All eyes are on Hot Chili as the next potential takeover target
Hot Chili (ASX:HCH) is fielding a lot of interest from potential suitors after having picked up another potential major copper deposit in Chile.
Since news emerged that the junior explorer had got its hands on the Cortadera project — which had been privately held for years — earlier this year, Hot Chili’s share price has headed north.
Hot Chili, which has some big investor names behind it like Rick Rule from Sprott and Sydney-based Taurus Funds Management, is up over 215 per cent since the start of the year.
A couple of months ago Hot Chili appointed corporate advisors to field the strong domestic and international interest.
Managing director Christian Easterday told Stockhead on the sidelines of the Latin America Downunder mining conference in Perth this week that Hot Chili is in talks with “a lot of big groups at the moment”.
There is increased interest from the majors in big copper discoveries in Latin America, as evidenced by BHP (ASX:BHP) and Newcrest Mining’s (ASX:NCM) battle to win a stake in SolGold’s massive Cascabel mine in Ecuador, and last year’s US$1.4 billion takeover of Canada’s Nevsun Resources by Chinese heavyweight Zijin Mining, which wanted the high-grade Timok copper deposit in Serbia.
“There are very, very few of these [major discoveries] available,” Easterday said.
S&P Global Market Intelligence said recently that major new copper discoveries were at decade-long lows and if the industry doesn’t get cracking, there could be a massive shortage in the next 15 to 20 years.
The level of funding spent on copper exploration over the past decade has increased significantly. The problem is, it’s not turning up any new discoveries.
“So where the copper market is now going towards electrification, and going to be one of the prime movers in demand growth out of all of the battery metals, we see that we have a project here that is truly going to be giving Hot Chili a seat at the table,” Easterday said.
“And when I say a seat at the table I don’t mean a seat at the Australian table in little copper, I mean a seat at the big boy table, and the entry price for that is 5 million tonnes of contained copper or at a minimum 100,000 tonnes of copper production potential.”
Hot Chili’s plan is to take two Tier 2 discoveries and combine them into one massive Tier 1 deposit.
Easterday said a combined development that leveraged central processing and infrastructure for the Productora and Cortadera mines was now possible, transforming Hot Chili into a Tier 1 producer and one of the very few large ASX-listed developers of the red metal.
“The potential and quantum of Cortadera has never previously been publicly released but is one of the most significant such discoveries since SolGold’s Cascabel find,” he said.
The grades of Hot Chili’s Cortadera deposit are comparable to Cascabel.
Cascabel has a resource of 3 billion tonnes at 0.37 per cent copper and 0.2 grams per tonne (g/t) of gold.
Cortadera doesn’t quite have as many tonnes as Cascabel yet, but its resource is 236 million tonnes at 0.48 per cent copper and 0.1g/t of gold.
“I’m sure that the market is waiting to see whether we can produce 400m/500m/800m intercepts – the type of intercepts coming out of Cascabel and also for the Australian market the type of intercepts that Jean-Sebastien three days ago in interviews was getting so excited about with their really exciting Winu discovery up in the Paterson,” Easterday said.
Cortadera is a porphyry deposit, which means it is hosted in a type of granite rock, the same as most of the major copper deposits around the world.
Porphyry deposits are usually large and low-grade but can be mined at low cost due to their scale. Globally, over 60 per cent of copper, all of the world’s molybdenum, 10-15 per cent of uranium and a significant amount of gold comes from porphyry deposits.
“We’re sitting in a position where we can make a huge re-rate on our resources and reserves with very little money in a short time-frame,” Easterday said.
A pre-feasibility done by Hot Chili on its Productora deposit shows it will have an initial 10-year mine life based on production of 66,000 tonnes of copper concentrate and 25,000 ounces of gold each year.
“Cortadera can now add to that, being a major discovery extending from surface and exhibiting all the characteristics of a long-life shallow open pit mine in addition to numerous satellite bodies,” Easterday said.
“We’re pushing into a completely different league, we’re pushing into a big copper league and we are trying to build a Tier 1 copper development.
“The last five years has been a toil for the company and now we’re sitting two or three months in on the resurrection of Hot Chili as a force in copper again.”