Hot Chili to squeeze quick and easy revenues out of Productora
Hot Chili has struck a win-win deal with the Chilean Government by accepting an offer for lease mining and processing of ore from its Productora copper-gold deposit in Chile, which will see Hot Chili realise surprise revenues from Productora way ahead of any internal planning.
The deal between Hot Chili and Government agency, Empresa Nacional de Mineria, or “ENAMI” is still subject to formal sign off and has a few main components.
ENAMI will lease and mine Hot Chili’s Productora mining concessions with a view to pulling out around 120,000 tonnes per annum of copper-gold ore over two years from the two main concessions.
The Productora JV company that is 80% owned by Hot Chili and 20% owned by partner, Compania Minera del Pacifico, will receive US$2 for every tonne of ore processed and a 10% royalty on the sale of any extracted minerals.
Hot Chili said that at current copper prices of US$2.15 per pound, the agreement potentially represents between US$400,000 and US$500,000 in annual payments from the Chilean Government for Hot Chili’s 80% interest in the Productora JV.
With the Australian dollar tanking to US$59 cents recently, the deal represents an unexpected windfall for Hot Chili of between AUD$676,000 and AUD$845,000 a year to plug up its ongoing exploration and corporate costs.
It will also give Hot Chili some valuable information about how the Productora ores behave when mined and processed ahead of any full-scale mining operation.
The ore will be processed through ENAMI’s Vallenar plant, which is located just 15 kilometres north of Productora.
ENAMI has estimated that 10,000 tonnes per month of ore grading 1% copper could be pulled out of Productora, based on historical production figures.
As a sign of its support for the local community, Hot Chili said that its deal will help to underwrite some 400 jobs at ENAMI's Vallenar plant.
Productora boasts an impressive resource of 5 million tonnes of copper and about one million ounces of gold, which was considered the company maker until Hot Chili discovered Cortadera just down the road that has been throwing up some ridiculously long mineralised drill intersections lately.
Cortadera is now looking like a stand-alone project in its own right and Productora is looking more like it will just add to the mine life by contributing ore, thereby improving the project NPV.
Hot Chili’s Cupero prospects 1, 2 and 4 have an average recorded high-grade zone to date ranging from 0.7 to 1.3% copper and 0.3 to 0.7 grams per tonne gold.
To give Cortadera context, the massive Cascabel copper-gold project in Ecuador has a mineral resource of 8.4 million tonnes of copper grading 0.41% and 19.4 million ounces of gold grading 0.29g/t.
In March of 2016, Hot Chili polished off the Productora pre-feasibility study that shows an initial 11-year mine life, processing 17 million tonnes of ore per annum at 0.43% copper.
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