High-Leverage Copper Opportunity In Peru

High-Leverage Copper Opportunity In Peru
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Element 29 Resources Inc. (CAN:ECU / US:EMTRF) is a resource development stage copper exploration company focused in Peru and currently flying under the radar. It has already defined a significant open-pit copper resource, and the Company is literally just scratching the surface of its enormous exploration potential.

More on this later.

The BIG opportunity in copper

A recent Dynamic Wealth Research article explained how recent events in the copper market have been nothing less than a “game-changer” for the copper market – and the copper mining industry.
Demand doubling. “Record” copper deficits.

With copper inventories already tracking near multi-year lows and copper mine supply looking more uncertain, what does that suggest for future copper prices? Up and up and up.

These supply/demand issues can only be addressed by dramatically ramping up mine supply.

This brings us back to investing in copper.

Junior copper explorer defining resources in elephant country

Element 29 Resources was born a little less than 3 years ago when GlobeTrotters Resource Group, a private Peru-focused project generator, decided to take its two most-exciting copper projects public.

Both GlobeTrotters and Element 29 are focused in “elephant country”: the world-famous Andean Copper Belt – that contains many of the world’s largest and most-lucrative copper mines.

Element 29 is clearly positioned in the right place for investors to make money in copper. Then there is the management team.

President and CEO Steve Stakiw has been there and done that in his 25-year career, as both a geologist and an integral part of management.

As Vice President of Investor Relations at Trevali Mining, he was part of the team that grew a small exploration company into a global top-10 zinc producer with four mines and a $1+ billion market cap. Stakiw then moved on to New Pacific Metals, where he played a key role in advancing their world-class silver deposits.

Vice President of Exploration, Paul Johnston (PhD., P.Geo), has an impressive resume of his own. Dr. Johnston began his career as a mine geologist with Noranda’s legendary Hemlo gold deposit. He then moved to multinational mining powerhouse, Teck Resources, where he gained invaluable international experience – leading him to South America.

Most recently, Paul Johnston has been Chief Geologist for GlobeTrotters Resource Group in Peru. When GlobeTrotters decided to take its highly-prospective Elida and Flor de Cobre copper projects public, Dr. Johnston wanted to be leading the exploration team.

Two copper properties with mega-project potential

Since going public in 2020, Element 29 has been all about execution. You can’t argue with success.

When Element 29 commenced exploration on its Elida Project, the Company reported significant copper mineralization in 3,500 of the first 4,000 meters of its drilling. Element 29 moved from its first drilling at Elida to its initial resource estimate in less than 2 years.

For investors, the Company is already showing that it can be just as efficient in advancing its copper projects as it is in conducting its drilling operations. And management strongly believes that there is a lot of copper to be found on both of its co-flagship projects, Elida and Flor de Cobre.

Elida Copper Project

The Elida Copper Project is located on a large, 100%-owned, 19,800-hectare property in central Peru, proximate to Peru’s west coast and port facilities. Initial exploration on the project (under a different operator) commenced in 2013. Drilling in 2014 revealed a significant porphyry copper system on the property.

In August 2021, Element 29 commenced its own drilling campaign at Elida, 4,481 meters spread across seven drill holes. On September 27, 2022; based on that initial drilling, Element 29 released its first resource estimate for Elida’s porphyry copper deposit.

[copper mineralization from a drillcore sample at Elida]

It took just 14 months to go from the first drill-bit hitting the ground to an initial resource estimate at Elida. Astute mining investors will be impressed with that efficiency.

The Elida copper deposit is a 321.7 million tonne Inferred Mineral Resource, grading at 0.32% copper, 0.03% molybdenum, and 2.6 g/t silver, amounting to 2.24 billion pounds of copper. CEO Steve Stakiw framed these numbers for the audience of Dynamic Wealth Research.
“Our initial mineral resource estimate at Elida illustrates a major new porphyry copper deposit in Peru. Evaluation of its potential is still at an early stage, and we see the opportunity for strong resource growth given this resource estimate covers only a portion of our Zone 1 porphyry, one of five porphyry centres we have identified on the project for testing.”

This open pit constrained resource at Elida has a very low strip ratio of 0.74:1, a factor that can help to improve project economics for a potential open pit mining operation.

The deposit is open laterally and at depth, with mineralization already confirmed to at least 900 meters below surface. Management indicated to Dynamic Wealth Research that they are eager to test mineralization at even greater depths.

Porphyry copper systems (such as Elida) often demonstrate significantly higher grades at greater depths. If Elida’s grades should follow this pattern, this could then make underground mining commercially viable – enormously expanding the Project’s overall resource potential.

Another factor that is strongly in Elida’s favor is the Project’s elevation.

While Peru is the world’s second largest copper producer, most of this country’s prolific copper producers operate at elevations well in excess of 3,000-4,000 meters.

Not only can this amplify cap-ex outlays to put a project into production, it also has a significant impact on operating costs, as higher elevations impact the efficiency of mining machinery. This loss of efficiency can approach 30%.
In contrast, at an elevation of only 1,600 meters, Elida has mining-friendly topography.

With the Project close to renewable hydroelectric power and proximate to port facilities, this will further enhance Elida’s economics if/when the Company undertakes economic studies of the project.

The initial copper resource at Elida (in Zone 1) is from just one of five highly prospective zones for copper mineralization on this property. So, not only is there considerable potential for resource expansion in Zone 1, four other mineralized zones await further exploration.

Flor de Cobre Copper Project

Flor de Cobre is a 1,927 hectare land package in southern Peru that is practically surrounded by world-class copper mines and projects. Most notable among these neighbors is the world-famous Cerro Verde Copper Mine, owned by a consortium led by Freeport-McMoRan.

Cerro Verde boasts total copper resources in excess of 25 billion pounds of copper. Flor de Cobre is on-strike and adjacent to this massive copper deposit and has exhibited similar grades.

Early exploration at Flor de Cobre has focused on two zones: Atravesado and Candelaria. Atravesado appears to be another classic porphyry copper system.

Candelaria features a more complex mineralized formation.

Above the primary chalcopyrite (copper) mineralization at Candelaria is a “copper enrichment zone” of higher-grade chalcocite. Think of that copper enrichment zone as a layer of icing on top of the chalcopyrite “cake”.

Mineralization in the Candelaria Zone is already quite well-defined. The Company completed a 12-hole, 4,532 meter drilling program in 2022, with hole FDC001 illustrating the bulk-tonnage potential here:
  •          349 meters of 0.77% copper, including
  •          123 meters of 1.42% Cu (the enrichment zone), and
  •          226 meters of 0.42% Cu (primary chalcopyrite mineralization)

However, management is equally enthusiastic about the exploration potential of the Atravesado Zone. No one is more familiar with this geology than Paul Johnston –from his time with Teck Resources, GlobeTrotter and now as Vice-President of Exploration for Element 29.

Dr. Johnston shared his insights on Flor de Cobre.
“Copper mineralization and porphyry style veinlets exposed over a broad area combined with a compelling geophysical response reveal the exploration potential of Atravesado.  The undrilled target is located in the Southern Peru Copper Belt, which hosts a number of Peru’s important, long-life copper mines.”

One of Element 29’s co-flagship projects, Elida, already has significant size and grade potential, from the initial pit-constrained resource in Zone 1. Not only does that zone have significant exploration upside, four additional zones wait to be explored.

The other co-flagship project, Flor de Cobre, is next-door to one of the world’s largest copper mines, with similar geology. And it has already demonstrated robust copper mineralization in early drilling.

Beyond this, Element 29 holds two other copper properties, both with prospective porphyry copper potential.

Muñaorjo is a 1,000-hectare concession with exposed copper-gold mineralization.  Pahuay is also a 1,000-hectare concession that features widespread copper-molybdenum mineralization.

Near-term exploration and development strategy

With so much exploration potential, perhaps management’s most difficult operational decision for Element 29 is where to prioritize its exploration.

In speaking with Dynamic Wealth Research, CEO Steve Stakiw indicated that the Company is planning a drilling campaign for 2024 at Atravesado. This will test mineralization in that highly prospective zone and give management a better idea of the overall commercial potential of Flor de Cobre.

Naturally, further exploration at Elida remains a priority as well. Management told Dynamic Wealth Research that the near-term goal at Elida is to further define and expand the resource.

The Company is looking to further grow the resource at Elida, at which time Element 29 may seek to progress to economic studies at Elida. However, should the next phase of drilling at Elida encounter higher grades of copper beneath the constraining pit shell, this could alter that timeline, given the increased commercial potential.

Peru is not only a great jurisdiction for copper exploration, it’s a great jurisdiction (in general) for Canadian-based mining companies – like Element 29 Resources.

The Canada-Peru Bilateral Investment Treaty (and Canada’s Free Trade Agreement with Peru) ensures security of ownership, both for the Company and its shareholders.

Investors need to keep this in mind, particularly given Element 29’s extremely attractive valuation. Despite a 2.2 billion pound copper Inferred Resource and enormous exploration upside, Element 29’s current market is less than $10 million.

We plan to put this valuation into much greater context for investors in our next feature coverage of Element 29 Resources. That next article will not only frame Element 29’s valuation both in absolute terms and versus its peers, we will also provide investors with greater economic context regarding copper investments in Peru.

Element 29 corporate presentation

DISCLOSURE: Element 29 Resources is a paid client of Dynamic Wealth Research.


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