ASX-listed Hot Chili seems to be sailing into a perfect storm as it looks to ramp up copper production at its Costa Fuego project in northern Chile while the bellwether red metal trades at close to US$10,000 per tonne on the benchmark London Metals Exchange.
The company is already pushing out copper from high-grade lodes at its Productora mine and is now casting an eye over the nearby Cortadera porphyries as it looks to launch into a larger scale operation.
Hot Chili says it is on schedule to kick into feasibility mode on Cortadera in the weeks ahead as drilling continues to return thick intercepts of copper and gold. Latest results include a whopping 836 metres at 0.4 per cent copper and 0.2 grams per tonne gold.
In light of the strengthening copper price, Hot Chili is eager to charge up operations at Costa Fuego due to the rich endowment of the mineralised system. The global resource for Costa Fuego, including Productora and Cortadera deposits, contains a modelled king’s ransom in metal - 2.9 million tonnes of copper and 2.7 million ounces of gold.
However, the totals are likely to balloon out in the months ahead as the company continues to pepper the Cortadera porphyries with deep drilling and exploration commences at the Cortadera North and Santiago Z discoveries that appear to be repetitions.
Hot Chili has already dusted off its 2016 Productora pre-feasibility study, or “PFS”. The original PFS proposed a large, bulk open pit mining operation, as opposed to the small-scale underground venture currently providing feed to the nearby ENAMI copper plant and a still-healthy cash flow to Hot Chili.
Interestingly, the Productora deposit boasts a bulk-tonnage open pit reserve of 167 million tonnes grading 0.43 per cent copper and 0.09 g/t gold, with only the high-grade portions of the potential ore system being exploited by the current mining operations. This is unlikely to have a material impact on the updated mining study.
The revised financial model for Productora is showing vastly improved economic outputs due to the burgeoning copper price, boasting a 500 per cent increase in the net present value, which now sits at an impressive US$1.1 billion whilst the internal rate of return has leapt 150 per cent to a respectable 38 per cent.
With the Productora modelling already showing handsome returns, Hot Chili is racing to complete the current 40,000m resource drilling program at Cortadera to allow the calculation of a new JORC resource that can then be inserted into a revised project pre-feasibility study.
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By Matt Birney
