Hot Chili shares climb on potential for early Productora cash flow
Link copied to
Special Report: Hot Chili could enjoy some early cash flow from a satellite project as it focuses on delivering the maiden resource for its potentially massive Cortadera project.
Shares in Hot Chili (ASX:HCH) climbed 16.7 per cent after the company accepted a non-binding offer from Chilean government agency Empresa Nacional de Mineria (ENAMI) for the mining and processing of ore from its Productora copper-gold project.
Under the proposed two-year agreement, which is subject to a formal agreement being signed, ENAMI will mine and process ore from the project at an estimated rate of about 10,000 tonnes per month based on existing underground mine developments and the average grade of historical production by ENAMI from Productora.
In return, Hot Chili and its partner CMP (20 per cent) will receive a 10 per cent royalty on the sales value of minerals extracted from Productora and an additional bonus of $US2 ($3.39) per tonne of copper ore purchased at the Vallenar plant.
The company noted that at current copper prices of about $US2.15 per pound, the agreement could deliver annual payments of between $US400,000 and $US500,000 for its 80 per cent interest in the project.
Additionally, the royalty component provides potential for payment upside in the event of increased copper prices or higher copper grades.
Productora currently has a resource of 237 million tonnes grading 0.48 per cent copper, 0.1 grams per tonne gold and 135 parts per million molybdenum.
Hot Chili had originally intended for Productora to be the centre of its planned production hub development.
That was until drilling of Cortadera, which was acquired as a bulk tonnage, open pit mine to complement Productura, started returning some remarkable intersections.
Results like 972m grading 0.5 per cent copper and 0.2 grams per tonne (g/t) gold from surface and 649m at 0.4 per cent copper and 0.1g/t gold from a depth of 330m and ending in porphyry have highlighted Cortadera’s potential to be a tier 1 project in its own right.
That drilling continues to extend the size of the higher-grade core within the main Cuerpo 3 porphyry has just lent more weight to this belief.