Though Hot Chili Ltd.'s (HCH:ASX) Productora is a copper project—Hot Chili lists resources at the site at more than 1 million tonnes copper—exploration at Sierra Zapallo has "revealed very attractive dimensions and grades demonstrating the potential for significant open pit resource" at the site, the company announced on Aug. 24. This is based on "a systematic surface mapping and sampling programme across thirteen high grade gold reefs exposed at surface within the historical Sierra Zapallo gold project," according to the company.
The upgrade by Hartleys is based in part on the Sierra Zapallo gold prospect, according to Barnett. "If HCH can define a small high grade gold deposit, it would materially change the investment proposition from being based on speculation on copper prices, to being based on near term gold production earnings," the analyst wrote in a July 25 research report.
Also factoring into Hartleys' analysis is a recent capital raise, which, Barnett wrote, "removes near term risk, while the exploration potential at Sierra Zapallo suggests there is potentially a near term positive catalyst."
According to the company, its "landmark infrastructure deal with Chilean resource major CMP (Compañia Minera del Pacífico SA). . .is pivotal to Productora because the CMP assets will help reduce time and costs associated with the infrastructure needed to underpin the project, and gives Hot Chili a powerful local partner with extensive financial resources and local mining experience."
CMP also has "an option to acquire an additional 32.6% interest (taking CMP to 50.1%) in Productora for a minimum cost of US$80 million and maximum of US$110 million. This option agreement aligns the interests of both parties to ensuring Productora has a clear funding path through its final stages of growth and development studies."
With regard to copper at Productora, Barnett wrote, "The Company has a completed PFS (prefeasability study) which is modelled for average annual production of 66kt copper and 25koz gold over first 8 years of production." The analyst notes that, given "a shortage of large copper projects," Productora may, in the future, become "a very viable mine."
Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.
1) Tracy Salcedo compiled this article for Streetwise Reports LLC. Tracy Salcedo provides services to Streetwise Reports as an independent contractor. She owns, or her family owns, shares of the following companies mentioned in this article: None.
2) The following companies mentioned are sponsors of Streetwise Reports: None. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview or article until after it publishes.
Hartleys, Hot Chili Limited, July 25, 2016
The author of this publication, Hartleys Limited ABN 33 104 195 057 (“Hartleys”), its Directors and their Associates from time to time may hold shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities. Hartleys and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of a transaction arising from any advice mentioned in publications to clients.
Hartleys has completed capital raisings in the past 12 months for Hot Chili Limited ("HCH") for which it has earned fees. Hartleys has provided corporate advice within the past 12 months. Hartleys has a beneficial interest in 8 million unlisted options in HCH.