Productora Project
Ore Reserve conversion, Mineral Resource growth, advancement of development studies a focus

Productora

The Productora project is located 15km south of the township of Vallenar, at low altitude (< 1,000m) in Chile’s Region III.  Since drilling commenced in August 2010, the Company has outlined a large-scale, bulk tonnage copper-gold-molybdenum project amenable to open pit mining. 

Ore Reserves

In the first quarter of 2014 Hot Chili focussed its development study on completing the first open pit Ore Reserve for Productora.  This work now underpins the first nine years of mine life for the Company’s sulphide operational plans exclusively from a single central pit.

Productora’s maiden open pit Ore Reserve is classified totally as Probable, and estimated at 90.5Mt grading 0.48% copper, 0.11g/t gold and 172 ppm molybdenum.  Payable metal comprises 350,000 tonnes of copper, 152,000 ounces of gold and 9,000 tonnes of molybdenum.

The Ore Reserve estimate was completed by leading independent Chilean mining engineering firm NCL Ingeniería y Construcción SpA (NCL) and is tabulated below.

Productora Open Pit Probable Ore Reserve Statement- 31st March 2014.

Note 1: Figures in the above table are rounded, reported to two significant figures, and classified in accordance with the Australian JORC code 2012 guidance on mineral resource and ore reserve reporting.

Note 2:  Average recoveries applied to Probable Ore Reserve estimate are: Fresh Cu– 88.8%; Fresh Au - 65%; Fresh Mo - 60%, Transitional Cu- 50%, Transitional Au- 50% and Transitional Molybdenum- 50%.  Payability factors applied for Cu- 96.5%, Au- 78% and Mo- 98%

Key focus areas in completing the first Ore Reserve estimate included geotechnical characterisation and slope angle design, mining methodology, mining cost estimation, mine optimisation and design, dilution studies and metallurgical assessment. 

This was also supported by work completed by Ausenco at Scoping study level, and by benchmarking studies undertaken against several similar copper operations in Chile.

The Probable Ore Reserve was estimated using price assumptions of US$3.00/lb copper, US$1,250/oz gold and US$10/lb molybdenum and an exchange rate (AUD:USD) of 0.88.

Studies have indicated that bulk tonnage mining utilising large fleet selection is optimal for the mining development of Productora.

At this stage, Hot Chili has only estimated an Ore Reserve for the central pit development at Productora and no copper oxide resources have been included within the Ore Reserve estimate.  Excluding consideration of oxide resources from within the pit design, strip ratio is determined to be approximately 4:1.  The recovery of any oxide resources into future Ore Reserve estimates has the potential to reduce overall strip ratio at Productora.

Metallurgical recoveries have been conservatively applied having consideration for benchmarking of other similar Chilean copper operations and limited test work results already achieved.  No transitional ore type was used to drive pit optimisations ensuring the pit design process was considered robust against fresh sulphide ore types only.

The first Ore Reserve marks a major milestone in the growth and development of a new long-life, low-cost, bulk-tonnage Chilean copper mine.

Central pit design displaying Ore Reserve blocks (pink) against oxide Mineral Resource block (yellow).  Oxide Mineral Resources are currently considered waste within the Ore Reserve central pit design.

Mineral Resources

Major Copper Oxide Project Opportunity Identified

A major copper oxide opportunity has been identified at Productora which has the potential to significantly reduce pre-strip capital expenditure and overall strip ratios, and add another revenue stream to the front-end of the project. Copper oxide resources were not previously considered in the Company’s sulphide operational plans for Productora.

The Productora Mineral Resource estimate contains copper oxide resources of 25.6Mt grading 0.52% copper, 0.09g/t gold and 63ppm molybdenum for 132,000 tonnes of copper metal, 76,000 ounces of gold and 2,000 tonnes of molybdenum from surface. The in-pit portion (currently not considered in the current Ore Reserve) represents 15.4Mt grading 0.58% copper, 0.1g/t gold and 87ppm molybdenum.

Hot Chili has undertaken early geochemical analysis to understand the distribution and mineralogy of copper oxide species within the resource.  Preliminary acid consumption and sequential acid digest tests have been completed.

Work to date has indicated that the copper oxide Mineral Resource has potential to be economically exploited. Large-scale, low-grade treatment of favourable copper oxide ore types is typical of many Chilean copper operations. 

Copper oxide resources  provide scalability at lower cut-off grades should further study into low-cost leaching options prove successful.  Multiple pit optimisation scenarios using conservative benchmark comparisons to other Chilean oxide leaching operations have highlighted the potential for several satellite pits to become available north and south of the central pit design.

Copper oxide Mineral Resources at Productora now represents one of the largest recently identified opportunities at the project.

The Company is planning to initiate a detailed study into the definition of a potential copper oxide project for Productora during 2014.  This work will also involve an escalation in study and analysis of transitional sulphide resources in order to demonstrate a robust definition for early revenue stream.

Bulk Tonnage Resource Grows to Over 1 Million Tonnes of Copper Metal

The Productora Mineral Resource estimate was completed by Hot Chili in co-operation with independent consultants Coffey Mining Pty Ltd (Coffey) and is summarised in Table 2 below.  The resource estimate utilises a total drilling inventory of 905 holes for a cumulative 238,185m of drilling.

The resource has been estimated in accordance with the guidelines of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code 2012). 

Productora Mineral Resource Statement - 31st March 2014.

Note 1: Figures in the above table are rounded, reported to two significant figures, and classified in accordance with the Australian JORC Code 2012 guidance on Mineral Resource and Ore Reserve reporting. 

The Mineral Resource estimate has seen a 90% increase in Indicated resources since the first major revision released in February 2013.  Copper metal at Productora is now classified as 78% Indicated and 22% Inferred. 

 

The current Mineral Resource has involved a complete revision of the entire resource model to standardise a nominal +0.1%, +0.2% and +0.3% copper grade shell model that was utilised to constrain the block model Mineral Resource estimation.

Capturing the low-grade copper material at Productora has allowed a bulk tonnage mining methodology to be utilised and accurate dilution studies to be undertaken to assist in developing an optimal pit design.  

Exploration Potential

Rocoto Discovery- Advanced Alteration Targeting Technique

The Productora copper project in Chile continues to strengthen, with the discovery of another large zone of copper-gold mineralisation early in the quarter. The latest drilling results at Productora have outlined a substantial new copper-gold zone, known as Rocoto, immediately below the planned central pit design.

Rocoto was identified using the same advanced targeting technique that led to the discovery last year of the high-grade Habanero zone at Productora. This is important because Hot Chili now has two firm pieces of evidence that this technique- which identified a total of eight targets close to the central pit- is extremely effective.  Hot Chili plans to progressively drill test these other high priority targets during 2014.

Discovery drilling intersections at Rocoto in relation to the planned central pit design at Productora. 

Long section of the Rocoto target zone.  Note the depth extension of potassic alteration- a proximal alteration signal to copper mineralisation at Productora