Hot Chili adds another piece to Costa Fuego jigsaw

By Paydirt Media

Hot Chili has entered a binding letter of intent for 100% of the Cometa project to the south-east of Costa Fuego

Hot Chili Ltd continues to enlarge its footprint at the Costa Fuego copper-gold project in Chile, acquiring the 56sq km Cometa project directly adjacent to its keystone asset in August.

Hot Chili entered a binding letter of intent with Bastion Minerals Ltd for 100% of the Cometa project – 600km north of Santiago – just 25 days after starting a 30,000m expansion drilling program at Costa Fuego.

“We’ve had a long consultation strategy over a decade to build the Costa Fuego project,” Hot Chili managing director Christian Easterday told Paydirt. “The Cometa project is a known large-scale target, more an IOCG target at this stage, akin to Productora-style, but something that sits well within range of our central processing hub strategy.”

Cometa will be incorporated into Hot Chili’s wider plans to upscale Costa Fuego’s resource base and boost proposed copper production towards a 150,000 tpa target, before an expected PFS in 2024.

“Cometa is a greenfield project, which will give us a further exploration pipeline within our reach,” Easterday said.

A first-pass RC drill programme of 16 holes for 4,116m along the western edge of the Cortadera resource earlier in the year confirmed the potential for resource expansion. Easterday said the company was confident the prospect could provide Hot Chili with even more to talk about.

“Some of our drilling programme is dedicated to the last extremes of the PFS, which is largely complete,” Easterday said.

“We’ll be drilling a number of regional targets on top of expansion targets around the Cortadera resource which, in our opinion, is not finished yet. That drilling is related to a large pit assessment that we’ll undertake to determine the optimal path for our final PFS – whether its open pit then underground, or whether we might consider a higher strip ratio and a larger [open pit] operation.”

The company’s investor base had shown a lot of faith in Hot Chili’s Costa Fuego assets and Easterday said the new acquisition reflected a strategy of expansion.

“[The shareholder reaction] was positive but we do have a positive reaction to a lot of news flow,” Easterday said.

“We’ve confirmed the only 100mt-plus copper production project on the ASX outside BHP [Ltd], so I think the company’s taking strong steps towards being one of the premiere names on the ASX in terms of scale in the copper sector.

“Cometa is part of that strategy, to expand the project through the drill bit and to expand the project through acquisitions.”

Hot Chili commenced trading on the TSX in January 2022 and the OTCQX three months later. Easterday said it had been slow going on the North American exchanges, but conservative planning had paid off as the company fielded interest from Canadian institutional investors.

“The limited amount of liquidity we put over there has been largely focused into institutional hands,” Easterday said.

“In the initial TSX placement, interest came largely from about eight or nine Canadian funds and institutions as well as some retail spread. But recently what we’ve been seeing is a real transition in our trading, particularly since the PEA and the transaction.

“The royalty that we put over the project for about 1.1% effectively secured our next 12-18 months of funding. Since that, we’ve seen a change in the investor type and their buying.”

The Costa Fuego roadmap takes in a planned mineral resource upgrade in H1 2025, with development studies and resource growth ongoing throughout the year. A DFS in H1 2026 will precede FID in the second half of the year. Easterday was comfortable with Hot Chili’s scheduled milestones and confident in the company’s timing, coinciding with predicted commodity values.

“Our roadmap outlines a pretty logical pathway for FID in 2026 which we see as a pretty good time to get into [production],” Easterday said.

“We are, of course, using conservative consensus numbers. If we were to run out numbers at the same as other PEAs in the market – at $US8/lb – we’d probably have a project nearly twice the value.

“We have a $US1 billion-plus NPV on the project now and a much larger NPV if we start to see copper prices moving. So, we are pretty focused on expanding Costa Fuego to a 150,000 tpa production base, which exposes us to revenue profiles in the region of $US1.5 billion over the life of mine. That’s very important if you are trying to get into the first quartile of cash costs.”

Chile’s recent change in administration would not prove problematic for Hot Chili’s arrangements, Easterday was full of praise for the country’s robust political framework.

“Chile has gone through a well-publicised, two-year long constitutional debate
on taxation change and has largely emerged with no constitutional change and
a very limited increase in taxation,” Easterday said.

“That’s been very pleasing to see and that’s been a process of initiation from the new president and his side of parliament.

“The people of Chile spoke, and the protection of a two-third majority on constitutional change was very good. It meant that nothing crazy is happening regardless of who is in the President’s seat.”

– Michael Cameron