TD Flash Note: Impact PositiveStrong 1.5 Bt Resource; Starter Pit of 287 Mt at 0.79% CuEq
Event This morning, Solaris reported an updated resource estimate for the Warintza Central deposit at its Warintza Project in southeastern Ecuador.
Impact: POSITIVE
In-Pit Indicated resources of 579 Mt at 0.59% CuEq (0.47% Cu) and Inferred resources of 887 Mt at 0.47% CuEq (0.39% Cu), above a 0.3% CuEq cut-off grade (total resources of ~1.5 Bt at 0.52 CuEq), came in well above our estimate of ~1 Bt at 0.53% CuEq (0.36% Cu).
The company also reported an ‘Indicative Starter Pit’ comprised of Indicated resources of 180 Mt at 0.82% CuEq and Inferred resources of 107 Mt at 0.73% CuEq (above 0.6% CuEq cut-off grade).
In our view, this updated resource demonstrates a baseline for the Project (Warintza Central forms part of a 7km x 5km cluster of porphyry deposits), featuring a high-grade indicative starter pit (quick payback period) and low strip ratio, within a mining district offering structural advantages from highway access, abundant and low-cost hydroelectric power, fresh water and low elevation.
Ongoing drilling is targeting further growth, with an emphasis on the open extensions of near surface, high-grade mineralization at Warintza Central and expanding the recent Warintza East discovery to include it within a shared pit, while testing the further potential within the cluster. The company is planning an ~$30mm drill program for the year.
As a reminder, our model for Warintza does not incorporate the West/South discoveries or other company targets (Yawi, Caya, etc.).
Solaris last reported a cash balance of ~$34mm (December 31). We note that the company could get additional funds from some warrants expiring in 2022 (C $47mm; strikes of C$1.20-C$6.75).