When a renowned geologist like Douglas Kirwin throws his weight behind a junior exploration company, the mining world usually sits up and takes notice.
Kirwin, a member of the joint discovery team of the Hugo Dummett deposit at Oyu Tolgoi in Mongolia and a corecipient in 2004 of the Prospectors and Developers Association of Canada’s inaugural Thayer Lindsley Award for the most significant international mineral discovery, is chairman of Chakana Copper Corp., a privately held company that through its wholly owned Peruvian subsidiary owns the rights under an option agreement to acquire the Soledad copper-gold-silver project from a subsidiary of project-generator Condor Resources (TSXV: CN).
Under the option deal Chakana Copper can earn the 100% stake over four years, subject to a 2% net smelter return royalty (NSR).
Soledad — which hosts multiple high-grade, quartz-tourmaline-sulphide breccia pipes that crop out at surface — is 260 km northwest of Lima, and lies in the Cordillera Negra and western ranges of the Andes Mountains. The project is 35 km south of the Pierina gold-silver mine operated by Barrick Gold (TSX: ABX; NYSE: ABX) in the country’s prolific Miocene metallogenic belt.
Kirwin first came across information on Soledad in January and was asked his opinion of the project by some friends. He recommended that they try to acquire the project because he was impressed by the gold and copper drill intercepts and the tourmaline breccia pipe-style mineralization. There were also a number of targets ready to drill straight away.
“Breccia pipe targets are not everyone’s cup of tea, and most majors are not interested in exploring for these, as they tend to be relatively small tonnages — with a notable exception being Anglo American’s Los Sulfatos deposit in Chile,” Kirwin tells The Northern Miner. “Having said that, they can be very high grade, and tourmaline pipes often have vertical extents of greater than a kilometre.”
They also typically occur in clusters, he says, and the team now knows of at least 12 around Soledad.
But designing a drill campaign can be challenging, he says.
“They are tricky to drill, as the best mineralization is normally concentrated at the pipe margins, and thus a drill campaign has to be designed with this in mind,” which is not the case for the previous drilling, he adds. “The pipes at Soledad are possibly unique because of their exceptional gold content. Most tourmaline breccia pipes are barren. Some have copper and some have copper and molybdenum — rarely do they contain economically significant copper and gold.”
Results from two of five holes drilled into Soledad in August and September returned highlights of 147 metres from surface grading 2.51 grams gold, 48.6 grams silver and 0.77% copper, with the top 44 metres of the hole cutting 3.92 grams gold and 29.6 grams silver in hole 17-17. The second hole, 17-18, returned a 209-metre intercept from surface grading 2.22 grams gold, 69.6 grams silver and 0.96% copper. Within the 209-metre intercept was a 74-metre interval of 3.31 grams gold, 65.5 grams silver and 1.1% copper.
In October, Chakana Copper reported assays from the other three holes. Hole 17-20 returned 113 metres from surface grading 1.17% copper, 3.58 grams gold per tonne and 51.5 grams silver. A second hole, 17-19, penetrated a blind breccia zone from 88 metres to 230 metres, to the southwest of previous drilling. The hole returned two strongly mineralized intervals of 37 metres with 2.20% copper, 0.80 gram gold and 136.1 grams silver, and 25.3 metres grading 1.64% copper, 1.72 grams gold and 221.4 grams silver.
So far, all the drilling has been on breccia pipe No. 1, where previous drilling had documented continuous mineralization from surface to 490 metres.
“When we initially started negotiating for the project I was still focused on a porphyry copper target like everyone else, I hadn’t contemplated that the breccia pipes had the potential to become a high-grade copper-gold mine by themselves,” David Kelley, Chakana’s CEO, says in an interview.
“It was Doug Kirwin that brought our attention to the potential of the mineralized breccia pipes. In the process of putting the company together, Doug had been shown details of the project. He became immediately interested since he had started his career by studying tourmaline breccia pipes, and has visited many of the related occurrences and mines around the world. Doug was impressed with the high grades at Soledad, particularly with respect to the associated gold, and their demonstrated vertical extent.”
With input from Kirwin and the company’s technical advisor, Brian Lueck, Kelley and his team started working on the breccia pipes and putting together a 3-D model from previous drilling and surface mapping. The work, Kelley says, suggested potential pipe diameters of 50 to 100 metres, but was based on limited information.
“Although we had some sense of the grade, Doug pointed out that tourmaline breccia pipes typically have strongly zoned grade profiles in the horizontal dimension, and often the highest grades are along the margin of the pipes where breccia textures have higher permeability,” Kelley says, explaining that this owes to the alignment of tabular breccia clasts, which form a “shingle breccia texture.”
Previous drilling had been largely down the pipes, and though reasonably good grades were found, the true grade potential was unknown. “To characterize the grade profile you have to drill across the pipes,” Kelley says. “So an initial goal in our drilling program was to demonstrate that if you drill across the margin zone of the breccia pipe, you’ll get better overall grades than previous drilling has indicated, and that’s exactly what our first five holes have demonstrated.”
Chakana Copper’s second objective, Kelley says, is to establish the tonnage potential of the individual pipes, and the company kicked off a 16,000-metre drill program in August. Initially the company will work on four pipes. Drilling in the top 300 metres from surface will be done from a central platform in the centre of each pipe, with various azimuth and dip orientations to determine the geometry of the pipes.
The real challenge and opportunity will be how well Chakana can follow the pipes to depth, Kelley says, but adds that modelling the geometry of the pipes in the top 300 metres will give them more control in drilling a deeper extent of the pipe from step-out platforms away from the pipes.
The company hopes to get drill information down to 600 metres deep, produce an inferred resource on two pipes and drill the next two pipes. It will also explore high-priority targets on the property. The company has already found nine mineralized pipes in a 2 sq. km area. Separation between the pipes at surface is on the order of 300 to 500 metres.
Kelley says the initial target was a 75-by-75 metre pipe. Back-of-the-envelope calculations suggest that a pipe of those dimensions down to 600 metres could generate 8 million tonnes per pipe, he says, and with more pipes the tonnages could add up.
Additional upside comes from the pipes getting wider at depth and extending beyond 600 metres, and more occurrences of hidden pipes, all of which are noted characteristics of tourmaline breccia pipe type deposits, he explains.
“Unlike diatremes that erupt at surface, flare outward in the shallow extent and taper at depth, the tourmaline breccia pipes often have the geometry of an ‘inverted carrot,’ as Doug likes to say.”
Typical breccia pipes can be oval-shaped and range from tens of metres to hundreds of metres across, Kelley says. The biggest ones are in the Los Bronces-Rio Blanco district in Chile, where large tourmaline breccia deposits of the same style as Soledad are found.
The most spectacular, Kelley says, is the Los Sulfatos deposit, which is owned and being developed by Anglo American (LON: AAL; US-OTC: AAUK). Los Sulfatos has an inferred resource of 1.2 billion tonnes grading 1.46% copper and 0.02% molybdenum. Other important tourmaline breccia deposits in that district, he says, include Sur Sur and Donoso.
“A big part of this opportunity is that there is limited knowledge and experience with these types of deposits,” says Kelley, who was a member of the joint discovery team of the Zuun Mod molybdenum-copper discovery in Mongolia, the Wayamaga gold deposit in French Guiana, and the High Lake East deposit in Nunavut.
“Tourmaline breccia pipes are fairly common, but they’re generally not a specific exploration target for anyone. They are often found associated with porphyry copper deposits and when economic to mine, the ores are comingled with porphyry ore. In this case with Soledad, the breccia pipes may be related to a porphyry or a volatile-rich crystallizing magma at depth that caused the brecciation, followed by hydrothermal fluids that mineralized the breccia. Previous explorers did some excellent work, but they were focused on a porphyry copper-gold target and not the breccia pipes.”
According to Kelley, knowledge of the mineralized tourmaline pipes at Soledad dates to the 1950s, but the first serious exploration was in 1996 by Rio Amarillo, a junior exploration company from Canada. Rio Amarillo was doing a much more regional program focused on gold rather than copper, but they noted mineralization in the tourmaline breccia pipes. At the time, there were only three known pipes (since then, many more have been mapped at surface). Drilling around breccia pipe No. 1 by Rio Amarillo returned a 28.5-metre intercept grading 5 grams gold, 27.9 grams silver and 1.10% copper from 55.5 metres deep.
“This was pre-SEDAR and the digital revolution, so it’s been difficult to track down information, except from their press releases in 1996 and 1997,” Kelley notes. “Their drilling was generally shallow but it did demonstrate some interesting grades associated with the tourmaline breccia.”
The project largely sat dormant until 2011, however, when a subsidiary of Condor Resources won the Soledad claims in a government auction driven by Ever Marquez, Condor’s vice-president of exploration, who had previously visited the property and was interested in the surface mineralization. (Marquez is credited with the Breapampa discovery for Newmont Mining [NYSE: NEM], Kelley says, and has a very good understanding of Peru geology.)
“Ever is an excellent exploration geologist that I’ve known for about 15 years — he’s the kind of geologist that, when he’s interested in something, you should be interested as well.”
Kelley became drawn to the project when he was the general manager exploration for the Americas for MMG, whose major shareholder is China Minmetals. Kelley visited Soledad in 2012 along with Jim Wise, MMG’s chief geologist for the Americas, and together they recommended that MMG option the property, but were unable to convince them to move forward.
In late 2013, Mariana Resources stepped in and completed surface sampling and 12 drill holes. They also did a deep-seeking induced-polarization (IP) geophysics survey to give them better information to target a porphyry. “They came up with some very interesting deeper targets, but their Hot Maden project in Turkey was taking off and pressure was building for them to focus solely on that project, leading them to walk away from all of their projects in Peru,” Kelley says. “Their exit from Soledad wasn’t based on any negative sentiment, it was based on a business decision to focus on their number-one priority in Turkey.” (Sandstorm Gold [TSX: SSL; NYSE-AM: SAND] acquired Mariana in July 2017.)
Two years ago, Casapalca, a private Peruvian company and operator of the Americana mine, optioned the property from Condor and continued the work Mariana started, targeting a blind porphyry. Casapalca’s CEO, Carlos Gubbins, a geologist and graduate of the Colorado School of Mines, saw Soledad and projects like it as growth opportunities. But the geologist was killed in December 2015 in a car crash while travelling in northern Peru on vacation with his family.
While dealing with the death and succession of its CEO, Casapalca kept its exploration commitment by drilling 2,816 metres in four holes, with three deep holes in breccia pipes 1, 5 and 6, and one more hole in the Cima Blanca target, a high-sulphidation epithermal alteration zone at the highest elevation on the project. All of the drill holes in the breccia pipes were designed to drill down the pipes to determine their source, inferred to be a porphyry.
While the results were generally positive in the three breccia pipes drilled, Kelley says, including a 490-metre interval of 1.15% copper equivalent in breccia pipe 1 from surface until the hole deviated out of the pipe, Casapalca ended its agreement with Condor in January 2017 to focus on its operating mine.
The importance of Casapalca’s work, Kelley says, is that it showed the vertical continuity of mineralized breccia from surface to nearly 500 metres. And based on Mariana’s IP survey, and a more recent controlled source and natural source audio-frequency magnetotellurics survey by Chakana, the pipes are thought to extend much deeper, and there could be more hidden pipes.
Kelley left MMG in November 2016 and the following month set up Chakana along with Tom Wharton (currently a director of Ely Gold, Angel Gold, Dolly Varden Silver and GRP Minerals) and Juan Valdivia (15 years of experience in the development of mineral properties and hydropower assets in Peru, Colombia and Brazil), along with private financial backing.
“Tom and Juan had already been in the process of putting something together in Peru so the timing for the three of us to come together was perfect,” says Kelley, whose exploration experience over a quarter of a century includes working in the Americas, Central Asia and Australasia for MMG, Oz Minerals (ASX: OZL), Zinifex, Newmont Mining, Western Mining Corp., BHP Billiton (NYSE: BHP; LON: BLT), Westmont Mining and Gold Standard.
As soon as they heard that Soledad might become available, they started negotiating with Condor, signing an option agreement in April. Under the deal, Chakana Copper can acquire all of Soledad by drilling 12,500 metres; paying US$5.38 million in cash; issuing 500,000 shares to Condor Resources; and granting Condor Resources a 2% NSR on any mineral production from the project, subject to Chakana Resources’ rights to buy back 50% of the NSR at any time for US$2 million.
“I have been involved in three discoveries but none are mines yet — all are located in remote areas, so they are challenged from the lack of infrastructure,” Kelley says. “This is by far the best opportunity I’ve seen that has true potential to be a mine. The question is: How big a mine will it be?”
Kelley reasons that even if the resource is small, somebody will be able to mine the breccias at Soledad, given the high grades so far.
“If a sufficient resource can be established, a very profitable, high-grade mine could be developed,” he continues. “The pipes occur over a vertical range of 500 metres. Access by adits would potentially allow extraction from the bottom up using a bulk-mining method. Given the proximity of the pipes, the potential exists to mine several pipes simultaneously.”
The company doesn’t have to find a tier-one asset, he adds.
“It would be great if it turns into that. And Antares is a good example of a very large porphyry that they discovered in Peru and sold to First Quantum, so it can happen on that scale. But our view is that mid-tier mining companies are also looking for quality mining assets to develop profitably, and if we get this to as little as 30 to 50 million tonnes, it’s going to draw a lot of attention … whether it’s a mine that a major company is interested in or one that a mid-tier would be interested in, either way would be a big win for Chakana.”
Chakana Copper hopes to list on the Toronto Stock Exchange before year-end in a reverse takeover of Remo Resources.