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Castillo Copper (CCZ:ASX)

Divesting non-core asset crystalises value at Marlborough

1 Video - Jul 18

Castillo Copper Limited (ASX:CCZ) has announced a joint venture with A-Cap Resources (‘A-Cap’, ASX: ACB). A binding term sheet to explore the Marlborough nickel-cobalt project, near Rockhampton in north-east Queensland, has been signed. Highlights of the announcement include the following.

  • A-Cap will earn up to a 60% interest in the Marlborough project by spending up to $2.25 million on activities there over the next two years.
  • Subsequently, A-Cap will continue funding 100% of the project’s expenditure until completion of a bankable feasibility study.
  • The Marlborough project is a non-core asset for Castillo, as only limited work has been completed there to date.
  • Castillo remains focused on exploration activities at its Cangai copper project and Broken Hill cobalt project.

Analyst comments: although the Marlborough project is highly prospective, it is a non-core asset of Castillo’s and has added little, if any, value to the company’s current share price.

The terms of the joint venture are favourable for Castillo (as outlined above). Moreover, it will retain a 40% interest in the project if a discovery is made without having to contribute any further expenditure until completion of a bankable feasibility study. Considering the limited amount of exploration work at the project to date, and the funds likely to be required to advance the project towards this stage of development, it is an excellent outcome for Castillo.

Importantly for Castillo, both its funds and management time will remain totally focused on its main assets at Cangai and Broken Hill. We look forward to initial assay results from the ongoing exploration drill program at Cangai to be release in late August/early September.   We maintain our assessment of Castillo as a SPECULATIVE BUY.

Initiation Report

7 Videos - Jun 18

Castillo Copper (CCZ.ASX) is developing the Cangai copper project in NSW, Australia.  Cangai historically mined exceptionally high grade copper (+13% Cu) over 100 years ago, however very limited work has been completed since its closure.  In the short term we see numerous catalysts, including drilling at the Cangai site, metallurgical test results from the tailing as well a ramp up in activity at the Broken hill cobalt project.

Cangai – Virtual Site Trip

1 Video - Jun 18

Virtual site trip to the Cangai historical copper mine in NSW, Australia.  This analysis reviews the following aspects:

  • Surrounding infrastructure
  • Historical operation
  • Exploration strategy
  • Future development potential.

 

 

Written Report – Re-discovering high grade copper in Australia

1 Video - Jun 18

Castillo Copper Limited (ASX:CCZ) is exploring the high grade Cangai copper project in New South Wales. The project was mined more than 100 years ago, which saw exceptionally high-grade copper (13% Cu) mined, as well as silver and gold credits.

What else do we know about Cangai?  With the exception of a period during the 1980s when major miners WMC and CRA (Rio Tinto) undertook limited exploration, since its closure a century ago, the site has remained largely unexplored – despite the excellent surrounding infrastructure, a skilled workforce within driving distance (just an hour by road from Grafton) and, most importantly, significant copper mineralisation clearly visible around the old workings (refer to virtual site trip video).

What work has Castillo completed recently? Last year Castillo announced a maiden JORC resource for Cangai of 3.2 Mt at 3.35% Cu. Castillo has  since completed and exploration drill program earlier this year, noting numerous promising copper intersections.  The company has also just announced a follow up 39 drill holes exploration drill program, focused predominately on the supergene ore area.

Is there other potential at Cangai? The Smelter Creek stockpiles are about one kilometre from Cangai. Given the exceptional high grade historical ore processed at this site and the poor metallurgical technology available at that time, it’s likely significant mineralisation remains. Castillo has announced an initial 4 hole drill program at Smelter Creek whilst they have also had a number of enquiries from prospective off-take partners.

Broken Hill cobalt asset: as well as the Cangai project, Castillo has an early-stage cobalt project at Broken Hill, immediately north of Cobalt Blues (ASX: COB – market cap. $125 million) Thackaringa project. Castillo recently released a desktop study for Thackaringa which identified six highly prospective sites for cobalt mineralisation.  Work is on-going at the Broken Hill project.

Valuation catalysts: the company will release a number of key announcements in the second half of this year, including the following.

  • Drilling at Cangai deposit – commence shortly.
  • Drilling at Smelter Creek stockpiles – commence shortly.
  • Assay results – 3Q18.
  • Metallurgical testwork (Smelter Creek) – 2H18.
  • Field exploration at Broken Hill – commencing 2H18.

Analyst comments: given the clear evidence of copper mineralisation around the historical Cangai mine site, as well as its proximity to world-class infrastructure and a skilled workforce, it’s surprising the project has remained idle for so long. However, with an aggressive 39 drill-hole program exploration program to commence shortly, Castillo is looking to quickly change this.

Unlike the initial program, which targeted deep mineralisation, this one is focusing on the shallower supergene material surrounding the historical workings. We believe this, as well as the use of smaller drill rigs better suited to the surrounding terrain, is likely to produce improved exploration results in comparisons to the first exploration program.  Assuming exploration success, a resource upgrade at Cangai is likely in the near future.

In addition to Cangai, drilling will also take place at the Smelter Creek stockpiles.  We were impressed by the potential there (as discussed above) and believe the results of this program may surprise on the upside. Longer term, the potential of the stockpiles will however be determined by the metallurgical testwork which is due to commence shortly after drilling.

In addition to Cangai/Smelter Creek, Castillo’s Broken Hill cobalt project holds significant blue sky potential for shareholders.  Given their neighbors COB recent announcement a strategic partnership with LG International (one of the world’s largest lithium-ion battery makers), this alone we believe should add value to Castillo’s long-term share price, particularly as work ramps up in the near future.

Broken Hill cobalt project – overview

1 Video - Jun 18

In addition to the Cangai copper project, Castillo owns the Broken Hill cobalt project.
Castillo has released a desk top study on the project which identified six highly prospective sites for cobalt mineralisation.  We discuss with management the strategy at Broken Hill moving forward.

Cangai – History

1 Video - Jun 18
  • The historical Cangai mininig operation was operational from 1904 until production ceased during the first world war in 1917.
  • We review the history of the project to highlight the potential which remains.

Cangai – Deposit & tailings projects development strategy

1 Video - Jun 18

The Cangai deposit has a current resource of 3.2Mt @ 3.35% Cu. We discuss with the company the strategy to grow this resources further as well as the potential to extract value from the historic tailings workings.

 

Cangai – Exploration strategy

1 Video - Jun 18

Review the exploration strategy and potential at the Cangai copper project and the surrounding areas.