Can you describe your company and say what it does?
Cornerstone Capital Resources (TSX: V.CGP, Stock Forum) creates value for shareholders by advancing exploration at several key properties in our portfolio. Our strategy is to be a prospect generator. We find properties of merit then add value through systematic exploration. Right now we're focused on a number of highly prospective gold and copper properties in Ecuador and Chile and on the Little Deer copper project in Newfoundland.
Since we last spoke in April what has Cornerstone Capital Resources done to increase shareholder value?
Most of our work since April in Latin America has been at the Shyri property, located in southern Ecuador about 15 kilometers to the west of Iamgold's multi-million ounce Quimsacocha gold deposit. The property is optioned to Intrepid Mines of Australia, which is spending US$6 million over five years on the property to earn a 60% interest. It can choose to go to 80% on specific project areas up to 5,000 hectares each by making a $750,000 private placement in Cornerstone, completing a bankable feasibility study or spending an additional US$20 million, whichever comes first, and making a payment to Cornerstone of up to US$5 million based on the gold equivalent ounces in the mineral reserve.
Intrepid has already spent over US$2.7 million completing a Phase 1 drilling program on the Gama prospect at Shyri. We got some good results from the program in that we seem to have discovered an extensive gold-enriched copper-moly porphyry. Hole 2 intersected 45 metres at 0.71 g/t gold within a broader zone of 101 metres at 0.41 g/t gold, and Hole 11 intersected 26 metres at 0.45 g/t gold.
A thorough technical review of the Phase 1 drilling program was completed in Ecuador in late August 2011 by the combined team of Intrepid and Cornerstone geologists and geophysical consultants.
On October 12, Cornerstone announced that Intrepid approved a Phase 2 diamond drilling program at Gama focusing on porphyry targets. The program will cost approximately $1.5 million and includes two 600 metre long holes, as well as additional soil sampling, re-interpretation of target models, induced polarization and ground electromagnetic and magnetic surveys. The program will allow us to test the porphyry targets at depth and to develop new drilling targets for both porphyry and epithermal styles of mineralization on Gama. Further details of the program will be announced in the coming weeks.
Environmental permits for drilling the Vetas Grandes and Cañaribamba prospects on the southern portion of the Shyri property are expected to be received toward the end of the first quarter of 2012.
In North America, the Little Deer copper project is the company's most advanced asset. Along with our JV partner Thundermin Resources, we have increased the resources at Little Deer to indicated resources totaling 99 million lbs. of copper and inferred resources of 175 million lbs. of copper.
Our belief is that this is a significant resource that has a strong potential to be developed into a new mine. That belief led us to exercise the option recently to acquire 100% of the property from the original vendor.
It's also the reason that we have invested in an internal scoping study to take an early look at potential mining methods and indicative economics. The results of that internal review are expected in October.
On September 13, your company released results of initial exploration work on your 100%-owned Cascabel project in northern Ecuador. What is the significance of these results?
We had some very good initial results at Cascabel. We took 179 rock samples and found that most were anomalous in gold, copper and zinc. We also found significant free gold when we panned in most of the streams that run through the property. This is pretty exciting for just a few weeks of work, so we plan to move to a full exploration program in the near future.
How advanced is this project and is there a timeline for production?
This is an early stage exploration project. Preliminary fieldwork has been very positive. However there is significant additional exploration work required in order to develop drill targets, with the goal of identifying new mineral resources. Assuming we are successful in defining the resources, extensive environmental, socioeconomic and engineering studies need to be carried out prior to making a production decision, so clearly it’s premature to speak in terms of a production timeline.
Why is Cornerstone Capital Resources involved with so many projects in eastern Canada and South America? Is it not better to spend more effort on fewer properties?
Our project generator strategy allows us to participate in a wider spectrum of projects. We find properties of merit, advance them with early stage exploration, then bring in joint venture partners who bring significant resources such as technical expertise and exploration funding. At Shryi, for example, our JV partner is funding 100% of the exploration expenditures.
What are the main challenges that you face in operating your business?
There are a variety of challenges that early stage exploration companies face including political, exploration and financing risks. Today the most significant one of these is obtaining ongoing funding from capital markets. Many investors have temporarily left the market and are “sitting on cash.” We believe they will return in the longer term when they more fully appreciate the significant rewards that come from exploration success in this sector.
Who are your competitors?
We don’t perceive a lot of competition in the early stages of mineral exploration, even though there are many thousands of junior mining companies. The mining industry tends to work collaboratively, often in formal joint ventures. As a matter of fact, Cornerstone would welcome other companies to come to under-explored jurisdictions such as Ecuador. Competition tends to occur more often between majors who sometimes compete for the deposits identified by juniors.
Who are the major shareholders of Cornerstone Capital Resources?
Cornerstone’s share register is dominated by individual retail investors and a few institutions such as mutual and hedge funds. The largest fund owns around 7%, and the next largest owns less than 4%.
How much cash do you have on hand and what is your monthly cash burn rate?
We have approximately $4.3 million of cash on hand. We keep our monthly burn rate relatively low as a significant amount of exploration expenditures are funded by partners. Our burn rate is approximately $450,000 per month.
Where does Cornerstone Capital Resources go from here?
In addition to continuing work on the Gama soil sampling and ground geophysical surveys, community consultations have begun at another key target on Shyri, Cañaribamba. We will also shortly begin consultations at a third target, Vetas Grandes, in an effort to have environmental permitting ready to support drilling those targets around the end of Q1 2012.
Cornerstone is making great progress in Chile too. In late August we released the first results from our La Fortuna property, where we have an option to earn a 100% interest.
Significant copper and silver assay results were obtained in the northern two-thirds of the property, with seven prospective mineralized zones identified over a large area of approximately 18 km2.
Channel sampling at Trench #1 returned 19.5 metres at 1.34% copper and 58.0 g/t silver. We've completed over 200 line kilometres of ground magnetic surveys and that data is currently being processed and interpreted. We also plan to carry out induced polarization (IP) surveys in prospective areas. There are already some obvious drill targets, and with further trenching and integration of magnetic and IP data, new targets will be developed.
Also in Chile, we have made application for exploration concessions covering approximately 300 square kilometres in our Miocene project area, located just north of the Maricunga belt that hosts several world-class gold deposits.
Disclosure: Cornerstone Capital Resources is a Stockhouse client