Sprott's investment will speed Copaquire exploration program
I first started following molybdenum exploration companies closely when Sprott Asset Management become involved with Blue Pearl Mining (TSX: T.BLE, BullBoards) and Roca Mines (TSX: V.ROK, BullBoards). Both companies have done exceedingly well, rocking the stock charts in a non-stop ticker tape parade, arguably since Sprott got involved.
Sprott recently invested $7 million into a mid-stage molybdenum junior called International PBX (TSX: V.PBX, BullBoards). The private placement financing of 14 million units (comprised of one share at $0.50 and one two-year warrant at $0.75), as well as other recent developments, have bolstered the argument for PBX's success significantly.
A dialogue between PBX and Sprott Asset Management began last November when PBX CEO Gary Medford was on site in Chile. He called Sprott analyst Maria Smirnova and spoke about the company and its projects for about an hour. After another meeting in Toronto, a meeting was orchestrated a meeting between PBX Management, including Chairman Len DeMelt and Tom Thomsen and Sprott founder, Eric Sprott himself.
According to Thomson, Mr. Sprott listened to DeMelt's pitch on PBX for "three and a half minutes" and finally said, "How can I not invest?" He committed two of his funds, including the newly launched Molybdenum Participation Fund, to purchasing two tranches of 10% of the company's float.
In an interview with Resourcex last week, PBX President and CEO Gary Medford commented on the significance of Sprott's involvement. "Sprott's involvement gives us great credibility - involvement with this group that has financed so many successful ventures. It also gives us the funds we need to quickly do a substantial drill program on Copaquire and move ahead developing an asset that could be very large and very valuable."
PBX has several ongoing exploration programs in Chile, one with a NI 43-101 compliant resource estimate of about 75 million pounds copper at Tabaco, and a molybdenum-copper resource at Copaquire. The latter project, Copaquire, is comprised of three main targets, two of which have seen substantial drilling: Cerro-Moly is a moly-copper target, and Sulfato is a copper play.
To date the Cerro-Moly target has consumed the bulk of the company's energies because it is consistently mineralized over an area of 900,000 meters squared, which the author of PBX's 2006 43-101 technical report on the property says suggests a 1.4 billion tonne target grading between 0.06 and 0.1% Mo - plus substantial copper credits.
According to the same technical report, "the weighted average grade of all drill-hole intersections is 0.077% Mo." Thus, an approximate gross calculation of the in-situ resource estimate at the Cerro-Moly target is 1,078,000 tonnes, or 2.38 billion pounds.
To put Copaquire into perspective, one can make a crude comparison between Copaquire and the historical Climax Mine in Colorado. Climax, a primary moly (molybdenum only) mine, started production in the early 1900s and operated until the mid-1990s. According to Michael Magyar of the USGS (United States Geological Survey), with whom I spoke recently about the relationship between moly and the rare metal rhenium, Climax operators extracted 1.9 billion pounds of moly during that period, and more than 1 billion pounds remain in the ground.
As Magyar says, "Climax is the largest moly deposit. Period."
Lest my comparison cause consternation, the differences between Climax and Copaquire are numerous: For example, Climax was a primary molybdenum mine, whereas Copaquire has strong copper showings. Climax would have been a higher-grade deposit - in fact, the 158.7 million tonnes of ore still in the ground at Climax grade an average 0.19 percent moly, compared to Copaquire's 0.077 weighted average at Cerro-Moly.
Nevertheless, the sheer size of PBX's potential resource, its substantial copper credits, the fact that PBX also has two other sizeable deposits at Copaquire - all these factors combined lead me to believe that PBX has a property that fits comfortably into the same realm. Or to put it as Magyar did (who was not, by any means, speaking about PBX): "When you get up to a billion pounds of moly, you're in a world class deposit."
That said PBX has at least another 5,000 to 10,000 meters of drilling to do on this property prior to confirming this behemoth resource calculation. Recent drill results do continue to confirm the company's projections at Cerro-Moly, with low-grade assays over lengthy widths.
Most recently PBX announced 94 meters grading 0.029% moly, with 0.17% copper in the core as well. In January, the company reported 200 m grading 0.067%, 186m grading 0.063 and 168m grading 0.052%Mo. In each case, the copper adds significantly to the value.
Moreover, late last week, PBX announced it discovered rhenium in an assay at Copaquire. Hole 42 at PBX's Copaquire molybdenum-copper property in Northern Chile was found to contain 0.481 g/t rhenium over 30m, which may add further upside to this project.
Rhenium (Re) is a rare metal associated with copper-moly deposits, and is one of the ten most valuable metals on earth with recent prices reaching US$212 per ounce. The company now intends to assay all significant molybdenum sections to determine if it is sitting on more rhenium.
Should that be the case, now is an excellent time to find rhenium - which is always associated with copper-moly plays. The market for rhenium is, according to USGS's Magyar, "Very tight."
He told me, "I don't think there's any doubt that there's more room for more production. You need to understand that the size of the rhenium market is 40 to 45 tonnes per year worldwide, and half of that comes out of one company in Chile, Molymet."
Presently, PBX is wrapping up a stage one drill program of 5000 meters drill program on its Copaquire property. Stage two - and this is where the funds from Sprott will be worth their weight in molybdenum - involves acquiring two more drills (for a total of three) to ramp up exploration, which PBX CEO. Medford told me will take place between now and May of 2007.
"It's probably going to take five to ten thousand more meters of drilling in total," he said. "Especially once you get onto the copper zone again, because we want to upgrade that. But with the three drills it's going to go a lot faster."
Doug Hadfield is the Chief Editor of the Resourcex Investor, an internationally distributed newsletter specializing in identifying as-yet-undiscovered resource companies representing the best in their class. For more information, visit the website www.resourcexinvestor.com.
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