Brownfield expansions remain in favor.

BY Jason Spizer

Juniors progress in Chile

July 28, 2020

Image courtesy of DSI Underground

Taking a walk around the core shack at the SEG conference in October of 2019, it was obvious that Chile will continue to possess some of the most compelling geological opportunities regardless of its status as a mature jurisdiction with declining ore grades. Representatives of some of the top junior mining companies operating in Chile presented on the economic and geological promise of their projects. However, there was one topic of discussion that was ubiquitous. Obtaining financing to advance projects was an existential challenge. This is not an unfamiliar discussion. There was a multi year contraction in exploration expenditure from 2012-2016, after hitting a record high of US$1.04 billion in 2012.

During that period, returns mining companies had promised failed to come to fruition, leaving project financiers out of pocket and unwilling to fund more developments. This sentiment is continuing to affect project investment today, and is why most of the capital currently invested is ‘stay-in-business’ expenditure, typically replacing reserves through brownfield expansions.

The positive trajectory established in 2017 gave juniors hope that the market had finally turned for the better. But in 2018, the exploration budget in Chile dropped to US$576.2 million, down by around US$27 million year-on-year from 2017, based off Chochilco reporting. This positioned Chile in sixth place internationally, accounting for 6% of the global exploration budget.

In analyzing the drop in the countries exploration budget, the number seems small. However, the lack of funding opportunities have been more acutely felt by juniors, who decreased their budget by 52% in 2018, with their share of the total budget dropping to 5% in Chile. Meanwhile, the contribution of majors held steady due to their brownfield projects.

Dave O’Connor, chief geologist at Aethon Minerals, commented: “There is a lack of investment in junior companies resulting in a lack of activities from them. It has become increasingly difficult for juniors to raise financing on the stock markets. There has also been a slowdown in exploration activity from the majors, making it hard to do joint ventures.”

That said, there are still many companies willing to endure soft market conditions in the short term in order to reap the benefits of remaining in Chile when the market turns up again. 110 companies are conducting exploration in the country and 46% remain active. Some 54% of these exploration projects are focused on copper, 25% on gold, 4% on lithium and 3% each on silver, cobalt and iron, a Cochilco study disclosed.

According to José Ignacio Silva, country manager of Hot Chili, an Australian junior operating in Chile: “As financial markets have not been funding many exploration projects in the last few years, the few ones that remain will be very important in the next cycle.” He went on to address why greenfield projects are less favorable at the moment: “In general, drilling is very expensive and chances of success are very low. That is why it is better for junior companies to look for a project with some drilling and some results than rather than opting for a greenfield project.”

Some of the juniors that are skillfully navigating the current challenging environment in Chile are Aethon Minerals, Coro Mining, Hot Chili, Los Andes Copper, Rio2 limited, Wealth Minerals, Lithium Chile and Revelo Resources.

Los Andes Copper is leading the development of the industry with its Vizcachitas project, located in the Rio Rocin Valley of central Chile. It is one of the largest advanced copper projects in the Americas not held by a major. The project is currently well positioned to continue its development as it is now in the permitting process for its pre-feasibility study. According to executive chairman Fernando Porcile: “The Vizcachitas project not only has a large resource, but also has some qualities that make it more competitive than many new greenfield projects and even some of the brownfield expansions in Chile.”

His colleague Antony Amberg, CEO of Los Andes Copper, explained why their project has garnered so much attention from the mining community: “The PEA demonstrated that Vizcachitas is a very attractive and viable copper project. We were able to show a net present value (NPV) of US$1.8 billion and an IRR of 20.77% at US$3.00/lb copper after tax. We demonstrated a significantly larger resource base and have measured and indicated resources of 1.284 billion mt.”

The PEA also demonstrated that there are no fatal flaws and the project can be mined without any significant complications.

Another notable copper exploration project is Coro Mining’s Marimaca. The project is geologically unique in that it is an oxide deposit and is hosted by intrusive rocks, while the numerous manto deposits in the same region are hosted by volcanic rocks. With a lack of new copper exploration discoveries in Chile, it represents a new type of deposit, which challenges accepted exploration wisdom and may open up new frontiers for discoveries elsewhere in the country.

Marimaca’s location on the coastal belt at low elevation close to Antofagasta and Mejillones is considered advantageous, particularly when compared to projects in the high Andes and this prime location could enable its future development at a relatively modest capital investment. “Marimaca lies in the heart of Chile’s main copper producing region, surrounded by the skills and infrastructure needed to build and operate a mine. Crucially, it does not need to incur the significant infrastructure costs associated with a remote development project,” said CEO Luis Albano Tondo.

At Hot Chili, its Cortadera project saw notable progress in 2019. The company’s latest drill results announced are globally competitive, with 972 m of drilling and grading at 0.5% copper and 0.2 g/mt gold from surface. José Ignacio Silva described this years developments: “Once we began reporting positive results from our project, the financial markets quickly took notice of our larger than expected resources and this explains the exceptional performance of our stock year to date.”

Cortadera, first thought of as a satellite project for Productora, is now the companies flagship asset. Hot Chili’s combined resources base is approximated at 236 million mt at 0.5% Cu equivalent.



The two most influential juniors operating in the Chilean lithium mining market are Calgary based Lithium Chile and Vancouver based Wealth Minerals. Most Canadian lithium explorers battled massive share price declines and difficulties raising financing in 2019. As a result of falling prices, companies reacted quickly to the deteriorating market conditions and curtailed drilling operations to prevent excessive cash burn. Globally, the Mining Intelligence Data Application revealed that in Q2 2019, drilling activities focused on exploration and resource evaluation of lithium and cobalt deposits dropped to the lowest level in two years. Also, the number of completed drillholes dwindled by more than 50% from the peak reached during Q3 2018.

In spite of market conditions, Lithium Chile remained committed to advancing its lithium property portfolio consisting of 166,150 hectares covering sections of 14 salars and 2 laguna complexes in Chile. Lithium Chile is the largest landholder of lithium exploration projects in Chile outside of the government and SQM. In December 2019, the company announced that drilling has commenced at its Turi lithium brine project in Chile. Turi is one of six high-priority projects identified for early drill testing.

For Wealth Minerals, the announcement of a memorandum of understanding with Uranium One could lead to a Definitive Agreement for a partnership that would accelerate the development of the companies Atacama lithium project. This includes the use of Uranium One’s lithium extraction technology, which potentially has big implications for more efficient use of water. A Pertinencia (or work program review affidavit) was received from the Chilean Environmental Agency for the company’s Atacama project in August 2019. This key document allows for low impact exploration programs at the property.



In contrast to copper and lithium, precious metals focused companies have not experienced the same level of difficulty in financing their operations. Because of this, the market for new exploration has been reinvigorated.

Rio2 is a junior led by CEO Alex Black. Black previously turned Rio Alto Mining into a new gold producer in Peru, which was eventually acquired by Tahoe Resources for US$1.12 billion. Rio2’s Fenix project, located in Copiapó Province, Antofagasta region, is one of the largest gold oxide resources in the world according to the company. In 2019, it completed an updated pre-feasibility study to reveal an after-tax net present value of US$121 million discounted at 5% and an IRR of 27.4%. The study also proved that the project is capable of profitability at prices as low as US$1200/oz. According to Enrique Garay, senior vice president of geology: “Rio2’s business model is to move the large resource at Fenix Gold into development and production as an open pit, gold heap leach mining operation. The strategy is to take the project into production in the shortest possible timeframe based on a staged development strategy.”


Prospect Generating

Revelo Resources is a prospect generator and the company’s CEO Tim Beale outlined its strategy: “The idea is that we generate prospects and then look for industry partners to make joint venture agreements. We are now looking to modify our strategy by continuing to look for option and joint venture agreements with mid-tier or large companies, but also by raising private finance to fund exploration – perhaps by spinning out certain projects which we will operate.”

The company signed a letter of agreement with UK based BMR Group in 2019 to acquire an 80% interest in the Montezuma copper project for US$6.5 million in cash and US$1.5 million in exploration expenditures. Montezuma is located in northern Chile between the Chuquicamata and Centinela copper districts and BMR will have an option over the property, while Revelo Resources will have a retained interest through to the completion of a PEA.

As for the company’s future plans, it intends to continue spending money on exploration and advancing projects: “The exploration process is the biggest step up in value creation in the whole chain of exploration, feasibility and development in mining. If we make a discovery, significant shareholder value will be created,” Beale said.


Private Equity

Junior exploration companies primarily fund their operations through liquidity generated by stock market listing. Analysis of the geographies in which these companies are listed gives a strong indication into where the capital for exploration activities in Chile are raised. The Toronto Stock Exchange (TSX), the TSX Venture Exchange (TVX) and the Australian Stock Exchange (ASX) are the principal markets, according to Cochilco. Given, funding for junior explorers dropped 25% year on year on the Canadian stock markets, and these exchanges finance over 50% of juniors operating in Chile, it is understandable why impacts are being felt so markedly in Chile.

Private equity provides an alternative to financing via the stock market and insulates companies from the volatility of public financial markets. Two of Chile’s top juniors, Coro Mining and Los Andes Copper, have significant private equity backing. Greenstone and Tembo Capital own 70% of Coro Mining and Resource Capital Funds has been instrumental in helping Los Andes Copper advance its Vizcachitas project. The company financed drilling for Vizcachitas in 2016 and in 2018 provided funds to complete the preliminary economic assessment and initiate the prefeasibility study.

Criteria for private equity firms differ significantly, but often companies are flexible and adapt to opportunities in the market. According to Ignacio Del Rio, CEO of Minería Activa: “Back in the boom of 2010, it was difficult to acquire an operating company. We saw valuations at US$4 copper projections, so it made more sense to invest in exploration or pre economic assessment stages. We did this with Dominga and it proved to be successful. When we went through the crisis and copper fell back to US$2 in 2016, that is when we acquired Pampa Camarones, a copper operation that was filing for the Chilean bankruptcy process. In this case we went for a distressed opportunity with a turnaround idea. We are opportunistic and flexible regardless of what stage a company is in or what mineral they are producing.”


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