ASX: HCH
TSXV: HCH
OTCQX: HHLKF
Costa Fuego Copper-Gold Project Preliminary
Economic Assessment (PEA)1 Outlines One of the World's
Lowest Capital Intensity, Major Copper Developments
PERTH,
Australia, June 28, 2023 /CNW/ -
- Strong Economics: Costa Fuego PEA delivers using an 8%
discount rate and long-term metal price assumptions of US$3.85/lb copper (Cu) and US$1,750/oz gold (Au):
-
- Base-case post-tax Net Present Value (NPV8%) of
US$1.10 Billion (approximately,
within a range of US$733 Million to
US$1.46 Billion) and Internal Rate
of Return (IRR) of 21% (approximately, within a range of 17% to
25%)
- Base-case pre-tax Net Present Value (NPV8%) of
US$1.54 Billion (approximately,
within a range of US$1.05 Billion to
US$2.03 Billion) and Internal Rate
of Return (IRR) of 24% (approximately, within a range of 19% to
29%)
- Low Start-up Capital: US$1.05
Billion estimated, resulting in fast 3.5-year payback.
Initial phases of open pit mining fully fund development of a bulk
underground operation
- Low Capital Intensity: One of the lowest capital
intensities of global copper development projects
- Approximately 112 ktpa Average CuEq2 Production
Rate: Including 95 kt Cu and 49 koz Au during primary
production (first 14 years) at C1 Cash Cost3 of
US$ 1.33/lb (estimated net of
by-product credits)
- Initial Mine Life:
16-years with 1.41 Mt Cu and 718 koz Au produced for total revenue
of approximately US$13.52 Billion and
total free cash flow of approximately US$3.28 Billion (post-tax, after operating costs,
capital costs, and royalties)
- Conservative Approach: 20% contingency on capital and
US$3.30/lb copper price for
optimisations
- Low Elevation with Advanced Permitting: One of only a
few global copper development projects at low elevation with a
water permit and power connection
- Highly Leveraged to Copper Price: For every US$0.10/lb increase above US$ 3.85/lb Cu price, US$100 Million (approximately) is added in
post-tax NPV8%
- Resource Growth Potential: 30,000
m drilling program set to commence across multiple
targets
- Pre-Feasibility Study (PFS) Planned for Release by H2
2024: 80% of workstreams to support a PFS are completed, with
minimal study costs remaining
- Single, Large Pit Scenario for Cortadera: Being studied
in H2 2023, with potential to materially increase mine life and
scale
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1 The PEA is
preliminary in nature and includes 3% of production feed from
Inferred Mineral Resources that are considered too speculative
geologically to have the economic considerations applied to them
that would enable them to be categorised as Mineral Reserves (NI
43-101) or Ore Reserves (JORC 2012), and there is no certainty that
the PEA will be realised. Mineral Resources that are not Mineral
Reserves or Ore Reserves do not have demonstrated economic
viability. References to "Mineral Reserves" in this announcement
include Ore Reserves (JORC 2012). See page 39 for additional
cautionary language.
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2 The
copper-equivalent (CuEq) annual production rate was based on the
combined processing feed (across all sources) and used long- term
commodity prices of: Copper US$ 3.85/lb, Gold US$ 1,750/oz,
Molybdenum US$ 17/lb, and Silver US$21/oz; and estimated
metallurgical recoveries for the production feed to the following
processes: Concentrator (87% Cu, 56% Au, 37% Ag, 58% Mo), Oxide
Leach (55% Cu only), & Low-grade Sulphide Leach (40% Cu
only).
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3 See page
40 for full non-IFRS measures disclaimer.
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The Preliminary
Economic Assessment referred to in this release is equivalent to a
Scoping Study under JORC Code (2012) reporting guidelines. It has
been undertaken for the purpose of initial evaluation of a
potential development of the Costa Fuego Copper Project in Chile.
It is a preliminary technical and economic study of the potential
viability of the Costa Fuego Copper Project. The PEA outcomes,
production target and forecast financial information referred to in
the release are based on low level technical and economic
assessments that are insufficient to support estimation of Ore
Reserves. The PEA is presented in US dollars to an accuracy level
of +/- 35%. While each of the modifying factors was considered and
applied, there is no certainty of eventual conversion to Ore
Reserves or that the production target itself will be realised.
Further exploration and evaluation and appropriate studies are
required before Hot Chili will be in a position to estimate any Ore
Reserves or to provide any assurance of any economic development
case. Given the uncertainties involved, investors should not make
any investment decisions based solely on the results of the
PEA.
Of the Mineral Resources scheduled for extraction in the PEA
production plan, approximately 97% are classified as Indicated and
3% as Inferred during the 18-year evaluation period. The Company
has concluded that it has reasonable grounds for disclosing a
production target which includes a small amount of Inferred Mineral
Resources. There is a low level of geological confidence associated
with Inferred Mineral Resources and there is no certainty that
further exploration work will result in the determination of
Indicated Mineral Resources or that the production target itself
will be realised. Inferred Mineral Resources comprise 2.5% of the
production schedule in the first four years of operation. The
viability of the development scenario envisaged in the PEA does not
depend on the inclusion of Inferred Mineral Resources.
The Mineral Resources underpinning the production target in the PEA
have been prepared by a competent person in accordance with the
requirements of the JORC 2012. For full details on the Mineral
Resource estimate, please refer to the ASX announcement of 31 March
2022. Hot Chili confirms that it is not aware of any new
information or data that materially affects the information
included in that release and that all material assumptions and
technical parameters underpinning the estimate continue to apply
and have not been changed.
This PEA is based on the material assumptions outlined in Table 11
in this announcement. While Hot Chili considers that all the
material assumptions are based on reasonable grounds, there is no
certainty that they will prove to be correct or that the range of
outcomes indicated by the PEA will be achieved.
To achieve the outcomes indicated in the PEA, including reaching
Definitive Feasibility Study ("DFS") stage, funding in the order of
US$1.10 Billion will be required, including pre-production and
working capital, and assumed financing charges. Investors should
note that that there is no certainty that Hot Chili will be able to
raise that amount of funding when needed. One of the key
assumptions is that the funding for the Project will be available
when required. It is also possible that such funding may only be
available on terms that may be dilutive to or otherwise affect the
value of Hot Chili's existing shares. It is also possible that Hot
Chili could pursue other value realisation strategies such as debt
financing, a sale or partial sale of its interest in the Costa
Fuego Copper Project, sale of further royalties and/or streaming
rights, sale of non- committed offtake rights, and sale of non-core
assets.
This announcement contains forward-looking statements. Hot Chili
has concluded that it has a reasonable basis for providing these
forward- looking statements and believes it has a reasonable basis
to expect it will be able to fund development of the Costa Fuego
Copper Project. However, a number of factors could cause actual
results or expectations to differ materially from the results
expressed or implied in the forward-looking statements. Given the
uncertainties involved, investors should not make any investment
decisions based solely of the results of this study.
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Hot Chili's Managing Director Mr Christian Easterday commented,
"The Costa Fuego PEA cements Hot Chili's position as the largest
copper developer listed on the ASX by both resource size and
potential scale of copper production.
Costa Fuego ranks highly amongst global peer
projects1 and stands out as one of the world's lowest
capital intensity, major copper developments. The PEA indicates a
strong investment case for advancing Costa Fuego to a PFS for what
would be a low-cost, low-risk, long-life, large-scale copper
project, which is extremely leveraged to both resource growth and
copper price appreciation.
I am very pleased with our entire teams' effort to deliver
the PEA on-time and within guidance and look forward to delivering
on our objective to transform Hot Chili into the only 100 thousand
tonne copper producer listed on the ASX outside of the control of
major miners.
We are focused on our next steps in resource growth and the
delivery of an optimised and potentially larger project
definition for our pre-feasibility study next year.
The recently announced US$15
Million investment agreement with Osisko Gold
Royalties positions the Company to be fully funded for the next 12
to 18 months to deliver on our growth and development
timetable."
Chairman Nicole Adshead-Bell
affirmed, "Hot Chili is now one of a select group of
companies with a copper development project of this scale of
production that is not controlled by a major. The Company is also
advantaged by its coastal, low elevation location and abundant
existing infrastructure, reducing its economic hurdle and resulting
in the lowest capital intensity of its global peer
projects.
Our decade long efforts on decreasing development risk,
including acquiring water rights, surface rights and securing
connection to the electrical grid, will materially reduce
development timelines when we make the decision to advance the
Project through final permitting.
Hot Chili is very well positioned to benefit from the looming
structural shortfall in copper production1 due to the
size and scale of the Project. Combined with the ability to more
quickly advance to production when compared to some of our
development peers, due to our 10-year long commitment to reducing
exogenous risk combined with the strong ESG credentials of Costa
Fuego".
Chief Operating Officer Grant
King further added, "The PEA outlines for the first
time - a combined production hub approach for Costa Fuego,
utilising centralised processing for open pit and underground
production sources.
We have taken a conservative approach in the PEA - Twenty
percent contingency has been applied to all capital costs, Mineral
Resources are reported at US$3.00/lb
copper price, mining optimisations were undertaken at US$3.30/lb copper price and financial modelling
at US$3.85/lb copper price, with
closure costs included.
Our PFS is well advanced and awaiting the outcome of further
resource growth activities before finalising study scale. We will
also investigate a large single open pit scenario for Cortadera (no
underground block cave) with the potential to materially increase
processing feed and mine life."
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1 Source:
Published Company reports on studies undertaken on projects that
were not in production at the time of the studies. Information from
projects has been sourced from publicly available data that has
been provided under differing economic assumptions. Public
information for projects has been adjusted to provide a
standardised data set under a US$3.85/lb Copper price. The Global
Developer Peer Group of project studies were selected on the
following basis: Global primary copper projects (not controlled by
a major miner), with by- product revenues where applicable,
reporting studies of average annual life-of-mine copper production
of greater than 40 kt, which have been published within the last 4
years. Projects with older studies were considered to be on hold.
Significant projects such as Pebble and King-king were excluded by
Hot Chili due to high perceived geopolitical risk, limiting the
probability of development. Projects controlled by mid-tier mining
companies near Costa Fuego were also included (Josemaría, Santa
Domingo, Mantos Blanco and Mantoverde).
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The company will be hosting webinars on 29th June at
9.30 am AEST / 7.30 am AWST (for Australian audience) and at
10.00 am EST (for North American
audience) to brief shareholders and investors on the outcomes of
the Costa Fuego PEA.
Hot Chili's Chief Executive Officer Christian Easterday and Chief Operating Officer
Grant King will be hosting the call,
which will also include a Q&A session.
The following links will provide access to the Costa Fuego
investor briefing webinar:
Registration Link for Australian
Audience - 29th June at 9.30 am AEST
/ 7.30 am AWST
Registration Link for North American Audience – 29th June at
10.00 am EST
After registering, you will receive a confirmation email
containing information about joining the webinar.
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1 "Green
Metals - Copper is the new oil". Published 13 April 2021, available
at:
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https://www.goldmansachs.com/intelligence/pages/gs-research/copper-is-the-new-oil/report.pdf
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For more information please contact:
Christian Easterday
Managing Director – Hot
Chili
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Tel:
+61 8 9315 9009
Email:
admin@hotchili.net.au
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Penelope Beattie
Company Secretary – Hot
Chili
|
Tel:
+61 8 9315 9009
Email:
admin@hotchili.net.au
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Harbor Access
Investor & Public
Relations (Canada)
|
Email:
Graham.Farrell@harbor-access.com
Email:
jonathan.paterson@harbor-access.com
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or visit Hot Chili's website at www.hotchili.net.au
Read the full release and the Preliminary Economic Assessment
(PEA) here
View original content to download
multimedia:https://www.prnewswire.com/news-releases/hot-chili-announces-pea-for-costa-fuego-301865613.html
SOURCE Hot Chili Limited