A Management Dream Team & A Unique Mine

Written by Gerardo Del Real
Posted May 7, 2018 at 4:49PM

Publisher's Note: Today, we're bringing you the transcript from Gerardo Del Real's interview with CEO, President, and Director of Chakana Copper, Mr. David Kelley.

Mr. Kelley has decades of experience working with some of the biggest names in the commodities sector, such as BHP, Western Mining, and Newmont.

Read on to learn about Chakana Copper's Soledad project in Peru, its unique structure, and how Chakana's management team is uniquely qualified to explore it.

To your wealth,

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Nick Hodge
Publisher, Outsider Club


Gerardo Del Real: This is Gerardo Del Real with the Outsider Club. Joining me today is CEO, President, and Director of Chakana Copper, Mr. David Kelley. Mr. Kelley is an economic geologist and exploration geochemist with more than 25 years of international exploration experience throughout the Americas, Central Asia, and Australasia.

Most recently, Dave was responsible for developing the exploration program at Las Bambas for MMG as a general manager of exploration in the Americas. Dave, that's a mouthful. Thank you so much for your time today.

David Kelley: Thank you, Gerardo, and thanks for the interest in Chakana Copper.

Gerardo Del Real: Absolutely. Listen, it's a compelling story and it's not a new story in the sense that we've seen this project pass through the market before. But your perspective and take on the project is unique, it's interesting, and I think provides a clear path forward for unlocking more shareholder value.

I want to get to that, but I want to start by asking you about your background. I did a very brief introduction there, but you have a whole heck of a lot of experience and I think your experience and the technical team's experience is critical to the success of this project. So let's start with some of your background, if you could indulge us.

David Kelley: Yeah, sure. I mean, you hit the main two points. An economic geologist and exploration geochemist, I graduated from Colorado School of Mines in 1989 and spent 22 years with the majors, big companies like BHP, Western Mining, Newmont, and then the last 10 years with MMG and its predecessor companies.

So lots of big company experience, and this is really my first opportunity to jump off into the junior world in a leadership capacity like I'm in now. But I've worked all over the world. I've done copper exploration, global gold exploration, nickel exploration, a variety of different commodities, different deposit types, and many, many different geographies.

The Soledad project is right in my comfort zone and a part of South America that I've worked in for 20 years, so it was a really good shift.

Gerardo Del Real: I mentioned that the Soledad project has been looked at before. Your technical team, as well as you, obviously, are looking at this differently. I'd love to talk about the team in place and why this technical team is, frankly, so critical to the success of the project, because you are taking a different approach with the Soledad project.

David Kelley: Yeah, that's right. Really, when we talk about the technical team at Chakana we start at the very, very top of the company.

Doug Kirwin's our chairman. Doug was really inspirational in getting us focused on the tourmaline breccia pipes themselves as a target type as opposed to the previous exploration campaigns that were focused on a deep, conceptual porphyry target that was thought to be driving these tourmaline breccia pipes.

That really comes from Doug's global experience in tourmaline breccia pipes. He did his master's thesis many decades ago on tourmaline breccia pipes and he's visited, I would say, all the major mining camps that have tourmaline breccia pipes as part of their ore systems. So it was really Doug's influence that got us directed in the right direction.

Also at the board level we have John Black. John is an outstanding economic geologist in his own right, a consummate professional. He's also a very successful CEO and a discoverer. So the three of us formed a technical team at the board level, and then that passes down to our Peruvian team.

Steve Park is our chief geologist. He has 20 years' experience mapping and working and exploring in Peru, was part of the Pierina drill lot team for Barrick. So very experienced in the Cordillera Negra.

Our project manager is a guy named Carlos Montoya, lots of mine geology exploration experience, very good at running drill programs. The caliber of the results that we are getting now really speaks to the caliber of the team that we have in place. We've got eight geologists on the team in Peru, and we're ramping that up too as the program goes forward and we add more drill rigs.

Gerardo Del Real: Let's talk about the history of the project. I've mentioned several times that you look at this project differently. You outline, I believe you're up to nine pipes, but you're only currently testing two. Is that correct, Dave?

David Kelley: Yeah, that's right. The current inventory of outcropping mineralized breccia pipes at surface is at nine, and then we have about a dozen other strongly altered zones that have sheeted quartz cerussite tourmaline veins with sulfides that cut the andesitic volcanic rocks, and that fits the model perfectly of what the top expression of a blind pipe would look like. So we've got a huge inventory of targets to be tested.

Gerardo Del Real: Excellent. How is the grade distributed among the two pipes that you're testing now?

David Kelley: Well, the first two pipes that we drilled, they are different in terms of grade. The average grade of breccia pipe one is coming in right at about 3% copper equivalent.

When I say copper equivalent, I'm talking about copper, gold, and silver. About half of the value is in the gold and silver, and the other half is in copper. That's breccia pipe one I'm talking about.

Breccia pipe five is lower grade, but very good consistent mineralization. It averages about 1.5% copper equivalent, so still really an excellent high-grade style of mineralization in both pipes.

Now, the distribution of the grade varies. The fortunate thing about the breccia pipes at Soledad is that the breccia pipes tend to be mineralized throughout the breccia. It's a matrix-dominant style of sulfide mineralization within the matrix of the breccia, and they tend to be mineralized throughout the extent of the breccia. So if you're in the pipe, you're in mineralization.

Breccia pipe one, that's the one that we've done the most drilling on, and it shows a very spectacular margin zone range that reflects a higher sulfide content. We believe that that reflects the higher permeability and porosity of the breccia at the margins of the pipe where it's in contact with the host andesitic wall rock.

So we can go from 1% copper with 1.5 grams gold in the center of the pipe out to a margin zone that might be running 2 to 5% copper, and anywhere from 5 to 10 grams of gold, some really, really spectacular margin zones.

But the important point is that all of the breccia tends to be mineralized, so from a mineability standpoint we're not looking at just mining margin zone mineralization. We're looking at taking out the entire breccia pipe itself.

Gerardo Del Real: And that's important, especially in light of the fact that you're hoping, obviously, that the other pipes are mineralized as well.

I mentioned that you're currently testing two. You're expecting a very important permit here in the next couple of months that's going to allow you to test the other pipes.

What does that look like in the next few months? Does the team have a plan in place once that permit is in hand, fingers crossed, of course?

David Kelley: Yeah, we do. In fact, we've got a lot of drilling to do right now just on breccia pipe one. We're drilling breccia pipe one in detail for two primary reasons. One is to understand the geometry of the pipe.

We had an initial theory going in, and again, this comes back to Doug's experience with these tourmaline breccia pipe systems, is that the breccia pipes should get larger at depth. The reason for that is that these types of breccia pipes do not vent at surface. They're not diatreme breccias.

They're explosive, volatile events that happen instantaneously. They brecciate a column of rock above the crystallizing intrusion at depth, and that column of rock perpetuates upward until it runs out of energy. Then, the breccia collapses back on itself in the void space that is created during the explosive eruption.

That is a totally different process than, say, a diatreme breccia which erupts at surface, has lots of transport of a class in minerals and being brought up in the pipe and creates a lot of rock flour that fills the void space in the breccias, and hence, inhibits the permeability of the breccia and the consequent sulfide mineralization. We don't have that.

Most of our breccias textures at Soledad are open space filling where the sulfide is just permeated through those open spaces and deposited the sulfide mineralogy in that open space, and that's one of the reasons we get the very spectacular grades.

The second objective, of course, was to determine what that true grade profile was across the pipe. All this extra drilling that we're doing on breccia pipe one has really increased our knowledge in terms of how to drill the pipes, what to expect from the grade profile, the shape, and the geometry as we go at depth.

That experience, of course, is going to be taken into the other pipes when we get the permit. We've drilled two of the pipes so far, breccia pipe one and breccia pipe five, and then the next permit will allow us to drill breccia pipes three and six and additional step out platforms in five.

At the same time, we've expanded our land position at Soledad to incorporate four additional outcropping pipes that will be part of an expansion of the work area in that permit, and we'll be drilling those pipes by the end of the year in the fourth quarter.

So lots of drilling to be done, and that experience we've gained in this first phase of drilling breccia pipes one and five will certainly come into play as we drill those other targets.

Gerardo Del Real: Just for context, Dave, I want to cherry pick the latest release here just to give people an idea of the mineralization, the intensity of the system. Your last news release on April the 4th, you intersected 44.1 meters with 2.02% copper and 8.5 grams per ton gold, including 19.4 meters with 2.70% copper and 14.36 grams per ton gold.

That was from breccia pipe one, so just for some context there. How is the infrastructure?

David Kelley: You mean in terms of infrastructure to the project and the district?

Gerardo DelReal: Correct. Access to the project, nearby power.

David Kelley: Yeah, that's a really good question because the project's located in Ancash, in central Peru. Ancash is one of the historic mining provinces in Peru. There's the Pierina mine 35 kilometers to the north, and Antamina is 65 kilometers out to the east. So it's one of the historic provinces in Peru where mining has just become part of the culture. Because of that, mining is well accepted.

David Kelley: The communities that are around our project, generally the people that work in the mines immediately to the east of the Soledad project, and there's four operating mines in the district, they come from those two communities, Aija and Recuay. So mining is very much accepted. It's a part of the lifestyle there.

The road network getting to our project is excellent because it's maintained by Lincuna Mines. It's public road access, but it's maintained by Lincuna, who operate their four mines and two processing plants in the district off to the east of our project.

In terms of power, we're not far from the Peruvian grid power system. In fact, part of that grid power is used by Lincuna Mines and supplemented with some hydroelectric power that they've developed themselves. The topography lends itself well to water storage. There's two reservoirs up slope from our project that could be enlarged to store larger amounts of water needed for mine processing.

So really, it sits well from an infrastructure standpoint in a project that could be moved along rapidly because of the benefit of that infrastructure.

For part two of this interview, please click here.


For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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