After a year of talks and hundreds of hours of due diligence, BHP Billiton (NYSE: BHP) has signed an option agreement to earn a 75% stake in Aston Bay Holdings’ (TSXV: BAY) Congolese-style, sediment-hosted copper deposit in Nunavut, potentially spending US$40 million on exploration over nine years.
“BHP shows an extraordinary level of technical due diligence and we’re ecstatic to have them as a partner,” Aston Bay’s president and CEO Benjamin Cox says. “It’s like being invited to sing a duet with Adele — it’s glorious — but most singers would never get the chance.
“BHP only does exceptional projects — that’s all they do,” he continues in a telephone interview from London. “They go bigger or they go home.”
The Storm copper project on Nunavut’s Somerset Island covers a more than 100 km strike length of mineralized showings within stratigraphy that favours sediment-hosted copper mineralization.
Historic drilling focused on mineralized outcrops and included intercepts of 100 metres of 2.5% copper and 56 metres of 3.1% copper at the 2750N zone, and 49 metres of 1.8% copper at the 2200N zone.
“It was an old Cominco project where they focused on surface expressions — they concentrated on relatively shallow drilling,” Cox says, noting that Cominco, now Teck Resources, worked on the project between 1996 and 2001. “We’re looking at a deeper layer than what had been drilled previously.”
The option agreement with BHP is not the junior’s first with a major. It had previously partnered with Chilean copper miner Antofagasta (US-OTC: ANFGY), announcing an earn-in agreement in December 2014. But the base metal group pulled out just six weeks later, in January 2015.
“The week they pulled out, the price of copper went down 20% and they lost their nerve on a lot of projects,” Cox says. “Sometimes, timing is just not pleasant.”
But the experience had a silver lining, as Antofagasta’s chief geologist for North America, Thomas Ullrich, eventually jumped ship, joining Aston Bay earlier this year as the junior’s executive vice-president of exploration and chief operating officer.
“He spent five years at Antofagasta and looked at 120 projects, and this was the best one he found,” Cox says, adding that Ullrich “lives for discovery.”
Before joining Antofagasta in 2011, Ullrich was senior geologist for Almaden Minerals (TSX: AMM; NYSE-MKT: AAU), where he managed the drill program for the team’s discovery of the Ixtaca silver-gold deposit in Mexico.
Cox points out that as far as he can tell, BHP’s earn-in with Aston is unusual, as the mining giant prefers not to invest in publicly listed juniors. “We did a lot of due diligence on BHP and their base metal projects, and we could only find three or four projects dating back to the late 1990s that they invested in through public companies,” Cox says. “It’s a pretty rare occurrence … and speaks to the utility of our asset. I think they like the asset enough to put up with us, that is, a small junior.”
The last time this happened on a base metals project was with Anglo Potash. BHP signed a joint-venture deal with the Calgary-based junior, which had nearly 7,200 sq. km of potash permits in Saskatchewan, including a resource at Jansen Lake, 30 km from Potash Corp. of Saskatchewan’s (TSX: POT; NYSE: POT) Lanigan mine. BHP went on to acquire Anglo Potash in May 2008.
Cox says Aston Bay will benefit hugely from BHP’s technical team, which he believes is second to none. “The level of technical brains BHP has is extraordinary,” he says. “They put a lot of thinking into their projects.”
As for copper, Cox says its supply and demand fundamentals outshine every other metal. The 38-year-old mining executive, who has an MBA and an undergraduate degree in economics and medieval history, with a minor in business, previously worked in the front office at hedge fund D.E. Shaw, where he specialized in the red metal. “I ran a team of six people and we determined that copper was the only thing that really excited us, so when I left Shaw in 2010, the only natural thing to do was look for copper deposits,” he says.
“Fundamentally, copper is irreplaceable — modern society cannot exist without it, and it’s the only commodity that we’re running out of. If you want to double the global supply of iron ore you can do it, but there’s not enough copper in resources within major mining company portfolios to even increase the supply 10%.”