Investor Digest ArticleBelow is an article written by Mexican Mike and published recently in the Investors Digest. Great article Mike!
Duran Ventures Inc: A new contender with a solid one-two punch
Duran Ventures Inc is a newly minted Canadian junior explorer that has emerged after a transaction to revive the dormant listing of a shell company. That in itself is nothing new in a bull market for resource stocks, but what makes Duran worth watching is the interest it has acquired in the Aguila Property in Peru.
This exploration project is notable for its potential to host not one but two potentially massive deposits. The El Halcon concession was known to host a large copper-molybdenum porphyry deposit that was in production as an open-pit mine in the 1970s. The adjacent Pasacancha Property to the east hosts a past-producing silver-lead-zinc mine with the potential for a much larger, bulk tonnage resource to be established at and around the old workings.
The two properties were consolidated in 2000 by MacMillan Gold, a company I featured in the Mexico Mike column earlier this year, to form the Aguila Project, comprising 110 square kilometers. Duran has nearly completed the provisions for its option to earn 50 percent ownership of Aguila, in a joint venture arrangement. The property is not subject to any royalties or back in provisions with other companies, and that is also a big plus.
It is an ideal scenario for an exploration prospect to have data from prior exploration and development completed by other companies. This helps to lower the risk for a project, allowing more rapid advancement and cheaper development than might be expected from a typical grass-roots exploration program.
A Peruvian mining company had been involved in small scale production efforts in the 1970s at the Aguila deposit, working higher grade zones estimated to average about one percent copper. Due to low metals prices the economics of the mine were marginal at best and the operations ceased. MacMillan Gold then gained control of the project and worked with senior mining partner Rio Tinto to explore the wider property area.
Extensive sampling and geophysical work led to a round of exploration drilling. After punching a series of widely spaced drill holes in 1998 and 1999, Rio Tinto encountered wide intervals of copper-molybdenum mineralization in a porphyry geologic setting. Based on that data, the estimated target was in the 100 million tonne range, although the geometry of the deposit was less than ideal and much lower resources would have been available in an open pit mine. Once again, low metals prices prevailed at that time, and there existed a general revulsion within the industry towards the expenditure of exploration funding. As a result, Rio Tinto walked away from the project and MacMillan regained full ownership.
Now that copper prices are hovering near all-time highs for the metal, and molybdenum prices have also surged due to unprecedented world demand, the Aguila prospect is suddenly very attractive again. In addition, a second porphyry structure has been identified in close proximity to the original discovery area, deemed the Aguila East target. It is this new resource area that has greatly enhanced economic potential for a mining operation.
To earn its interest, Duran funded a 5-hole drill program this year to confirm the historic data on the property, with a more closely spaced drill fence that was also intended to extend the lateral limits of the established deposit and test Aguila East. The results have come in extremely positive.
Within the original porphyry area, the drill cores hit intervals of 400-500 meters bearing in the range of 0.5 percent copper and 0.04 percent molybdenum. The first ever drilling completed at Aguila East also came in above expected grades, where a 371 meter interval assayed above 0.50 percent copper equivalent. These numbers are exceptional due to the continuity of the mineralization, which begins almost from the surface.
There was even more good news from this drill program however. Duran confirmed the presence of a 100 meter wide mineralized contact zone along the western margin of the Aguila porphyry. It was also discovered that the sedimentary country rock between the two porphyry bodies contains significant copper-moly values.
This successful program has demonstrated a much larger resource envelope and just from this new data the projected target size for the deposit can now be estimated in the range of 200 to 300 million tonnes. In addition, the pit design for the deposit could now include these peripheral areas with mineralization that will likely prove profitable to mine, where the area would have been considered waste rock in the original mining plan.
Just to put the magnitude of Aguila into perspective, just assuming an average grade of 0.50 percent copper, an open-pitable resource of 200 million tonnes would represent about 2 billion pounds of copper. The current spot market price for copper is in the high $3 range, and threatening to break all time highs, if you need it…
Investors should rejoice that in a relatively short time, Duran could share ownership in a large, high priority development prospect like Aguila. But that is only part of the story. The Pasacancha silver target at the eastern edge of the project area would be also considered a flagship project on its own and exploration work to confirm and expand the historic resources is just beginning.
The old Pasacancha Mine operated in the 1920s through to the 1960s, working higher grade epithermal vein structures bearing silver and base metals. While it is probable that a great deal of vein-hosted resources remain to be exploited at this deposit, the real discovery upside depends on the bulk tonnage potential for a larger, lower grade zone of alteration surrounding the veins. Sampling has revealed extensive stockwork mineralization, and widespread argillic alteration surrounding the old workings.
No thorough exploration program has ever been completed at Pasacancha to investigate the limits of this intensely mineralized system. Just considering the area that was subject to underground mining, a significant tonnage could be outlined that would be suitable for an open-pit mine. Systematic sampling and mapping is currently underway to define targets for drilling. Published results have demonstrated that lower grade gold, silver, lead, and zinc values occur across hundreds of meters of width and about 2km along strike. This certainly suggests the ‘foot print’ for a massive deposit, and Duran will soon commence deep-hole drilling work to investigate that potential. Positive drill results could elevate Pasacancha to the ranks of world-class silver deposits, and that could also propel the company stock prices to dizzying heights.
Consider that junior explorer Bear Creek Mining was the toast of the market in 2005 with a major discovery in southeastern Peru at its Corani Property. Corani bears many similarities to the Pasacancha target in terms of silver grade and potential tonnage. As the magnitude of the Corani discovery was defined, the market capitalization for Bear Creek vaulted from less than $50 million to about $500 million. This bodes well for Duran and MacMillan investors.
The fundamental considerations for Duran are extremely favorable. The company has a very tight capital structure, with slightly more than 25 million shares issued. A cash position in the treasury of about $5 million means the company is well-funded to proceed with aggressive exploration work, and will not have to complete a dilutive financing in the months ahead. The company has nearly completed earning its interest in the project, so thereafter it will only have to contribute half of the future capital budget along with JV partner MacMillan. And since George A. Brown serves as CEO for both companies, it is safe to assume that the relationship between the JV partners will remain constructive during the exploration process.
It is rare to encounter a legitimate one-two punch of world class exploration targets on the same property. If either of these programs go on to reach the potential defined from the early stage work, then investors can look forward to impressive gains. MacMillan and Duran have recently been very strong market performers as the early stage work begins to be priced in, but if both Aguila and Pasacancha continue to yield positive results, then the real fun for shareholders has barely begun.