An update on V.DRV and V.MMGI was in Toronto yesterday to meet with George Brown of MacMillan Gold and David Bending, who is also the President of Shoreham Gold. They are both also involved with Duran Ventures. The purpose of my meeting was to review the data and maps for the exploration projects underway in Peru, Northern Ontario and Mexico.
I am most excited about Duran Ventures in the JV with MMG at the Aguila Project in Peru. This is a large property that has two former producing mines within its boundaries. The Aguila copper-moly porphyry target is an open pit deposit that saw limited production in the 1970s. Rio Tinto had the project in the 1990s and completed a widely spaced drill fence that encountered some very high grade mineralization, but the porphyry did not extend across a wide enough area, and the copper prices at the time were so low, that they abandoned the project. MMG picked it up thereafter, to control 100% with no back in rights or NSR outstanding. They vended a 50% interest to DRV, and the work commitment has almost been completed with the current drill program.
I like the results so far because there are very high grade for this type of deposit, averaging between 0.5 and 0.6% copper, with moly in the range of 0.04%. Combined this puts a gross metal value of roughly $45-50 per tonne, which is robustly economic in a bulk tonnage scenario. Data from testing has inferred a recovery efficiency in the range of 90% for the combined metals. Many other juniors with high market caps are exploring porphyry deposits with half the grade that DRV/MMG can brag about so far. And the results are relatively continuous across wide intervals of 400-500m of drill core.
We know that RTZ hit that kind of ore on at least one drill core, but they stepped out the drill fence too far on either side to encounter the edges of the porphyry. DRV/MMG drilled the middle off, and then angled the subsequent holes to punch out the lateral extensions as well. Only the results for the first 3 holes are known, but mineralization was also encountered in holes 4 and 5 where the assays are still pending.
What does all of this mean? Well first off, it will provide the basis for a large tonnage of rich ore, probably 150-200 million tonnes. But more importantly, the mineralization has now been encountered laterally from the higher grade core zone, and it is of paramount importance for a pit design. To extend a pit to depth, one must shape the 'bowl' extremely wide. IF your deposit is narrow, than means that a very large volume of waste rock must be extracted for every tonne of ore grade material. Now that we know the lateral limits of the deposit are also mineralized, then that potential waste rock zone is now going to generate a profit as the mine is developed.
The strip ratio is the comparison of waste rock to ore grade material. Many profitable mines in operation today commonly report a strip ratio of 2:1 or even 3-or-4:1, meaning up to 4 tonnes of waste have to be blasted, excavated, and hauled away for every tonne of ore that is sent to the mill. Lower strip ratios translate into higher profit margins, and more robust operating numbers. That means the deposit is worth more overall.
But Aguila is not just about copper. MMG staked a larger property package that was originally controlled by RTZ, and the project now includes the large, lower grade silver Pasacancha Deposit, along with gold and base metals. A year ago, we saw the market price for Peruvian junior Bear Creek Mining climb to over $500 million dollars as they outlined a similar deposit. Historical grades for Pasacancha run as high as kilo-per-tonne silver, but average in the range of 100 g/t for the bulk of the deposit.
Drilling is set to commence before xmas to test for the core silver-zinc zone and begin to compile data necessary for a compliant resource estimate. But it does look like this is going to be a big deposit. Surface showings extend along a corridor of about 2.5 kms and perhaps 400m wide. The mineralization has been encountered in the lower levels of the old mine below 400m.
Once again, the geometry of the deposit also looks to be ideal. Since the core area of mineralization occurs along a ridge, that means almost no waste rock will have to be dealt with for bulk tonnage mining. This is the kind of circumstance that adds value for an acquisition, as any senior mining operator will pay a premium to pick up a large, lower cost operation.
At the current time, I do not think the market has put even a fraction of the total value on either company. DRV has only about 25 million shares outstanding, so even with the superb price appreciation today, the company still has a modest market cap under $40 million. Considering just the Aguila target, potentially 2.5 billion pounds of copper and 200 million pounds of moly would suggest an asset value of $500-600 million, the half controlled by DRV worth $250 million, more than 5 times the current market cap. That does not include the value of the silver deposit. There is no published resource to work from yet, but that is coming and I expect upside share prive potential as the positive data continues to come in. If we get a few big acquisitions announced as that work is underway, look for an even bigger premium to be bid into the stock.
MMG owns 5% of DRV, plus the other half of Aguila-Pasacancha, plus a bunch of Mexico prospects including 3 that are drilling before the end of the year. MMG also has a modest market cap and with many irons in the fire, the leverage to discovery is strong. The company also has nearly $5 Million in the treasury and a warrants currently in the money.
I own shares of both companies.
cheers!
COACH247