Q2 Metals (TSXV: QTWO; US-OTC: QUEXF) has drilled its best hole yet at the Cisco lithium project – which it estimates as the fourth-largest globally – while the explorer in Quebec’s James Bay region plans a preliminary economic assessment (PEA) this year.
Hole CS26-093 cut three separate mineralized intervals, led by 403.7 metres grading 1.57% lithium oxide (Li2O) from 383.6 metres depth, Q2 reported Tuesday. It also returned 213.8 metres at 1.93% Li2O from 154.2 metres and a near-surface interval of 60.8 metres at 1.24% Li2O from 17.7 metres. See a 3-D image of the drilling with analysis.
“Drill hole-93 exceeded our expectations, intersecting three wide mineralized zones that collectively span approximately 678 metres of the 803-metre hole,” Vice-President of Exploration Sage McCallum said in a release. It’s “the best hole ever drilled on the Cisco project in terms of total mineralized pegmatite in one hole.”
Cisco’s April resource boasts 295 million inferred tonnes grading 1.36% Li2O, making it the Western Hemisphere’s biggest hard-rock lithium deposit, according to Canaccord Genuity. The brokerage sees the project supporting one of the world’s largest spodumene mines and considers it a compelling takeover target ahead of the PEA.
Shares in Q2 Metals gained 1.5% to $2.79 apiece in Toronto on Tuesday morning, valuing the company at $594 million. The stock has gained more than 240% over the past year.
Map courtesy of Q2 Metals.
Shallow interval
About 170 metres of the widest intercept reported Tuesday lies outside the conceptual pit shell used for Cisco’s April resource. The shallowest interval begins at a vertical depth of only about 14 metres near the CO20 outcrop zone, Q2 said.
“The area surrounding the CO20 zone is largely obscured by vegetation and till cover making these results particularly encouraging,” McCallum said. “Intersecting such broad and robust mineralization in an area that is not well exposed highlights the potential for additional mineralization beyond what is currently defined.”
The results come as Q2 advances infill drilling intended to upgrade Cisco’s inferred resource to the indicated category and support its first PEA. The company has completed 9,552 metres in 22 holes in its summer program, with four rigs operating in the main deposit area.
The April resource ranks Cisco the fourth largest hard-rock lithium deposit globally, according to Q2. It includes 270 million pit-constrained tonnes at 1.36% Li2O and 24 million underground-constrained tonnes at 1.34% Li2O. The deposit is about 6.5 km from the Billy Diamond Highway and about 150 km north of rail infrastructure at Matagami.
Canaccord Genuity mining analyst Katie Lachapelle on Aug. 17 raised the brokerage’s target for Q2 to C$9.50 a share from C$5.80 as it shifted its valuation from an in-situ approach to a full mine model ahead of the PEA.
Canaccord’s base case envisages a 6-million-tonne-per-year operation producing about 1 million tonnes annually of spodumene concentrate grading 5.5% Li2O. Such an operation would rank among the world’s largest hard-rock spodumene mines while consuming only about half of Cisco’s existing resource over its modelled mine life, according to the brokerage.
The analyst applied a 50% risk adjustment to Canaccord’s net asset value estimate and benchmarked capital and operating costs against other Quebec lithium projects, with adjustments for Cisco’s infrastructure and location advantages. The brokerage said further project development and de-risking could narrow the gap between Q2’s market valuation and its estimated net asset value.
“In our view Cisco continues to be a compelling M&A candidate for this reason,” Canaccord said.
Drilling plan
Q2 began its summer drilling in June with about 20,000 metres planned, primarily to convert inferred resources to indicated while also testing extensions and regional targets. The company says the deposit remains open along strike and has identified additional targets across its 412.5-sq.-km property.
The company intends to deliver a stream of strong news and results this year, Q2 Metals President and CEO Alicia Milne said in the release.
“These results continue to further demonstrate the exceptional scale and continuity of mineralization at Cisco and reinforces our confidence in the project’s significant growth potential,” Milne said.
“We are advancing multiple workstreams in parallel, including our PEA which will provide the first comprehensive assessment of Cisco’s development potential and economics.”
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