Sourse: http://epsteinresearch.com/2017/04/24/azarga-metals-epic-maiden-resource/
Azarga Metals Corp. [TSX-V: AZR]
owns a 60% interest (with a call option to move to 100%) of the Unkur Copper-Silver project (“Unkur”)
in eastern Russia. Unkur is a high-grade deposit that was actively
drilled and defined during the Soviet era. It had several mineral
resource estimates done, but none were (are) NI 43-101 compliant. The
following interview of CEO, President & Director Dorian “Dusty” Nicol conveys the excitement management has about its maiden mineral resource estimate.
[Corporate Presentation] [Prior article on AZR]. Readers should note the progress (execution) of the Company since my initial interview of Mr Nicol last year.
Peter Epstein [ER]
: Please describe Azarga Metals to readers unfamiliar with the story.
CEO Dusty Nicol
: Azarga Metals Corp. is a C$9 million market cap company listed on the TSX-V (ticker: AZR). It owns 60% of the Unkur Copper-Silver
project in eastern Russia. We acquired the project mid-last year and
have already delivered a maiden NI 43-101 Resource estimate based on the
first Phase of drilling we did. It shows 42 million metric tonnes
containing around 380,000 tonnes (840 million pounds) copper equivalent, (or 124 million ounces silver equivalent),
in the Inferred category. We believe our maiden Resource is one of the
larger ones put out by a copper or silver junior in the past few
years. And, the Resource has plenty of growth potential because it’s
open in multiple directions and down dip.… a very good start!
[ER]
:
The
maiden Resource press release came as a surprise, many thought more
time, money & drilling would be required. How did Azarga reach this
milestone so quickly?
Dusty
:
Yes, we get asked that a lot, there was historical exploration done on
the deposit back in the 1960s / 1970s, including drilling &
trenching. That work and various historical [non-43-101 compliant]
resource estimates indicated that Unkur had the potential to be a
copper-silver deposit of global significance, and what I mean by that
is, much larger than what’s reflected in our maiden Resource. We didn’t
simply ‘twin’ historical holes. We carefully considered prior
exploration data and our own interpretation of the geology, and
formulated a plan for the project’s first modern physical exploration
program.
The
presence of the historical data really improved our efficiency because
it meant that the maiden Resource could be derived from only 16 diamond
core drill-holes plus four trenches. Having said that, I want to
emphasize that while we used historical data to guide our exploration,
our Resource estimate is based entirely on our own verified data. The
total spend for that first Phase leading to the maiden Resource was
around US$1.5 million.
[ER]
:
Speaking
of historical data, are there important takeaways regarding, “Soviet
era” exploration drilling? How do recent drill results compare to
historical records?
Dusty
: Well,
if we look at the areas where our new work overlapped with the old, we
can honestly say that we have been pleasantly surprised by both grade
and thickness. That means we’re getting increasingly confident around
that notion that this could be a world-class deposit. Importantly, our
Resource only covers around half of the historically known strike
length. That portends plenty of potential upside. Also, we found some
things that the historical data didn’t cover, for instance, there are
multiple layers of ore, not just a single zone. Around a quarter of our
maiden Resource comes from a second layer (referred to as Zone 2). Having a second zone, maybe multiple mineralized zones, again suggests that we could be onto something really big.
[ER]
:
What are some near-term catalysts over the remainder of the year?
Dusty
: Before
I answer directly, there’s more to say about the Resource that defines
how we are moving forward. The majority of the deposit is located near
surface, including two higher grade pods of mineralization, plus as
mentioned, the Resource is open in multiple directions and down dip.
This leads us to a two-pronged strategy. We will continue our physical
exploration, which we expect will lead to a transformational increase
in the Resource after our second Phase of work.
Simultaneously,
we will be considering economic and engineering aspects in terms of
scoping study and PEA work. So, catalysts this year include; more
drilling results, results from geophysics and metallurgical testing,
likely a new Resource estimate, and the results of a PEA or internal
scoping study. So, there should be plenty of action and news flow!
Right now we’re planning the Phase two work program and should be ready
to approve and kick it off in the next 30-60 days.
[ER]
:
Presumably
you’re comfortable with Russian country risk. What can you share with
readers about your views on Russia (eastern Russia)?
Dusty
: I
speak five languages and as a 40-year veteran geologist, I have worked
just about everywhere. I’ve worked in really hard places in terms of
terrain, weather and permitting. Alaska is one — so is the high Andes
of South America — but Unkur’s location in eastern Russia is not. We
have no trouble getting to site or getting rigs in. The site is only 7
kilometers from a railway and it has a 220KvA powerline running over
it…. Russian is fast becoming my sixth language!
By
the way, I think the location has one extraordinary advantage that no
one talks about, and that’s the package of incentives provided to
promote investment in Russia’s far east. There are tax incentives and
royalty reductions, but the most important thing is the Far East Development Fund (“FEDF”).
It’s essentially a development bank specifically set up for the
region. It offers debt and equity funding on preferential terms for
projects such as ours. Examples of companies that are working with the
FEDF include Amur Minerals, Eurasian Minerals and Polymetal Intl. Plc.
We
have a strong presence in Russia. In fact, I’m the only full-time
employee who’s not Russian. Our entire technical team at site and small
administrative team in China is Russian. In addition, we have a strong
presence in Moscow through our Moscow-based Director and his business
associates & contacts. Also, a significant percentage of our
shareholder base is Russian. As a result, I’m very comfortable
operating in Russia and I really think that the issue of ‘country risk’
is more one of perception than one of substance. I’m finding Russia no
more difficult to operate in than most other jurisdictions, and in fact
in many ways I’m finding it easier.
[ER]
: Azarga Metals’ press release was quite detailed, can you summarize factors (other than size, grade and jurisdiction) that readers might benefit from focusing on?
Dusty
:
Yes, as I said before two important features of the Resource are; (1)
most of it is near surface, including the two higher grade pods of
mineralization – i.e., think ease of mining and economic benefit. These
pods could be amenable to lower-cost open pit mining and could be mined
earlier, thus helping accelerate capital payback, and (2) it’s open in
both directions along strike and down dip – i.e., think growth
potential!
[ER]
: Can you explain to readers the exclusive opportunity Azarga has to consolidate 100% of the project (via a call option on the remaining 40% Interest)?
Dusty: Yes,
we have a call option over the remaining 40% that can be exercised
if/when the Resource reaches 2 million tonnes of contained copper
equivalent, with 70% in the Measured & Indicated categories. The
price of the call will be either a mutually agreed upon valuation or
based on an independent fairness opinion. We have a clear path to
consolidate the project and are working towards the milestone to do so.
[ER] Thank you for your time and good luck on Phase 2 drilling later this year.
[Corporate Presentation] [Prior article on AZR] [Initial interview] [Proactive Investors] coverage of AZR
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