January 22, 2013
Exeter Resource Corporation Could Hit The Acquisitions Trail, As It Mulls Development Options For Caspiche
Exeter Resource Corporation has C$54 million in the bank and a resource of 19.3 million ounces of gold, 4.6 billion pounds of copper, and 41.5 million ounces of silver at its Caspiche project on the Maricunga gold belt in Chile.
Drill rig at Caspiche
That’s a powerful combination, but there’s still lots of work and a few key decisions to be taken before any metal gets produced.
Because although Exeter has defined a huge sulfide resource at Caspiche, it also needs US$2.6 billion to bring it into production.
And with that kind of price tag a major joint venture partner will be required, a difficult proposition considering the ominous lack of deals in 2012.
But as Exeter’s Vice President Corporate Comms Rob Grey points out: “We don’t need to build it overnight”.
And if a favourable partner does not come forward immediately then Exeter can still push the project ahead along another course.
A second option to develop a smaller oxide project at Caspiche before diving into the sulfides presents a potentially lucrative alternative which Exeter could undertake singlehandedly. The development of the oxide project as a heap leach operation is likely to require a more manageable capital investment of US$329.5 million.
As an added bonus, the oxide project will further advance the proposed sulfide operation by removing the oxide layer resting above the sulfides. And putting the oxides into production could go a long way towards enticing a major miner to the table to help with the development of the sulfides.
According to a study which Exeter put out in June, the heap leach project at Caspiche could produce around 210,000 ounces of gold and 365,000 ounces of silver over a five year mine life at a cost of US$524 per ounce of gold, including a silver credit.
The study showed that Caspiche could deliver an internal rate of return of 34.4 per cent, and payback over 3.2 years.
Production would come after an initial capital spend of US$335.6 million.
While evaluating both options, the Exeter team have continued to undertake various optimization studies designed to improve the economics as well as de-risk both potential avenues of development.
Additionally, the opportunity to share infrastructure with established miners could make a considerable difference. Sharing power by reaching off a Kinross power line is one option for the oxide project. The estimated cost of plugging into the Kinross line, which lies 12 kilometres away, is in the neighbourhood of US$12 million.
Meanwhile, Exeter has been actively exploring for water. The company already has one third of the water needed for the full Caspiche project under option, more than enough to develop the oxides should the company go that route.
Ultimately though, to de-risk the full sulfide project, more water will need to be secured and to that end the company has two water exploration tenements where drilling could provide the necessary supply.
Two water exploration holes were drilled at the Cuenca One tenement in 2012 and after breaking for the winter, the company is about to set the drills turning again.
“We were in the midst of drilling and had found some wet ground but winter conditions got too rough up there”, says Exeter’s corporate development specialist Marina Katusa. “So we had to stop the program. Now we’re getting back into where we left off and we’re hoping to move through the wet gravel area and deeper into water.”
If adequate water can be sourced Exeter will have significantly de-risked the project and removed the considerable cost which purchasing additional water would present for a project as large as Caspiche.
While all that’s going on, Marina reports that the company is now on the hunt for a new acquisition to provide additional blue sky.
Depressed share prices and market capitalizations, combined with the capital crunch many juniors are facing could present Exeter with the opportunity to flex some of its financial muscle. More than 600 junior miners on the venture have less than C$200,000 in working capital, according to John Kaiser of Kaiser Research Online.
At this point exactly which way the company will go in the medium term remains undecided. If conditions improve and capital can be sourced on favourable terms, the Exeter team are keen to develop the oxide potential of Caspiche.
But if markets sour Exeter has the financial clout to hold off and concentrate elsewhere. “If things do get worse”, says Marina, “then we’re okay with that because we think there will be good opportunities out there and if things get better then we’re ready to move forward on our oxides. Having cash is key right now so we’re very fortunate”.