Hot Chili has closed its transaction with Osisko Gold Royalties, receiving proceeds of US$15 million in exchange for the sale of a 1% Net Smelter Return (NSR) royalty on copper and a 3% NSR royalty on gold across its Costa Fuego copper-gold project in Chile.
Not only is the transaction a significant endorsement of the project from one of North America’s leading royalty-streaming groups, it’s also a nice boost to the company’s cash position to around A$26m – which means the upcoming 30,000m drill program is fully funded.
The deal also clearly highlights the value Osisko attributes to the project.
Hot Chili (ASX:HCH) MD Christian Easterday says that Osisko’s involvement, alongside Glencore’s strategic shareholding, demonstrates “Costa Fuego is globally relevant, being one of only a handful of projects with potential to deliver near-term, meaningful, new copper supply into a looming global copper supply shortage.”
“We are very pleased to have closed the Investment with Osisko Gold Royalties enabling the Company to advance the project without the dilution of a share issuance,” he said.
Near-term drilling and PFS in H2
The Costa Fuego project has a massive measured and indicated resource of 725Mt grading 0.47% copper equivalent.
And the recent scoping study flagged an estimated copper equivalent production rate of 112,000t per annum – consisting of 95,000t of copper and 49,000oz of gold over a 14-year period of a 16-year mine life – to the estimated revenue and free cash flow of US$13.52bn and US$3.28bn down to the post-tax net present value (a measure of profitability) of US$1.1bn.
For context, that’s the equivalent of bringing another Oz Minerals (ASX:OZL) into production.
The project also has an inferred resource of 202Mt grading 0.36% copper equivalent, meaning there’s still plenty of room to grow with Hot Chili targeting a potential increase in study scale towards 150,000tpa copper for a +20-year mine life.
Now the Osisko deal is wrapped up, Hot Chili is well-funded to kick off its 30,000m drilling program in the coming weeks which is targeting a resource expansion, and exploration targets ahead of an upcoming resource upgrade by late 2023.
Hot Chili is also aiming to deliver the Pre-Feasibility Study (PFS) – which is currently around 80% complete – in H2 2024.
This article was developed in collaboration with Hot Chili Limited, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.