A Milestone Moment for a Soaring Copper and Gold Miner

Written by Gerardo Del Real
Posted July 13, 2020

Chakana Copper (TSX-V: PERU) (OTC: CHKKF) just received its long-awaited permit which will allow it to drill some of the most exciting copper-gold targets in the space.

I caught up with David Kelley to go over the Soledad copper-gold silver project, which Chakana has an exiting option on that will allow it to retain 100% of the project. We talked about the excellent grades to date, when to expect drilling, and the multiple important catalysts ahead.  Enjoy. 

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader


Gerardo Del Real: This is Gerardo Del Real with the Outsider Club. Joining me today is the President and CEO of Chakana Copper (TSX-V: PERU)(OTC: CHKKF), Mr. David Kelley. Dave, how are you today?

David Kelley: Gerardo, I'm doing a lot better than the last time I talked to you. I can tell you that.

Gerardo Del Real: Let's explain to everyone why. And congratulations, of course. This is a milestone moment and I think a pivotal and critical one for the company moving forward.

David Kelley: Well, thank you. I appreciate that. I know the team appreciates it as well. They certainly have been working really, really hard to get this drill permit approval, which allows us to expand the work area. We're moving into a part of the property that we have not been able to drill yet. We've been able to do surface exploration and geophysics and that type of thing. 

We have some phenomenal targets, but we haven't been able to drill there. That's why it's such an important step to move into this new area. We know we have really, really robust targets and we've got a drill rig on the property. So we're super excited to get that permit.

Gerardo Del Real: Let's talk about what that looks like and provide some context because we are in a drastically different market than we were the last time we spoke just a month ago. If you were announcing the kind of drill results that you've already announced from previous campaigns, as robust as the share price has been lately, it would be multiples of today's share price. 

I want to highlight a couple of select intercepts; 209 meters of 2.22 grams per tonne gold, 69.6 grams per tonne silver, 0.96% copper. That would be 4.60 gold equivalent or 3.01 copper equivalent. These are the type of grades that you have consistently been able to intercept. 

I also want to talk a bit about the project. It’s 100% owned. It's a big project and you're moving into a part of it that many within the Chakana team believe is the most prospective. Can you talk about that a bit?

David Kelley: Yeah. The grade profile is really, really, I think, somewhat unique and it's a real bonus on this project. It's often that you get gold going with copper and it's maybe a small by-product type of consideration. It could still be material and economic. But we're talking about really, really high grades of precious metals. We've hit over 42 grams in our drilling for gold. We've hit over 5 kilograms of silver and then we've had multiple intercepts over 10% copper. So we're seeing high grades in all three metals. That's a really important, I think, aspect of it.

The other part of it is we've only tested a fraction of the targets on the property. We have 92 targets that have been defined by very detailed, extensive, thorough, and systematic exploration using geophysics, geochemistry, alteration mapping, and that type of thing. So we're really just getting started. If you go back and look at the drill results that we've had previously, I believe that we can produce those kinds of results moving into this new area because we have the same type of targets, very similar surface expression, multi-gram gold in rock chip and channel samples, right over the surface of these breccia pipes that are really obvious and sticking out of the ground. It's a really exciting time to be getting this permit and moving forward again with drilling.

Gerardo Del Real: Well said. You have 23 confirmed mineralized breccia pipes at surface, over 92 total targets. Let's get to the main catalyst here moving forward. There's two of course. One will be an aggressive 15,000-meter definition drill program. We'll talk about when that will commence in just a second. Then closely aligned with that is going to be the mineral resource, which I know was delayed because of the COVID lockdowns. Again, two big catalysts that hopefully we see soon, right?

David Kelley: Well, that's right. We feel the drilling is really critical prior to getting a resource estimate out just because we want to demonstrate that the project has legs, has a future, and hits a resource target that all other things considered in Peru is going to turn into a mine. That's our belief, that this project can become a new mine operating in Peru. The resource is the first step along that way to demonstrate some economic aspects of the project. 

The exploration drilling on new pipes to add to what we've already drilled. The goal is to get that all put together and then put out a maiden resource based on all of that drilling. That's really why this next drill campaign is so important. Then of course, the resource is a huge catalyst for the project and for the company going forward.

Gerardo Del Real: You've been very productive during the downtime. David, I'm going to put you on the spot here, but I know that you have to have a decent handle on what you would hope — forward-looking statement, right? — what you would hope that resource estimate looked like. Can you provide a bit of context on what you're expecting just based on the data to date?

David Kelley: I can tell you what our goal is Gerardo. I mean, our goal has been 10 million tonnes of the kind of grades that we've been drilling. You mentioned the drill intercept. Ironically, the 52 drill holes we put into Breccia 1, which is the main zone and a blind pipe that was discovered right next to it. The average of those 52 mineralized drill holes was just over 2 grams gold, 65 grams silver, and just below 1% copper. Very similar to the intercept that you mentioned. That's kind of the profile. That's not a resource grade, but that's a weighted average of a lot of drilling on those two breccia pipes. So that's indication of what kind of grade we can expect to achieve out of something like Breccia 1. Each breccia pipe is a little bit different. 

Our goal is to get something that is in the 10 million tonne range based on five or six breccia pipes. The top 250 to 300 meters from surface and demonstrate that all of those breccia pipes are still open at depth, which they are. We've never seen the bottom of a breccia pipe yet. Then we have all of the targets to test. We have already proven that these breccia pipes are getting bigger at depth. So there's so many different aspects in terms of upside potential. If we can start with 10 million tonnes and demonstrate to the market that we've got a viable project and then work really hard testing some of that additional potential increase in the resource from there. That's where the runway for this project and our share price to take off, I think, really comes from.

Gerardo Del Real: You have a cornerstone investor in Gold Fields, which I believe owns approximately 17% of the stock. When can we anticipate drilling to commence?

David Kelley: That's a good question. We're working hard on that right now. The permit is out of the way. So we're now really in the same basket that everyone else is in Peru. The government is supporting the restart of mining and exploration. That's been really good. They have published COVID-19 work protocols that are kind of industry-wide. You have to pick what segment of the industry you're in and then adapt what applies to your particular project and program. We're doing that right now, changing our work protocols to incorporate the COVID-19 safety precautions and those types of things. That's really going to be the determinant. 

When we go back to work will be when we're confident that we can do so safely for the health and safety of our employees and contractors and the people in the local communities. But I can tell you, after waiting as long as we have for this permit, we're very anxious to get started. We just don't want to jump the gun and rush out and do it without being fully prepared. But we have the right team working on this right now and some very experienced contractors that are all coming together to set up the work plan in the way that we can get started and continue to go. 

The worst thing that would happen is you get started, and you skipped a few steps and then you had to shut back down because you didn't do it right. People got sick or something like that. We want to avoid that obviously, but I can tell you that we're much closer to realizing the start of the drill program than we were months ago when we had no idea when this permit was going to come through.

Gerardo Del Real: You have a very supportive local mining community. It's good to hear that you're taking the precautions that you've taken. The drill program is fully funded, correct? The cash position looks like $6, $6.5 million Canadian. Is that an accurate number?

David Kelley: That's right. Yeah. We're right at $6.5 million Canadian. So we're well financed for the next drill program. The communities have been very supportive and we've been supporting them too. I put out a note recently on the last round of donations we made to the town of Aija, which is the largest small town near our project, and then two smaller communities closer to the project. We've been donating medical supplies and equipment and food and basic necessities and cleaning supplies and that type of thing to families in the communities around us. That's been well received by them and we're happy to provide that kind of support. 

We're excited to get this drill program going as well, because we know that a large part of our team will be made up of the local people that will help us execute this drill program. IT provides good income and steady work for them too in this time when it's most needed.

Gerardo Del Real: Dave, congrats once again. Let's chat once the drilling program commences. You're cashed up, you have a lot of gold. You have a lot of copper, you have a lot of silver. It's a perfect time to have a lot of those metals. Congratulations and we'll chat again soon.

David Kelley: Excellent. Thank you, Gerardo. Thanks for the support


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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