A new fresh focus on Canada for Chesterfield Resources
“…The prospect seems promising, the programme is fully funded, and its technical execution will be facilitated by Altius’s native expertise…”
As TMS Reach reported back in February copper and gold exploration and resource development company Chesterfield Resources (AIM:CHF) was one of the strongest small cap mining stocks through 2020, its share price rising from 3p at the start of the year to touch 17p by December as its ambitions to realise the promise of a set of prospective assets in Cyprus gathered momentum.
2021 has been tougher, the price falling back to 7p as the company’s programme in the Mediterranean island has encountered delays. But with a significant new acquisition in Canada it may be time to reconsider Chesterfield from a fresh perspective.
A new focus on Canada
The Adeline copper project in the Labrador region of eastern Canada, acquired in May, is unusual in encompassing an entire geological basin. The 40 km long prospect, which shares geographical features with copper-rich basins in Zambia, Michigan and Siberia, hosts around 250 copper-silver opportunities identified through exploratory work by previous operators.
A lack of road access has limited historic drilling: machinery has to be airlifted in as discrete components, and assembled on site. But extensive prospecting, mapping, trenching, geochemistry and geophysics work, including aerial and geophysical surveys, has furnished a rich database of opportunities. Chesterfield’s Director of Exploration Neil O’Brien believes there are ‘distinct similarities to many of the world’s great sediment-hosted copper deposits and belts including very rich copper ore mineralogy, efficient metal traps needed to form economic copper-silver deposits, and km-scale strike extents of prospective geology with hundreds of copper showings that allow for multiple camp-scale discoveries.’
Though the site currently presents logistical challenges, it is close to the regional service hub of Goose Bay, and within range of major road and rail infrastructure providing access to the coast. Labrador is ranked as one of the top ten mining destinations in the world by the Fraser Institute, and is host to several major mines. Local First Nation communities support and participate in other exploration and mining ventures in the region.
Chesterfield is working closely with Canadian natural resources company Altius, from which it acquired the asset through an all-share deal. Altius was issued 10pc of Chesterfield’s stock as payment for the project, with an option to purchase a further 10pc through a three-year warrant exercisable at 20p. The Canadian miner will help design and manage initial exploration operations on behalf of Chesterfield. A significant discovery would be marketed to one of the major mining groups, probably via an earn-in deal.
Chesterfield doubled the project’s geographical size in June, extending it to a contiguous 300 km2, covering 1,189 claims, by exercising the right to acquire new mineral licenses. The company also announced that it had begun analysing and re-modelling exploration data going back to the 1950s, and was about to undertake a field survey with a view to designing a diamond drill programme due to begin in the winter, when frozen lakes can help with the creation of drill pads. The seven week programme, which will be helicopter supported from the services centre of Goose Bay, will test for extents of high-grade copper-silver mineralised grey beds.
The company published a selection of historic trenching results that it believes demonstrate the continuity of resource-quality thicknesses and grades of rich copper sulphide mineralisation, and the potential for silver, along exposed strike lengths. They include samples averaging 7.5m thickness grading 1.25pc Cu along a trench-exposed 60m strike length, including one channel sample of 1.5m @ 7.1pc Cu, 90.8 g/t Ag; an average of 4.2m of thickness with an average grade of 1.35pc Cu, 49.8 g/t Ag along a trench-exposed 60m strike length, including one channel sample of 4.5m @ 2.5% Cu, 94.3 g/t Ag; and a drill hole with an assayed core at 7.9m @ 1.76% Cu, 56.2 g/t Ag.
By last month the analysis programme was nearing completion, and the field programme had been completed, with an update on identified targets to follow ‘soon’. The company is pursuing an investor relations and share promotion programme in Canada, ‘expecting that the combination of a large project in Labrador, copper, Altius as a partner and our rapid programme roll-out will attract the attention of the Canadian market’.
Progress in Cyprus
Until last year Chesterfield was focused on a portfolio of 100pc-owned licences – prospective for copper and gold – running across the dramatic Troodos Mountains that range along Cyprus’s southern spine. The 100 km2 cluster makes the company the island’s largest minerals rights holder.
Chesterfield is seeking to bring modern mining technology to some of the islands most ancient mines. Copper mining in Cyprus dates back to the fourth millennium BC – the island actually takes its name from the Greek word for copper, Kúpros. But there has been little exploration on the island since the Turkish invasion of northern Cyprus in 1974. The company is looking for gold as well as copper: gold was found on the island during the Cyprus mining industry’s heyday in the 1960s and 70s, but with its price pegged 50 times lower than today’s value, the discoveries were never commercialised.
Chesterfield has undertaken remote sensing, mapping, archive, geochemical and geophysics programmes to uncover Volcanognic Massive Sulphide (VMS) deposits that older exploration techniques had not been able to access, which it hopes will serve as the foundation for a mining project with a centralised planning unit. In 2019 a cluster of prospective VMS targets were identified some 50 to 200 metres below ground. Last year data evaluations indicated the presence of a VMS belt capable of producing a clean gold-rich copper concentrate, and the percussion drilling the company was able to undertake amid the pandemic restrictions found gold, zinc, copper deposits across the licence. The project received a major boost late last year when Polymetal International Plc (LON:POLY), the FTSE 100 precious metals mining group, invested £2.1m to take a 22.5pc strategic stake in the company, picking Chesterfield as a primary strategic partner for its ambitions to increase its exposure to copper.
Exploratory drilling in February intersected two high grade mineralised zones on two separate targets. The assays included a 16.6m grading 0.36pc Cu, 1.1pc Zn, 1.1 g/t Au, 9.7 g/t Ag at a depth of 137.9m. This included an interval of 2.45m grading 1.4pc Cu, 4.4% Zn, 3.0 g/t Au, 38 g/t Ag; and a 11.6m grading 0.65pc Cu, 1.0pc Zn, 2.5 g/t Au, 8.9 g/t Ag at a depth of 147.9m.
Diamond drilling got underway in June, targeting a promising North-South trending structure similar to those tapped by a nearby mine at Limni, which has produced around 8.1 million tonnes of ore yielding approximately 90,000 tonnes of copper. The programme has dragged on somewhat: last month Chesterfield said that it has ‘been extended and is still in progress’ and that ‘there is also a log jam in assay labs’ due to companies having to compress their drilling into shorter timescales because of Covid restrictions, generating concentrated demand for laboratory services. The company says that with ‘our extended drill programme and delays at the lab, realistically our Cyprus drill results are going to be pushed back to November.’
Earlier this week, however, Chesterfield was able to publish an interim update stating that announce that new diamond drill holes have intersected further mineralisation that could form a continuation of a known deposit. The intersections have yet to be assayed, but are of ‘a similar style and depth’ to known grades. The company also announced that following an appraisal of archive and other material it had decided to apply for a number of new licences with encouraging historic drilling and geophysics work, which would extend its Cyprus acreage by an additional 9.29 km2. The largest, located with 20 km of the Troodos West permits, and spanning an area of 4.05 km2, contains a 1.50 km long trending belt of 14 gossanous surface expressions with a coincident gold soil anomaly. The company believes there is considerable scope to augment the prospect – where work was last carried out in the 1950s – with contemporary techniques and data accumulated through its Troodos West exploration programme.
Copper’s long rally
Chesterfield is working to position itself to take advantage of one of the world’s economic mega-trends: soaring demand for copper driven by the shift to a green economy. As we have noted multiple times this year – in common with the wider financial press – industrial metals, especially copper and nickel, are set for a sustained rally. The price of copper, an absolutely fundamental metal for green transition technologies – an electric vehicle for example contains five times more copper than a car fitted with an internal combustion engine – has almost doubled in the past year. The International Energy Agency reports that copper’s market share will have to grow almost sevenfold between 2020 and 2030 if net zero emissions are going to be achieved by 2050.
Prices are being forced up further by supply pressures. Just as demand is surging the copper market is close to peak supply, with big miners curtailing investment in new projects. The industry has dramatically scaled back spending since the last commodity boom, when too many indulged in overpriced deals and over ambitious projects that brought them close to financial ruin. The mining industry has since focused on returning to cash to shareholders through dividends rather than signing off on new projects.
Global mining and smelting capital expenditure, which peaked at $220bn in 2012, only reached half that level last year, and exploration spending has also dropped sharply from $35.7bn in 2012 to just over $10bn last year. Other pressures on price include the increasing difficulty of finding high grade copper projects in safe mining jurisdictions, and the rundown of ageing mines with declining ore grades: it can take up to 10 years to develop a new copper project, even once all the regulatory approvals have been secured.
Chesterfield is funded for its initial work in Canada, and the continuation of its Cyprus campaign. The company raised £800,000 in July, and according to its most recent interims, published last month, had a net cash balance as at 30 June 2021 of £1,504,973.
But it has work to do to convince investors it can unlock its Canadian prospect. Chesterfield’s share price surged late last year after it secured Polymetal backing for its Cyprus programme. As the euphoria has faded so has the company’s share price. Though work at its Troodos licence continues, Chesterfield’s communications now emphasise its Canadian venture.
The market needs some persuasion. Much now rides on successful surveying and initial drilling work at Adeline. But there is good reason to hope for positive results. The prospect seems promising, the programme is fully funded, and its technical execution will be facilitated by Altius’s native expertise. The company has moved quickly to advance the project to the point of drilling within the space of a few months. The prize is the prospect of contributing to the market for one of the world’s most sought after commodities, and the possibility of attracting notice from larger companies.
We continue to think Chesterfield Resources is a small cap worth watching. With the possibility of positive updates in both Canada and Cyprus over the winter natural resources investors might want to consider taking advantage of this share’s current price.