Chariot on the Outside Lane in Peru

On the shoulders of its Marcona copper project in Peru, Chariot Resources (CHD-T, CHDSF-O) is aiming to build itself into the next mid-tier copper producer — no small task for any junior, let alone one that is trying to do so at the furious pace Chariot has set for itself.

The company is pushing ahead with its feasibility study, environmental impact assessment and financing simultaneously. It plans to have its feasibility and environmental impact studies completed by the end of the second quarter and financing finished by year-end.

If successful, the Toronto-based company will be in a position to start mine construction at the beginning of 2008, with production following in the third quarter of 2009.

And while company president and chief executive Ulli Rath admits that the pace has been demanding, he says the three-pronged approach gives the company significant advantages.

“We want to catch as much of the three-dollar-per-pound (US) copper as we can, and it allows us to have an interactive process where all three disciplines can be co-ordinated to meet the demands of one another,” he says. “We don’t want to have to go back and re-do technical aspects of the feasibility once we bring it to the banks.”

Chariot has some strong people on board to help get it there: Rath has 40 years of experience — with Anglo American (aauk-q, aal-l) and Rio Algom, where he helped bring three mines into production; and chairman Ed Thompson is a geologist formerly with Anglo American and onetime president of the Prospectors and Developers Association of Canada. David Bell, the discoverer of the Hemlo gold deposit, sits as a director, as does Fernando Porcile, who has 40 years of experience in the mining industry. Most recently, Porcile managed Falconbridge’s copper assets in South America.

Chariot holds a 70% interest in Marcona while its South Korean Partners — state-controlled Korea Resources and LS-Nikko Copper — hold the remaining 30%.

The partners bought Marcona from Rio Tinto for roughly US$33.5 million — US$20 million of which has been paid, with the second US$13.5-million payment due in January. Chariot has roughly US$18 million in the bank.

Rath says the South Korean partnership is a big plus for Chariot, as having an end-market buyer as a partner reduces risks and has made financing with banks much easier.

The agreement gives LS-Nikko the right to buy 70% of cathode and 90% of concentrate production for 10 years — at market prices.

The cathode and concentrate will come from the Mina Justa deposit, which has a measured and indicated resource of 346 million tonnes grading 0.71% copper, or 5.4 billion lbs. copper with a 0.3% copper cutoff grade. The Mina Justa deposit is the copper-enriched portion of Marcona’s 2.4-billion-tonne iron oxide-copper-gold (IOCG) system.

The deposit has copper oxide mineralization in the upper 200 metres of the orebody, which, while lower-grade, will get the copper cathode operation up and running.

Cash flow from the cathode can then be used to develop the deeper sulphides — where up to 42 metres grading 10.54% copper has been intersected. The sulphide mineralization is open at depth.

Beyond the robust nature of the deposit, Mina Justa has an excellent location. The project sits within 25 km of the paved Pan American Highway, access to the national power grid, water supply, a labour pool and two deepwater seaports.

Additionally, workers and equipment don’t have to contend with the high altitudes of many of Peru’s other high Andes projects, as it sits on flat terrain 785 to 810 metres above sea level.

And with no nearby farming communities or environmentally sensitive areas, the project has not been burdened with the community protests that have been known to erupt in the country.

But the company hasn’t been lulled into a state of apathy with regards to corporate social responsibility. Rath says the company put money into community relations before a drill ever broke ground.

Chariot will spend roughly US$350,000 this year on social programs in the nearest city to its project, San Juan de Marcona.

“Our philosophy is to develop trust with the community,” Rath says. “People who come in early and just write cheques without understanding only end up making half of the population mad. We integrate into the community, so we better understand their concerns.”

For example, to help stem the exodus of San Juan youth to the capital Lima, Chariot created a 2-year program to bring them up to a high school level of reading and math, and teach them skills that will help them secure jobs in the area.