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Valor Resources strives to bring low-cost Peruvian copper project into production

The company is approaching scoping study stage following the latest resource update.
picture of Berenguela deposit
Berenguela Project may be amenable to economical open cut mining

Valor Resources Ltd (ASX:VAL) emerged in February 2017, having undergone a name change from Carajas Copper (ASX:CJC), and acquired the Berenguela Copper-Silver-Manganese Project located in Peru.

The new look group also made significant board changes including the appointment of Ernesto Osorio as chief operating officer.

His experience in transitioning South American companies from explorers to producers is expected to be valuable.

The Berenguela project is situated in a district that hosts some of the country’s largest metals mines and world-class deposits.

Should the project progress to the development stage, access to power, water and transport infrastructure will work in its favour.

Surrounding geological trends provide promise

In terms of nearby geological trends, the project is positioned where a copper-gold porphyry skarn belt merges with an epithermal gold belt, host to some substantial copper and copper-gold deposits.

Six projects hosting a total contained copper resource of more than 13 million tonnes are operated by multinational mining groups such as Glencore plc (LON:GLEN) and MMG Ltd (HKG:1208).

They virtually form a straight line from Las Bambas (7.7 million tonnes of contained copper) in the north to Buenaventura (7 million ounces of contained gold), south-west of Puno.

In terms of proximity, the Berenguela project lies to the north-west of Puno, trending towards the southern end of the copper-gold belt. 

Valor to benefit from extensive exploration data

The advanced stage Berenguela Project had a JORC 2012 compliant Indicated and Inferred Resource when the project was acquired.

An extensive drilling program resulted in a substantial upgrade in the resource in October, including a 44% increase in the total Indicated Resource.The total Indicated and Inferred Resource increased 18%, representing an uptick of 4 million tonnes.

The resource now boasts 257,000 tonnes of contained copper and 93 million ounces of contained silver. Another important aspect of the resource upgrade in the current environment was the inclusion of circa 90,000 tonnes of contained zinc.

Valor has taken a measured approach to exploration spending, and to achieve a significant resource upgrade for a modest outlay of $2.3 million provides confidence going forward.

This is particularly important given that only 2% of its 6600-hectare land package has been explored.

At surface and shallow mineralisation remains focus

In discussing the project recently with Mark Sumner, chairman of Valor, he said the company had no intention to target ore at greater depths.

He said that the ready presence of surface and near-surface ore should provide the opportunity to develop a low-cost open cut project in a relatively short time frame with minimal exploration expenditure.

The at surface drilling results are impressive with multiple intersections of more than 50 metres grading between 1.4% and 1.9% copper at zero metres.

By quickly moving to low-cost production the company can benefit from near-term cash flow, allowing it to weigh up its options regarding further step out exploration, or longer-term plans to assess the economic viability of an underground project.

Further exploration is expected to result in near-term value drivers such as another resource upgrade and an updated scoping study with the latter expected to be completed by early February.

A 7000-metre resource extension drill program is planned to commence in March/April which will provide data to assist the company in commencing its pre-feasibility study in June.

Copper price plays havoc with October resource update

Positive drilling results featuring high-grade copper and silver intercepts were announced in the lead up to the October resource update.

These results were the catalyst for an 80% spike in the company’s shares as they increased from $0.025 cents at the start of October to hit an intra-day high of $0.045 on the day prior to the resource update being announced.

In what appeared to be a mix of bad timing, profit-taking and perhaps overly upbeat expectations from drill results, the company’s shares fell after the update.

However, this has been under relatively low volumes compared with the heavy buying that occurred between August and September when the share price increased five-fold from $0.007 to $0.035.

It is worth tracking the movement in the copper price since the resource update.

The start of the retracement in the copper price coincided to the day with the release of Valor’s resource update.

Copper’s six-month hot streak from circa US$2.50 per pound to US$3.20 per pound came to a halt in mid-October.

The price appeared to stabilise in mid-November, and this was reflected in the company’s share price.

However, as the copper price plunged again from US$3.16 per pound to $2.96 per pound over the last two weeks Valor has come under further pressure.

Copper grades and volumes key factors in resource expansion

This tends to indicate that the company is no longer viewed as a polymetallic play but one that is largely leveraged to copper.

Management has indicated that this is the direction the company will be heading in as it looks to improve grades and volumes of copper while still reaping the benefits of silver credits.

This time there hasn’t been the hype leading up to the resource update, and in fact it could be argued that the sell-off, which has seen the company’s shares recently slip below $0.02 has been overdone.

Consequently, should Valor be able to win back the confidence of investors with a promising update there is the potential for a positive rerating.

 

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