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Exeter Resource Corporation Delivers A 19.6 Million Ounce Resource At The Caspiche Gold-Copper Project In Chile
By Alastair Ford
It’s worth paying a little attention when a relatively small gold company like Exeter Resource Corporation suddenly comes out with a gold resource of nearly 20 million ounces. There aren’t many of those to be had in any given year, especially not when the planets have aligned to deliver US$1,000 gold as well. Even so, it took the markets in Canada a little while to wake up to what exactly Exeter was saying when it put out news that its Caspiche project in Chile holds 19.6 million ounces of gold and 4.8 billion pounds of copper. The catch was the low grade. At a gold equivalent cut-off of just 0.3 grammes per tonne gold equivalent, the big numbers begin to look a bit more tricky.
So it was, that on 14th September, when the Caspiche update was released, that Exeter’s share price ticked up a modest C$0.25 to C$4.65. The following day, though, the shares really took off, and leapt up a further C$1.10 to C$5.75. That was traders woke up to the fact that Caspiche is located just six miles from the giant 24 million ounce Cerro Casale project, jointly owned by Barrick and Kinross, and only slightly further away from the six million ounce Refugio project, solely held by Kinross. Development decisions on these projects are pending, but with Caspiche we are clearly talking about a big discovery in a country well used to witnessing big discoveries.
That the shares didn’t eventually go even higher is probably because of the perceived development risk. With a market capitalization of over C$300 million, Exeter is no minnow, but still, concedes Exeter’s chairman Yale Simpson, Caspiche is ultimately one for the majors. So the plan is to move it along with more drilling, and to complete a conceptual, or scoping, study, and then to consider the options as regards a possible partnership or a possible sale. By then the hope is that around three quarters of the current inferred resource will have been moved up to the indicated level, and that engineering studies will have demonstrated how the company might be able to get to grips with issues like water supply and power.
The first priority of the current drilling work will be to close off the deposit, as Yale points out that it’s still open along trend and at depth. That means the possibility of even more ounces, although clearly that’s no longer the primary concern. Interestingly, though, Exeter also put out numbers showing that if the cut-off at Caspiche is raised to 0.9 grammes per tonne, then it still delivers 12.5 million ounces. Those numbers will be worth bearing in mind when it comes to considering a possible sale or joint venture, as on those parameters Caspiche begins to look like it might yield some decent margin. With the engineering and metallurgical work rolled in, Caspiche ought to be taking shape as a potential project by early next year. “We want to transact on this project with a major on the basis of an NPV, not just as ounces in the ground”, says Yale. “We want to value it as a project”.
The thinking there is partly based on the value gap that currently shows between Caspiche and other projects have changed hands in the region recently, even allowing for the eventual sharp rise in Exeter’s share price on 15th September. Locally to Caspiche projects have changed hands recently priced at US$50 per ounce and US$68 per ounce, a long way north of Exeter’s current US$17. In a way, that makes Exeter vulnerable to any predator who may feel that it’s an auspicious time to pick up cheap ounces, and is partly why brokers like Thomas Wiesel and Canaccord set price targets on Exeter shares of between C$7.50 and C$8.50. But Caspiche is a big undertaking. At the very least, any potential predator will wait to see what moves Barrick and Kinross make as regards development at Cerro Casale, and an announcement on that isn’t expected until November at the earliest.
In the meantime, Exeter will be moving ever closer to its own independent production, as development work at the Cerro Moro project in Santa Cruz province, Argentina nears completion. This is a small, high grade operation that ought to deliver 100,000 ounces per year to Exeter, generating a nice operating income to sustain the company while it works out exactly how it wants to fry its bigger fish.