Looking for a Gold Company in two different continents? Then think Chesterfield
“…Polymetal may currently be sailing troubled waters, but the economic rationale for its taking such a significant stake in CHF still stands: the promise of two highly prospective projects that exploration so far indicates to be rich in one of the world’s most sought after commodities…”
Exploration and resource development company Chesterfield Resources (AIM:CHF) continues to work towards elaborating the full promise of two prospective copper and gold projects in Canada and Cyprus.
Progress in Canada
CHF acquired the Adeline copper project in the Labrador region of eastern Canada last May. Adeline, located within the western half of the 260km long Central Mineral Belt, comprises five contiguous mineral licenses totalling 29,725 hectares (297.3km2), covering the full extent of the Seal Lake basin, a geological structure approximately 40km long by 10km wide containing some 250 copper prospects. The project is close to the regional service hub of Goose Bay. Labrador, host to several major mines, is ranked by the Fraser Institute in the top ten international mining destinations.
Seal Lake has been repeatedly explored over the years, allowing for the compilation of an extensive exploration database. Historic trenching and channel sampling has established the presence of laterally continuous high-grade copper beds, but drill testing has been limited due to a lack of road access. Copper grades of around 10pc to 30pc have been recorded in areas of concentrated sulphide mineralisation rich in the principal copper minerals, chalcocite and bornite. CHF believes there are ‘distinct similarities to many of the world’s great sediment-hosted copper deposits’ – including Zambia, Michigan and Siberia – ‘with 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.’
CHF acquired the asset through an all-share deal with Canadian natural resources company Altius, which was issued 10pc of CHF’s stock as payment, with an option to purchase a further 10pc. The Canadian miner will manage initial exploration operations on behalf of CHF. A significant discovery would be marketed to one of the major mining groups, possibly through an earn-in deal.
CHF has 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.
Following the acquisition CHF moved towards designing a diamond drill programme by analysing and re-modelling exploration data dating to the 1950s, and undertaking a three month field survey to test for extents of high-grade copper-silver mineralised grey beds. Early this year CHF reported that the three month exploration and mapping programme had returned ‘locally high-grade copper and silver assay results’ from chip and rock samples across multiple targets. The dominant copper minerals are chalcocite and bornite, often disseminated in fine grained matrices that demonstrate high tenor of copper mineralisation as compared with chalcopyrite.
The desktop review, which encompassed results from historical geophysics, rock and trench sampling programmes, and various drilling programmes over the past 70 years, was also positive, identifying ‘highly encouraging historical drill intersections’ including 1.76pc Cu and 56.2 g/t Ag over 7.9m within the prospect’s Ellis target. The study also identified several entirely new target areas for exploration. CHF will use the data from the exploration programme and the review to generate ranked targets and the design for an initial diamond drill programme earmarked for later this year.
In March CHF published a NI 43-101 technical report summarising the information gained from the field programme and desktop study, and detailing the styles of copper mineralisation so far discovered. The report is a key component of the company’s application for secondary listings on Canada’s Toronto Stock Exchange and the US OTCQB market, intended to promote North American interest in the Seal Lake prospect.
Continued exploration in Cyprus
In addition to moving forward with Seal Lake CHF continues to define the potential of its portfolio of fully owned licences running across Cyprus’s Troodos Mountain range. The company is seeking to bring modern technology to historic mines first entered by the ancient Greeks, and reignite a Cyprian mining industry mothballed since the Turkish invasion nearly 50 years ago. CHF 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.
CHF 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. In 2019 a cluster of prospective VMS targets were identified some 50 to 200 metres below ground. The following year data evaluations indicated the presence of a VMS belt capable of producing a clean gold-rich copper concentrate.
Diamond drilling last year encountered what seemed to be ‘a highly encouraging strike on a gold/silver system’, confirmed by the publication of assay results in February which reported that drilling had ‘significantly enhanced the prospectivity at three target areas, Orchard, Evlim and Evlim South’ and ‘established a 12km geological trend … now considered key to controlling several mineralised systems, with the potential for further discoveries along the structure’. This ‘Westline Trend’, which will be the focus of this year’s forthcoming exploration campaign, yielded gold equivalent grades ranging from 1.63g/t to 8.04g/t, and copper equivalent grades from 1.00pc to 4.94pc. The company reported assay highlights from the Orchard area of 5.70m @ 2.27g/t Au, 6.32g/t Ag 0.42% Cu, 5.99% Zn and 4.05% CuEq1 within a zone of 24.05m @ 1.69g/t Au, 5.85g/t Ag, 0.11% Cu, 1.48% Zn and 1.73% CuEq1; highlights from the Evlim area of 21.90m @ 1.60g/t Au, incl. 2.40m @ 5.41g/t Au; and highlights from the Evlim South area of 14.00m @ 1.12g/t Au & 10.35g/t Ag, and 12.85m @ 0.84g/t Au & 5.07g/t Ag.
The next phase of exploration will focus on identifying further targets along the Westline Trend. CHF believes the results indicate that the gold zones so far encountered indicate the presence of copper rich deposits nearby: copper rich zones in Cyprus VMS systems tend to be smaller and more highly concentrated, while the gold zones have a much broader footprint, and more readily apparent. CHF notes that the two other main explorers on the island, Caerus Resources and Venus Minerals, have both reported gold-rich encounters.
The copper megatrend
CHF is working to position itself to take advantage of one of the world’s economic megatrends, the soaring demand for copper driven by the shift to a green economy. The price of copper, a fundamental metal for green transition technologies like wind turbines and electric vehicles, hit record highs above $10,500 a tonne last year, and has doubled since the depths of pandemic. The International Energy Agency says 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. Other pressures on prices 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 and Polymetal
CHF’s positioning to take advantage of the copper boom won significant backing 18 months ago from Russia-focused mining giant Polymetal International (LON:POLY), which invested £2.1m to take a 22.5pc strategic stake in the company to increase its exposure to the metal. The deal supercharged CHF’s share price at the time, but now risks being seen as a liability in light of POLY’s Russian commitments. During an interview with TMS at the outset of the war in Ukraine Executive Chairman Martin French said CHF did not see the relationship with POLY as a risk. The terms of the agreement do not allow POLY to sell its shares or increase its position by more than 1pc for at least three years. Nor can POLY control or influence the running of CHF.
Outlook
CHF undertook a fundraise of £700,000 in February to support its current round of exploration, and to fund its new North American listings. The company’s most recent Annual Report, published last month, stated a cash position at 31 December 2021 (prior to the fundraise) of £762,971. Exploration costs were up from £701,714 to £1,426,898, pushing the company’s loss for the year £900,636.
CHF’s share price took a hit immediately after the Russian invasion, falling from just under 7p to just over 4p. The price has since clawed up to around 4.5p at the time of writing, taking the company’s market cap to £6.13m. It’s not so long since the price was significantly higher, touching 17p at the end of 2020 as anticipation rose regarding its prospects in Cyprus. Since then the price has drifted as CHF has focused on the hard work of turning promise into reality, bolstering its offering through the Canadian acquisition. With both projects making headway CHF may now look somewhat underpriced. We continue to recommend Chesterfield Resources as a small cap to keep watching: POLY may currently be sailing troubled waters, but the economic rationale for its taking such a significant stake in CHF still stands: the promise of two highly prospective projects that exploration so far indicates to be rich in one of the world’s most sought after commodities.
