The latest drill results from the Zafranal project in Peru indicate that AQM Copper (AQM-V) made a good move by ensuring it would keep a significant stake in the project.
The company currently has 50/50 joint venture with Teck Resources (TCK.B-T, TCK-N) on the project, with AQM Copper serving as operator until a production decision is made. But until this past July, Teck had the right to dilute AQM’s interest down to 40%.
When the company began to get stellar results as part of its 40,000 metre drill program earlier this year, however, it decided to find a way maintain an equal interest in the project.
To get it done AQM agreed to issue Teck 5 million of its common shares, spend US$7.5 million on initial work and then fund the next $10.7 million in expenditures. After that time, both companies will share costs equally.
The renegotiation took away Teck’s back-in rights and also removed certain cash payments and an NSR royalty payable to Teck.
The original deal was signed in May of last year after AQM came out on top in a bidding process. While the original deal gave AQM a 51% interest with an option to move up to a 100% stake, it could only do so after Teck passed on its right to take 60% of the project.
With long copper intercepts coming in AQM didn’t want to take any chances, and hence a new deal was hashed out.
The most recent assay results bolster the wisdom of that decision.
Three holes in particular point to the large scale potential of the project with
Hole 76 returning 201 metres grading 0.68% copper and 0.08 grams gold; Hole 80 returning 196 metres grading 0.58% copper and Hole 77 returning 130 metres grading 0.43% copper
All three holes build on strong results from recent drilling.
Hole 76, for instance, was drilled on a different angle from the same pad as a previously drilled hole that returned 112 metres grading 0.79% copper.
Hole 77 was drilled 80 metres south of a hole that returned 163.5 metres grading 0.36% copper while hole 80 was drilled 60 metres south of a hole that returned 188 metres grading 0.73% copper.
The most recent drilling focused on a 3.1-km long segment of what is known as the Main Zone, which it self is one of six porphyry copper-gold targets within the project.
Zafranal is situated in the northwestern extension of Peru’s Southern Porphyry Copper Belt near the city of Arequipa.
AQM finished a 40,000 metre drill program in June with the aim of putting together a resource estimate by the third quarter of this year. It expects to have a scoping study done on the project by the fourth quarter and currently has US$28 million in the kitty.
Teck discovered the Main Zone at the Zafranal back in 2003. While the company outlined a conceptual resource through 11,805 metres of drilling, at the time it didn’t believe the project had the kind of tonnage that it needs to build a mine.
In Toronto on Aug. 25 AQM’s shares were off 3¢ or 4% to 77¢ on 104,200 shares traded. Over the last 52 weeks the company’s shares have moved between 58¢ and $1.10 and fully diluted the company has 146 million shares issued.
As Chief Geologist for AQM Copper Peru, I should also like to comment that AQM has also reported significant intercepts of copper mineralization on separate porphyry systems, Sicera Sur and Sicera Norte, both part of the Zafranal land package, and near the Main Zone results discussed in this article. AQM also continues to explore and review copper prospects and deposits for acquisition in South America and elsewhere.