TORONTO (miningweekly.com) – The recent release of results from the first phase of TSX-listed Chieftain Metals’ latest drilling programme at its flagship Tulsequah Chief polymetallic project, in British Columbia, has revealed the “strong prospect of doubling or tripling the resources”.
President and CEO Victor Wyprysky told Mining Weekly Online on Friday that he believed his company and its primary asset were significantly undervalued in the current market.
“We undoubtedly have one of the most high-grade volcanogenic massive sulphide (VMS) deposits in the world, but even more significant is the fact that we believe we have discovered the Tulsequah Chief’s twin,” he said in a telephonic interview.
The firm’s latest drill programme was focused on reinterpreting geological, geophysical and geochemical targets along with newly modelled three-dimensional induced polarization (3D-IP) geophysical inversion anomalies identified within the prospective Tulsequah Chief, Big Bull and Sparling-Banker areas between May and September.
Wyprysky pointed out that of main interest were the base metal values intersected in four holes targeting the strong 3D-IP chargeability anomaly located 350 m to the south-west of the known Tulsequah Chief orebody.
“This 3D-IP anomaly bears many remarkable similarities, in terms of strength and dimensions, with the 3D-IP anomaly associated with the known Tulsequah Chief orebody. It was also found to be directly associated with a very prospective, newly discovered VMS alteration zone and its corresponding wide zone of footwall massive sulphides and intensely altered rhyolitic stratigraphy,” Wyprysky said.
Chieftain was now using these results to plan its next round of drilling towards what appeared to be a substantial new VMS deposit.
“Our geologic model has generated immediate success; VMS deposits are well known to increase resources as mining progresses,” he said.
A January feasibility study for the project, estimated the project to have a 9.5-year life with operating costs of $126/t.
Focused mainly on zinc output, the mine was expected to produce 31 300 t/y of metal at the bottom of the global industry cost curve, and was pinned at a negative $0.90/lb of zinc net of by-products.
The after-tax net present value (NPV) was estimated at $144-million, when using an 8% discount rate, with an internal rate of return (IRR) of 14.7%.
However, Wyprysky said that since January, the company had reduced the construction time from three to two years, and was contemplating lifting the throughput from 2 000 t/d to 2 500 t/d, which would lift the NPV to $162-million and the IRR to 16.6%.
These numbers could, however, all change again, Wyprysky noted, owing to the significant exploration upside at the new deposits. “Should we be able to increase our ore resources by only 35%, we are already looking at doubling the NPV,” he noted.
Chieftain had recently doubled its land-holding in the region to about 35 000 ha, based on its theory that the VMS nature of the Tulsequah Chief would result in many more targets, especially to the north of the project.
Wyprysky said the company already had seven to eight “extremely” similar exploration targets, which it would test in due course.
“This project has a strong potential to become a mining camp in its own right, and we own all of it,” he boasted.
The Tulsequah Chief is currently fully permitted and shovel-ready, and Wyprysky said construction would start as soon as the company had successfully concluded financing negotiations.
He noted that despite the equity markets being in the doldrums, the market was actually “awash” with cheap credit, saying there were plenty of investors and banks out there “looking for good homes”.
Chieftain was currently on the lookout for a $220-million to $250-million senior debt facility to cover about half of the $450-million capital price tag to build the first phase of the Tulsequah Chief. This would add to an existing $50-million facility arranged two year ago with precious metals streaming and royalty firm Royal Gold and $50-million secured from suppliers.
Wyprysky also noted that the company had already garnered strong endorsements with the financing agreements already in place, and had also drawn interest from Chinese suitors, as well as major institutional consultants being on board.
Chieftain would seek to secure about $100-million to $125-million from equity-based sources, to cover the outstanding capital expenditures, finance costs and working capital.
Meanwhile, Wyprysky noted that one of the most significant aspects of the Tulsequah Chief was that it had such a favourable balance of minerals, including gold, silver, copper, lead and zinc.
“We believe there is significant upside to the present project valuation, owing to the prices of many of the commodities we would produce being depressed during the past several years. Prices are bound to return to higher levels during the period of mine construction.
“We expect a global zinc shortage in the next two to three years, which would benefit our operation significantly,” he said.
Wyprysky also said that he believed the local First Nation in the project area were largely on board, having signed a land use agreement providing permission for the company to build a road and the mine. They had also signed a memorandum of understanding.
Negotiations were, however, not yet finalised with regard to signing an impact benefit agreement.
The underground mine is scheduled to start production by the second quarter of 2016.
The Tulsequah Chief project currently held a National Instrument 43-101-compliant probable reserve of 6.45-million tonnes grading 1.13% copper, 1.04% lead, 5.59% zinc, 2.3 g/t gold and 81.39 g/t silver.
In the indicated resource category, the project currently held an estimated 6.77-million tonnes grading 1.19% copper, 1.1% lead, 5.89% zinc, 2.4 g/t gold and 85 g/t of silver.
Chieftain’s TSX-listed stock traded 3% higher on Friday at C$0.17 apiece.