Cyprus is still key for Chesterfield
“…Several events are on the horizon for Chesterfield that could push the share price back up. Field work is underway in Cyprus, and the company hopes to further define the nature of its resource with a view to then move ahead to drilling…”
Exploration and resource development miner Chesterfield Resources (AIM:CHF) has recalibrated its strategy over the past month as the company continues to work towards unlocking the potential of copper and gold projects in Canada and Cyprus. Our updates on CHF this year have covered the company’s assets in detail, but to recap:
The Adeline Copper Project, Canada
CHF acquired the Adeline copper project in Labrador, eastern Canada last May., Located within the western half of the 260 km long Central Mineral Belt, one of the world’s primary mining districts, Adeline comprises five contiguous mineral licenses covering 297.3 km2, encompassing the full extent of the Seal Lake basin, a geological structure hosting some 250 copper prospects. The project is close to the regional service hub of Goose Bay.
Historic trenching and channel sampling has established the presence of copper grades ranging from 10pc to 30pc. Drill testing has been limited due to a lack of road access but CHF says the data so far available indicates ‘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 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. CHF is moving 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 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 copper and 56.2 g/t silver over 7.9 metres within the prospect’s Ellis target. The study also identified several entirely new target areas for exploration. Earlier this year 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. 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. A significant discovery would be marketed to one of the major mining groups, possibly through an earn-in deal.
The Troodos Mountain range, Cyprus
CHF is also working 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 12 km geological trend … now considered key to controlling several mineralised systems, with the potential for further discoveries along the structure’. This ‘Westline Trend’ has yielded gold equivalent grades ranging from 1.63 g/t to 8.04 g/t, and copper equivalent grades from 1.00pc to 4.94pc.
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.
Chesterfield recalibrates
Earlier this month CHF announced changes to its management team and a shift of focus towards accelerating its Cyprus interests. Outgoing Executive Chairman Martin French has been replaced by Paul Ensor, who previously served as a non-Executive Director. Mr Ensor has acted in senior executive, non-executive, and advisory roles to a number of junior companies in the natural resources sector, and has also worked in the financial markets in institutional equity research and sales with Baring Securities, CLSA, and UBS.
CHF said: ‘Exciting well-defined prospects notably the Westline Trend and Orchard, amongst others, will be of increased focus and priority to create potential value for shareholders. A field work programme has been underway during 2022 albeit at a more modest pace than previously anticipated given market conditions.’ Regarding its Canada assets, the company said that the directors recognise ‘a project of Adeline’s scale, size and potential value will require the introduction of external support both for capital and to enhance the Company’s and Altius’ technical expertise. The Board will be commencing discussions with third parties and will update the market with developments.’ In view of the shift of focus towards Cyprus CHF has put on hold plans for a secondary listings on the Toronto Stock Exchange.
A week later CHF announced that Chief Financial Officer Ajay Kejriwal will also assume the role of interim CEO while the company searches for a new chief executive with ‘the appropriate technical and commercial skills to lead a junior exploration company.’ Mr Kejriwal has overseen number of transactions in the junior markets sector, and raised capital and served as a consultant or director for many mining and resource companies. He currently serves as a Non Executive Director for Apollo Minerals and several private entities. He has worked at Morgan Stanley, Cazenove and co, and Nomura International. Mr Ensor said: ‘Our initial goal is to move as quickly as possible to realise value for our shareholders through potential agreements with third parties with regard to our Canadian assets, while at the same time rationalising and consolidating our licences in Cyprus. Ajay Kejriwal is highly experienced in the sort of transactions that we contemplate in Canada and a skilled negotiator.’
CHF has also completed an initial round of cost efficiencies to minimise the need for dilutive capital raisings. Ongoing monthly cash outgoings are expected to be reduced by over 50pc in the months ahead, and ‘the Board does not expect to undertake any dilutive equity offerings for the remainder of 2022 ,and the ambition is for that to extend well into 2023.’
The copper megatrend
CHF is working to position itself to take advantage of one of the world’s economic megatrends, the long term 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 of $10,500 a tonne in the immediate aftermath of the Ukraine invasion. 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. A new S&P Global study notes that demand for copper will double over the next decade, from 25 million tonnes today to 50 million by 2035.
In the meantime cooper’s value has – as ever – swung with the ebb and flow of the global economy. The price has come back down from the clouds, falling below $7,000 tonne recently as the market frets about the possibility that the energy crunch, higher interest rates and China’s Covid crackdown will push the global economy into recession. A stronger dollar has also weighed on the price by making it more expensive for holders of other currencies to buy the metal. But its value has rallied again in the past couple of weeks as lower prices have generated concerns that miners will no longer sanction the new projects that will be desperately needed to meet longer term demand. Analysts indicate that if lower prices persist scheduled projects will be delayed and supply will peak in 2024-25, just as demand is set to increase from the energy transition. A supply crunch would have serious implications for the energy energy transition: companies are find it more difficult to locate high grade copper projects in safe mining jurisdictions, and it can take up to 10 years to develop a new copper project even once all the regulatory approvals have been secured.
Outlook
Short term market cycles notwithstanding, CHF has an opportunity to come on stream just as demand for copper is peaking. The company is funded for its current round of exploration, having undertaken a fundraise of £700,000 earlier this year. CHF’s latest interims, for the six months to 30 June 2022, reported a pre-tax loss of £491,607 (30 June 2021: £433,538), and a net cash balance of £663,226 (30 June 2021: £1,504,973). As noted, the company is pushing through cost efficiencies to reduce the size and frequency of future placings.
CHF faces the perennial natural resource small cap challenge of retaining the market’s interest through the long process of defining the scope of its resource and funding drilling programmes to turn promise into reality. The company’s share price has drifted down from 10p at the start of the year to around 3p, where it seems to have bottomed out. Several events are on the horizon that could push that price back up. Field work is underway in Cyprus, where the company hopes to further define the nature of its resource with a view to moving ahead to drilling. Suitable partners could be found to progress what seems to be an intriguing prospect in Canada. CHF has rather fallen below the market’s line of sight this year, but, energised with a new strategy, perhaps now is a good time to take a look at a company quietly working to unleash the potential of resources that a world in transition is going to need.
