Productora cash flow

Hot Chili expects Productora cash to start flowing within months.

Stockhead – Special Report June 2, 2020

Hot Chili is just months away from cash flow after executing a formal agreement for the lease mining and processing of ore from its satellite Productora copper-gold project.

With the execution of the formal agreement, Chilean government agency Empresa Nacional de Mineria (ENAMI) will start mining within three months from the grant of the necessary exploitation licences, with first revenue expected in the fourth quarter of 2020.

Hot Chili (ASX:HCH) says that at current spot prices for copper and gold, the lease mining of Productora could deliver revenues of between $1.2m and $1.5m per annum.

Under the agreement with ENAMI, Hot Chili and its partner CMP (20 per cent) will be paid $US2 ($2.95) per tonne of ore processed and a 10 per cent royalty on the sale value of extracted minerals.

Hot Chili is currently working with ENAMI to outline higher-grade areas with +1.2 per cent copper that can be assessed from the two existing underground mines.

The company noted that the lease mining rate of 120,000 tonnes per annum will not materially deplete the project’s existing 167 million tonne open pit reserve.

Location of Hot Chili’s copper hub in relation to coastal range infrastructure.

Flagship project returns to the limelight

Exciting as the lease mining of Productora and the prospect of some early cash flow might be, Hot Chili is especially keen to resume activity at its potentially massive Cortadera project.

The company recently completed a revised four-dimensional geological model of the project that incorporates all drilling completed to date to assist in the estimation of a maiden resource, which remains on track to be announced in the coming months.

Notably, the model has highlighted that the discovery remains open and has the potential to grow significantly beyond the limits of the initial resource as well as the growing extent of the high-grade core within the Cuerpo 3 and Cuerpo 2 porphyries and their potential to join up at depth.

Long Section of the Cortadera discovery demonstrating the growing extent of the high grade core within Cuerpo 3 and Cuerpo 2, and the potential for both to join at depth.

This higher-grade core now stretches over 500m in strike and 200m in width. It also extends from 200m vertical depth and remains open beyond a depth of 1,000m with average grades of between 0.7 per cent to 0.9 per cent copper and between 0.2 grams per tonne (g/t) to 0.5g/t gold.

Hot Chili noted that the grades and near 1km vertical high-grade core are features that are also found in some of the world’s best large-scale porphyry mines such as El Teniente, Grasberg and Cadia-Ridgeway.

Hot Chili has started preparation for the eventual resumption of drilling at Cortadera with a focus on the extension of several deep pre-collar and unfinished diamond holes

Additionally, the mining and development of high-grade satellite ore sources like Productora will help internal studies into a larger combined development centred around the company’s standalone Cortadera copper discovery.

Now watch: RockTalk: How COVID-19 might have made copper look more attractive sooner

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