Indicated resources have more than doubled to 4.6 billion pounds of copper at McEwen Mining’s (MUX-T, MUX-N) Los Azules project in Argentina, while inferred resources have jumped 4% to 10.8 billion pounds of copper.
The updated resource was based on limited drilling —8,100 metres between January 2011 and April 2012 — and confirmed that mineralization continues laterally and at depth. The drilling was confined primarily to step-out holes to the southwest of the known deposit, which the company describes as one of the world’s largest undeveloped copper deposits.
The next drill season will begin in November and will consist of about 15,000 metres with more powerful core drill rigs, which the company believes will increase the likelihood of reaching target depths of more than 700 metres where it has encountered high-grade mineralization.
Adam Graf, an analyst at New York-based investment bank Dahlman Rose, has a price target on the stock of $7 per share. At presstime McEwen Mining was trading at $3.04 per share within a 52-week range of $2.02-$6.86.
“The Los Azules project is an early-stage, giant porphyry deposit that is beyond the company’s current capabilities to build,” he wrote in a research note. “However the company is defining the asset in order to maximize value for shareholders — either through stock price appreciation for the intrinsic value defined or through a monetization event.”
Currently the indicated resource at a 0.35% cut-off grade contains 323 million tonnes grading 0.65% copper while the inferred resource has 948 million tonnes grading 0.52% copper.
The deposit has a high-grade core (using a cut-off grade of 0.70% copper) totaling 112 million tonnes at an average grade of 0.89% copper in the indicated category and 119 million tonnes at an average grade of 0.86% copper in the inferred.
Los Azules lies in western San Juan province within a belt of porphyry copper deposits that straddles the border between Chile and Argentina. Other copper deposits in the belt include Codelco’s El Teniente and Andina mines, Anglo American’s (AAUK-Q, AAL-L) Los Bronces mine, Antofagasta’s (ANFGY-O, ANTO-L) Los Pelambres mine and Xstrata’s (XSRAF-O, XTA-L) El Pachon project.
A portion of Los Azules is subject to litigation in British Columbia and a trial is set to start in November and last for about six weeks. The dispute dates back to 2009 and involves an option agreement between Xstrata and Minera Andes, a company that was combined with U.S. Gold to form McEwen Mining in January 2012.
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