Medinah Minerals (MDMN)

[TCand me]

hi rick,
also a nice read

February 24, 2011
Exeter Resource Moves Its Chilean Porphyry Copper-Gold Goodies Towards The Front Of The Shop Window

By Charles Wyatt

A year ago Bryce Roxborough, president of Canadian-listed Exeter Resource Corporation, came to the conclusion that his company had a number of assets which were not earning their corn. This happens when there is a flagship asset which overshadows the others, as there was with Exeter’s Caspiche gold-copper project in Chile. The best way to realise hidden value in cases like these is for non-core assets to be bundled up into a new company, packaged to appeal to a different set of investors. This was certainly the conclusion Bryce reached, and as a result the Cerro Morro and Don Sixto projects, as well as Exeter’s exploration properties in Argentina, were transferred to a new company called Extorre Gold, along with approximately C$25 million in cash. Exeter retains a significant, though indirect investment in Extorre.

Following the spin-off, Exeter was once again free to focus all its attention on the flagship Caspiche project, a porphyry deposit on the prolific Maricunga belt in northern Chile. Porphyrys are usually big and low grade, and rarely occur in isolation in a mining district. Caspiche certainly bears out this rule of thumb, as Cerro Casale, the jointly-owned 24 million ounce Kinross-Barrick project, lies just 15 kilometres to the south, while Kinross’s six million ounce Refugio mine is a mere 10 kilometres to the north.

With neighbours of that size it was not a huge surprise when Exeter announced its own bumper resource update back in September. This showed Caspiche to contain measured and indicated resources amounting to 21.3 million ounces of gold, 5.3 billion pound of copper, and 48.4 million ounces of silver. Also chipping in was a further 5.1 million ounces of gold, 1.4 billion pounds of copper and 14.5 million ounces of silver in the inferred category. This latest result represents a significant upgrade on the previous numbers. And, just by way of a statistic, it’s interesting to note that the gold equivalent now runs to 35.9 million ounces indicated and 9.1 million inferred, using only the gold and copper.

Big in anyone’s book, but low grade, as is the case with most porphyries. It is for this reason that gold-copper porphyries all over the world tend to be owned and operated by big companies as the capital requirement for development is huge. In the case of Caspiche, the gold grade in the measured and indicated resource is only 0.50 grams per tonne, silver is 1.14 grams per tonne, while the copper runs at 0.18%. On the telephone from South America Bryce confirms that this is a fact he keeps constantly at the back of his mind, even as he drives exploration on as fast as possible with a view to adding even more value. There comes a point, and it may not be far off, when one of the big boys will not be able to resist making a bid. And that’ll be the point at which shareholders make the money for which they have been waiting.

In the meantime, Exeter is fast-tracking metallurgical, engineering, and environmental programmes, and taking a look at infrastructure issues too. All will form an integral part of the pre-feasibility study on Caspiche which commenced last October. In fact, two concurrent studies are being run in parallel. The first is focused on the outcropping 1.5 million ounces gold-only oxide portion of the deposit, which is 100 metres thick. Testwork shows this portion of the deposit responds very favourably to heap leaching treatment, similar to that being carried out at the nearby Maricunga mine, so it could possibly be into production as soon as 2013, and at low cost. The second study considers all the options for mining the entire deposit, and includes a flotation flowsheet for the gold-copper sulphide ore at depth. The pre-feasibility will continue throughout this year, but investors should not miss the results for the oxide project which ought to appear in May. These will then be followed by the results for the large scale extraction of the entire deposit in the third quarter.

It’s not always easy to maintain a sufficiently frequent news flow, but Exeter has done well this year, with a couple of announcements that show its management is on top of the game. First it optioned water rights at a rate of 300 litres per second from a private Chilean company and, at the same time, acquired its own water exploration concessions over three basins. The rights and the concessions are about 100 kilometres to the north, and close to the water that Cerro Casale will use, so the obvious move is for the two mines to share a pipe. Bryce reckons that Kinross will reduce its interest in this project, leaving it to Barrick to develop, in which case talks with Barrick over a shared pipeline might lead to something more fruitful. Exeter would not have to give rights of first refusal at Caspiche to anyone, as it has just exercised its option to acquire 100 per cent of the project from Anglo-American, which simply retains a three per cent net smelter royalty.

Bryce is quite open about his search for a partner/purchaser for Caspiche. He says that eight confidentiality agreements have been signed, and points out in an oblique way that Chinese mining companies now have the green light to seek gold projects overseas. This introduces a useful bit of tension into the situation, as each company will have to consider when to make a move that is not too early, and not too late. If Exeter goes the oxide route it could be in production by 2013, a development that’s only likely to increase this tension. Bryce reckons that the company could raise the US$200 million required for the oxide portion independently. After all, Exeter currently has C$85 million in the kitty and is only scheduled to spend C$20 million this year, including on the pre-feasibility study. To stir the pot a little more, he also mentions that regional drilling is in progress, and a number of highly prospective targets have been identified at depth, which have the word ‘porphyry’ written all over them. He is assembling a very tasty dish for one of the big boys, and at the moment most of them have money coming out of their ears.