It’s what geologists dream of.
In the world of mining, size always matters. And the discovery of elephant-sized gold/copper deposits is the ultimate prize.
With this in mind, Aztec Minerals Corp. (TSX: V.AZT, Forum) has an extraordinarily rare opportunity: it believes it has a potentially world-class mineral trophy in its crosshairs.
The Vancouver-headquartered start-up has initiated a summer exploration program to better define high-priority drill targets at its Cervantes gold-copper property in geologically-fertile Sonora State, north-western Mexico.
At least two sizeable gold-copper porphyry targets will be drilled to test a tantalising geological theory: that near-surface, low-grade, oxide gold mineralization overlies a deep-seated, bulk tonnage, porphyry copper-gold-molybdenum sulfide deposit.
In other words, Aztec’s management theorizes that Cervantes is analogous to a particularly thick cake with plenty of icing on the top. The cake represents copper and the easy-to-access open-pitable gold as the icing.
Why is this so desirable?
The presence of such shallow mineralization — if it’s economic — means that it could be mined as an open pit (a quarry-like operation), at a low stripping ratio (the ratio of waste rock to ore).
Furthermore, oxide gold deposits are usually amenable to heap leach extraction, which is a relatively simple process that involves using a solution to separate valuable metals from its host rocks. Such deposits often also benefit from uncomplicated metallurgy, which makes it relatively simple to separate the gold from other minerals in the ore.
All of this typically translates into an inexpensive gold oxide mining operation—one that can significantly defray the cost of accessing larger bulk tonnage, copper-gold porphyry mineralization at depth.
Drilling is expected to get underway in September-October when weather conditions are more optimal. Subsequent to drilling, Aztec hopes to complete an initial resource estimate—both potentially big catalysts for higher share price valuations.
Dynamic Management is Always the Key to Big-League Success
The company-maker potential of Cervantes helps explain why Aztec has attracted so many big guns from the mineral exploration industry to its management team and board of directors.
They include President and CEO Joey Wilkins, who has 20 years of experience with Kennecott, an exploration-oriented subsidiary of the global mining heavyweight, Rio Tinto PLC. That is where he gained invaluable experience running exploration projects for porphyry copper-gold deposits in northern Mexico and South America.
Furthermore, the company’s founder and Chairman of the Board is Brad Cooke. A fellow geologist, he’s no stranger to success in the mining industry.
In fact, his flagship company Endeavour Silver Corp. (TSX: T.EDR, NYSE: EXK, Forum) , listed in New York (NYSE: EXK) and Toronto(TSX: EDR), is a great example of how a shrewdly-managed Canadian mining start-up can beat the odds, starting with no assets and going on to succeed and subsequently thrive by acquiring, discovering, building and operating silver-gold mines in Mexico.
From a standing start, Cooke developed Endeavour into a mid-tier silver miner that operates three mines and has three more advanced-stage projects in the pipeline.
Aztec Minerals directors Mark Rebagliati and Brad Cooke with CEO Joey Wilkins atop the California gold zone at Cervantes
Cooke and Wilkins have also recruited the expertise of fellow director Mark Rebagliati, who is a serious heavyweight among the ranks for the world’s top geoscientists.
An accomplished mining engineer and mineral explorationist, Rebagliati has a distinguished record of being integral to the discovery and development of several world-class porphyry copper-gold deposits.
This includes the mammoth Pebble porphyry deposit in Alaska, which contains a jaw-dropping 70 million ounces of gold and 57 billion pounds of copper.
Having won multiple awards and been inducted into the Canadian Mining Hall of Fame, his nose for finding mineral riches makes him a major asset to Aztec Minerals.
Finally,the board has one more big-game hunter within its ranks. Geologist Patricio “Pat” Varas has impressive career credentials, too.
Among them was his role as project manager for Kennecott Canada Exploration during the discovery and development of the multi-billion-dollar Diavik diamond mine in Canada’s Northwest Territories. Varas was also the leader of the exploration team that unearthed the large-tonnage Santo Domingo iron/copper/gold mine in Chile.
Most recently, he was a founder and former CEO of a mining start-up that developed the Milestone potash deposit in Saskatchewan into a multi-billion dollar asset and sold it to a Chinese state-run company.
At the Heart of Mexico’s Prolific Gold and Copper Porphyry Belt
The under-explored Cervantes Project is ideally located at the intersection of two prolifically-mineralized geological trends.
One is a porphyry copper belt that trends from south-eastern Sonora in a northwest direction all the way intoArizona. The other trend is a high-sulfidation epithermal gold belt that runs east to west across most of Sonora State.
Of particular significance, the copper belt hosts one of the five largest copper mines in the world — the huge Cananea porphyry copper/molybdenum mine of Grupo Mexico. The gold belt encompasses Agnico Eagle Mines’ nearby, low-cost La India gold mine, as well as Alamos Gold's large, near-surface Mulatos gold mine.
It’s therefore no surprise that Aztec believes that the Cervantes Project may offer the best of both worlds. This entails a bulk tonnage copper deposit that is overlaid by an oxide gold deposit (much like a centrepiece jewel in a crown).
Building on Early Exploration Success
Most of Aztec’s near-term exploration work will focus on the richly-mineralized California zone. This is the location of a large gold-in-soil target, measuring 600 metres by 900 metres. Better still, it overlies an expansive geophysical signature — one that extends hundreds of meters in several directions, most notably at depth.
Additionally, historic drilling by a past project operator confirmed the presence of ore grades over mineable thicknesses in near-surface oxide mineralization at California.
It’s important to note that the mining industry’s best exploration tools — namely geology, geochemistry, geophysics, and exploratory drilling — have all corroborated one another to point to the existence of something big at the California target zone.
Several outlying targets, including the well-mineralized Jasper zone, will also be probed in the upcoming drill program, which is expected to outline the parameters of the near-surface mineralization.
Copper oxide as neotocite and chrysocolla hosted in quartz feldspar porphyry intrusive at the Jasper target.
What appears to be emerging at Cervantes is a textbook, bulk-tonnage porphyry deposit, involving a gold-copper-molybdenum system that is outcropping at surface.
Investment Summary
Regardless of how much gold and copper may yet be revealed, there is also considerable intangible value in the project’s geographic location. A mining-friendly nation, Mexico is very attractive to North American miners due to its low geopolitical risk.
Furthermore, Mexico has long been supportive of mining, especially since this well-financed industry supports some of Mexico’s more economically under-developed regions.
Hence, Mexico is very supportive of foreign investment and offers attractive business incentives to North American mining companies like Aztec.
They include a favourable investment climate and tax regime, a pro-mining regulatory environment, and a long mining tradition that is integral to the long-term growth of Mexico’s flourishing economy.
Let’s not forget that Mexico is also “elephant-hunting” country for world-class gold-copper deposits. To this point, drilling this fall will help determine the overall size potential of a prospective large-tonnage gold-copper-molybdenum discovery at Cervantes.
In fact, all the exploration tools that have been used to date seem to indicate that a prospectively world-class discovery is waiting to be unearthed.
It is also worth reiterating that Aztec expects to complete an initial resource estimate once the upcoming fall drill program is completed. Both of these developments are likely to act as catalysts for higher share price valuations.
On a technical note, the company now has an enviable share structure with only about 27.9 million shares outstanding (38.9 million fully diluted), and Coeur Mining holds a strategic 9.9% of the fully diluted shares. Such a low share count, as well as having a strategic investor, represent prospectively powerful catalysts to high share price evaluations in the advent of positive exploration results.
In other words, Aztec’s undervalued share price is unlikely to stay that way for much longer. In particular, the turning of drills at the California zone this fall promises to show the investment community that Aztec Minerals really does have a tiger by the tail.
In such an eventuality, the company’s shares seem set for an exhilarating run.
About the Author: Marc Davis has a deep background in the capital markets spanning 25 years. He is also a longstanding financial journalist, having worked for leading digital financial news agencies in North America and in London’s financial centre. He is also a former business reporter for CBC Television.
Over the years, his articles have also appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post and AOL.