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Castillo Copper - Significant sulphide mineralisation encountered at Cangai

Aug 2018


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Summary - Significant sulphide mineralisation encountered at Cangai

Castillo Copper Limited (ASX:CCZ) has announced initial results from its ongoing drill program at the company’s Cangai copper project in NSW. Highlights of the announcement include the following.

  • The current drilling campaign (five out of 39 drill-holes completed to date) has intersected massive sulphides, including:
    • CC0023R: 18 m significant mineralisation intersected – includes 10 m massive sulphides from 41 m and 2 m massive sulphides from 56 m;
    • CC0022R: 18 m significant mineralisation intersected – includes 1 m massive sulphides from 92 m and 4 m semi-massive sulphides from 110 m, and
    • CC0025R: 8 m significant mineralisation intersected – includes 3 m semi-massive sulphides from 90 m.
  • Present in the massive sulphide intersections are extensive visible chalcopyrite, sphalerite, pyrite and pyrrhotite, consistent with historic mine reports.
  • A downhole electromagnetic (DHEM) team deploying to site will refine the drilling campaign’s trajectory and determine extensions to the newly discovered mineralisation.
  • A diamond drilling rig is being mobilised to perform follow-up infill work along the line of lode.

Analyst comments: This is a positive announcement from Castillo, highlighting that the company is right on track with the current drill program at Cangai.

While the drill program earlier in the year failed to meet market expectations, we remained highly optimistic regarding the potential of the Cangai project, given historical results and the limited amount of exploration completed there in recent years.

The current drill results appear to have supported this optimism, as they are more in line with expectations for the project (assays pending), with strong, continuous sulphide mineralisation encountered. If assay results confirm the presence of high-grade copper mineralisation – which is probable on the basis of the information released by the company (ASX announcement), as well as what historical production revealed about the project – there is the potential for a share price re-rating in coming weeks.

On saying this, we do understand that one drill result does not make a deposit (or a mining operation, for that matter). However, Castillo’s approach is pleasing, given that DHEM, an exploration technique already used with success at Cangai, is now underway. DHEM will not only provide a better understanding of the new zone’s potential but may also identify other targets in the area. Moreover, DHEM will allow for a more targeted approach when diamond drilling commences at that new zone later in the present campaign.

We look forward to more results (assay results, DHEM and ongoing drilling) from Cangai over the coming months and maintain our assessment of Castillo as a SPECULATIVE BUY.