deposits are the world’s largest source of copper mined today and are generally the lowest unit cost mines due to their size and additional by-product credits. Peru and Chile together produce around one third of the world’s copper.
During the September quarter, Latin improved its financial footing by taking up $2.2 million from an entitlement issue and shortfall offer and repaying $2.3million of debt in cash and shares.
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