VANCOUVER — Sitting quietly behind a table in Australian explorer SolGold’s (LON-AIM: SOLG; US-OTC: SLGGF) booth at this year’s Association for Mineral Exploration Roundup convention in Vancouver, a 10-year-old girl is clicking a magnet against a piece of SolGold drill core from northern Ecuador that’s chock-full of chalcopyrite, pyrite and magnetite.
Her father Jason Ward, SolGold’s exploration manager, sits beside her smiling and nodding in approval. The rock’s magnetic signature is one of the many reasons why he believes the company’s Cascabel copper-gold project, 180 km north of the capital Quito, may become one of the largest copper-gold porphyry systems ever discovered.
SolGold and its 15% partner Cornerstone Capital Resources (TSXV: CGP) have already delivered six world-class intersections of 1% copper equivalent over 1 km of continuous mineralization from the project’s Alpala Central zone. Out of the 19 holes drilled to date, 17 have hit the target and each have bottomed in mineralization.
The best intercept from Alpala Central is from hole 12, which returned 1,312 metres of 0.7% copper and 0.63 gram gold per tonne from 128 metres deep, including 576 metres at 1% copper and 1.19 grams gold from 844 metres deep.
“The Andean copper belt has some of the world’s largest copper-gold porphyries, but when you look at a map, there’s a gap in the number of mines over Ecuador compared to Chile and Peru,” Ward, an Australian native, tells The Northern Miner. “We went to Cascabel looking for a world-class discovery because it had all the right ingredients … and Alpala has the potential to be one of the biggest — if not the best — discovery.”
The Brisbane-based company’s latest drill hole 19 returned a broad, mineralized zone of 1,132 metres of 0.5% copper and 0.33 gram gold from 268 metres deep, across a 500-metre true width.
The hole, which represents the most southern intercept of Alpala Central to date, includes higher-grade intervals measuring 802 metres of 0.6% copper and 0.43 gram gold from 572 metres deep, and 516 metres of 0.8% copper and 0.5 gram gold from 838 metres, across true widths of 360 metres and 230 metres.
The current footprint of mineralization at Alpala Central, including its high-grade copper-gold core, measures 300 by 700 metres, has a dip extent of over 1,800 metres and is open in all directions.
Geological mapping and spectral mapping from soils and auger chips have shown that Alpala Central falls within a 4.5 km by 400-metre wide phyllic-argillic to advanced argillic alteration envelope, which displays all the geophysical and geochemical attributes of a giant porphyry complex, Ward says.
“As a company we’ve always explored aggressively, and our geologists know how to vector into the hotter, more mineral-rich portions of the porphyry system,” he says. “And from what we’ve seen so far, we reckon the best of Cascabel is yet to come.”
To support this, he points to a cross section that pins the company’s drill holes against airborne magnetic geophysical anomalies from a 3-D magnetization vector inversion model.
The magnetic anomalies, which indicate the potential for quartz-chalcopyrite-magnetite veining above a high-grade porphyry system, not only coincide with mineralization at Alpala Central, but extend another 750 metres north to the Moran target, and over 1.5 km southeast to the Cristal target.
Ward says the size of the Alpala-Moran magnetic anomaly is comparable to the Hugo Dummett deposit at Rio Tinto and Turquoise Hill Resources’ Oyu Tolgoi copper-gold mine in Mongolia.
“At Alpala, we see a strong correlation between the mineralization and magnetite in drill core, so our models suggest that Cascabel could contain more than 10 billion tonnes of mineralized rock, and that’s an exciting prospect for us,” he says.
Ward notes that the 3-D geophysical model is “constantly being updated,” with magnetic susceptibility data taken from every new drill hole at the project, which dramatically increases the accuracy of the model.
But it’s not just the geophysics and drill results that speak to Cascabel’s potential.
Ward thumbs through a company presentation that illustrates how the magnetic anomalies across the 50 sq. km property overlap with soil geochemical anomalies, induced polarization geophysical anomalies, favourable structures and alteration mapped at surface.
SolGold’s technical team includes chief technical advisor Steve Garwin, one of the world’s authorities on porphyry, epithermal and Carlin-style mineralization in the circum-Pacific region.
The team has interpreted 13 porphyry centres from the data. Each one shares the same geological signatures as Alpala Central, but none have been tested with drilling.
“If you follow the gold in the creeks, it won’t lead you to the porphyry, it will lead you to high-grade gold veins,” Ward says. “Copper-in-soil is also unreliable because it’s fairly mobile in the tropical environment, so molybdenum is a really good vector to mineralization, because it’s much more stable.
“In this type of tropical environment you usually see elevated manganese from the weathering of hornblende, which is an iron-rich mineral. But alteration from the porphyry wiped out the hornblende before weathering occured, so what we also see is a lack of manganese in the soils above these systems.”
The girl passes The Northern Miner a piece of drill core, while Ward explains that the nature of the veining in it is more evidence that Alpala Central is likely part of a much larger system.
“Our stockwork has multiple directions, so it’s not just one structure that’s controlling its emplacement, there’s been a complex, powerful, multi-directional stress regime at play here,” he says. “We have up to 12 vein episodes and every stage brought in copper, which is unusual. Normally, the late vein stages in porphyries are mostly pyrite rich, but this system had so much copper that even the late veins are still depositing metals.”
Over the next two years, the company plans to drill 95,000 metres, largely at Alpala Central and its southeastern extensions, where higher-temperature alteration minerals and bornite mineralization have been spotted on surface.
Ward adds that the property is accessed via a paved highway, whereas a public gravel road crosses the prospective targets.
“The best grades we’ve seen so far are in the sericite-propylitic alteration zones, which suggests we’re not even in the core of the system yet,” Ward says. “When we start seeing bornite more than chalcopyrite, then we know we’re getting closer to its heart, and that’s when we could see our grades potentially double.”
SolGold CEO Nicholas Mather tells The Northern Miner during a phone interview that the company is extending Alpala’s dimensions before calculating a resource estimate.
“You don’t want to half-bake the cake, because as soon as it comes out of the oven, it’ll fall flat,” Mather says. “The Alpala Southeast target alone could double the footprint of mineralization, so we want to make sure our resource is based on knowing the limits of the Alpala system.”
Mather adds that SolGold is fully financed to complete the exploration program, having amassed US$44 million in previous capital raises with Newcrest Mining (TSX: NM), Maxit Capital, DGR Global (ASX: DGR) and Guyana Goldfields (TSX: GUY).
“This is a transformational project for a company to have, so we’re not interested in a joint venture,” he says. “We want to take what we used to discover Alpala, and not only apply it to the rest of the property, but to the rest of Ecuador, as well. This is a geological province that has been neglected from an exploration point of view, and we feel like we’re just cracking the rock open. It’s a diamond in the rough.”
But there are reasons why some mining companies have hesitated to explore the country.
Ecuador earned its reputation as being a risky jurisdiction for exploration and mining in June 2013, when Kinross Gold (TSX: K; NYSE: KGC) announced that it wouldn’t proceed with its Fruta del Norte gold project in southern Ecuador. The company and the Ecuadorian government couldn’t agree on economic and legal terms, with a 70% windfall tax being the strongest impediment.
The move spurred an exodus of explorers from the region, leaving EcuaCorriente, a Chinese company developing the US$1.4-billion Mirador copper project, as the only active contract in the country.
Frustrated by the lack of interest in the sector, and plagued by a slowing economy as oil revenues collapsed, the government retained analyst-firm Wood Mackenzie to help revamp its tax laws to reinvigorate mining investment. By early 2015, eight fiscal reforms were put in place — including a new formula for the windfall tax — and a Ministry of Mines was created to oversee the sector.
By January last year, Lundin Gold (TSX: LUG; US-OTC: FTMNF) — which acquired Fruta del Norte from Kinross in 2015 — struck a deal with the Ecuador government to advance the project, and construction is targeted for mid-year.
Mather now refers to Ecuador as a “yellow light country.”
“I’m happy with the way Ecuador is emerging as a mining nation,” he says. “The government understands that to balance the books, you need a variety of capital sources. They want to build a mining industry, and not just open up the country to speculation.
“Newcrest and our other major shareholders believe that’s a likely outcome as well, otherwise they wouldn’t have approached us,” he says. “They don’t just invest in a company like SolGold without the confidence in the project, management and jurisdiction.”
SolGold acquired an 85% interest pursuant to an option agreement with Cornerstone. Cornerstone’s 15% interest is free-carried to completion of a bankable feasibility study. There is an underlying 2% net smelter return royalty on the project, which SolGold can buy back for US$4 million.
Shares of SolGold have traded in London in a 52-week range between 1.97 pence and 46 pence, and traded at 37.75 pence sterling at press time. The company has 1.4 billion shares outstanding for a £540-million (US$671-million) market capitalization.
Shares of Cornerstone have traded in Toronto within a 52-week range of 2¢ to 33¢, and closed at 27¢ at press time. The company has 287.5 million shares outstanding for an $82-million market cap.