Completion of 2017/2018 Field Program
The Company’s key operating focus for the three months ended March 31, 2018 was the completion of its 2017/2018 field program at the Filo del Sol Project, which occurred at the end of March 2018, coinciding with the end of the South American field season. Over its duration, the Company successfully drilled a total of 9,411 metres in 31 reverse circulation (“RC”) holes and 9 diamond drill holes. The assay results for the first 20 RC holes have been received and include the following highlights:
- VRC135: 20 metres @ 0.54% Cu, 0.96 g/t Au, 208.0 g/t Ag;
- VRC137: 164 metres @ 0.33% Cu, 0.36 g/t Au, 27.4 g/t Ag;
- VRC143: 36 metres @ 1.45% Cu, 0.34 g/t Au, 0.9 g/t Ag;
- VRC152: 38 metres @ 0.33% Cu, 0.28 g/t Au, 313.6 g/t Ag;
- VRC153: 12 metres @ 0.86% Cu, 1.91 g/t Au, 0.8 g/t Ag; and
- VRC155: 50 metres @ 0.56% Cu, 0.50 g/t Au, 236.4 g/t Ag.
With the field work performed and results received to date, the Company expects to achieve its goal of converting a portion of the Inferred oxide resource to the Indicated category, while step out drilling appears to have extended mineralization beyond the current limits of the Mineral Resource. In addition, over 4.5 tonnes of material has been collected during this past field season, which will be used for metallurgical, geotechnical and environmental testwork, all of which was undertaken in support of the Pre-Feasibility Study (“PFS”), which is currently underway.
On January 12, 2018, the Company obtained an unsecured US$ 2.0 million short-term credit facility (the “Facility”) from Zebra Holdings and Investments S.à.r.l (“Zebra”), an insider of the Company, to provide additional financial flexibility to fund ongoing exploration at the Filo del Sol Project and general corporate purposes. Zebra reports its security holdings in the Company as a joint actor with Lorito Holdings S.à.r.l., and at the time of entering into the Facility they collectively held more than 20% of the Company’s issued and outstanding common shares. Zebra received
6,000 common shares of the Company upon execution of the Facility, and an additional 300 common shares each month, for every US$ 50,000 in principal outstanding on the Facility, prorated accordingly for the number of days outstanding. There is no interest payable in cash during the term of the Facility, and all common shares issued in conjunction with the Facility are subject to a four-month hold period under applicable securities laws.
The Company drew a total of US$ 1.7 million against the Facility, which was fully repaid on February 28, 2018 following closing of a bought-deal equity financing and concurrent non-brokered private placement (see section below). The Facility remains available until January 12, 2019, and as of the date of this MD&A, the Company has issued a total of 12,300 common shares to the lender as consideration for providing the Facility to the Company.
Closing of Financings for $25.5 Million
On February 28, 2018, the Company closed the sale of 5,894,231 common shares of the Company on a bought deal basis to a syndicate of underwriters led by Haywood Securities Inc. (the “Underwriters”), at a price of $2.60 per share (the “Issue Price”) for total gross proceeds of approximately $15.3 million (the “Offering”), which included 124,231 common shares issued on partial exercise of an over-allotment option. The gross proceeds generated from the Offering were subject to a 5.0% commission, payable in cash.
On February 28, 2018, the Company also closed a concurrent private placement of 3,928,964 common shares, including 82,810 common shares issued to adjust for the Underwriters’ partial exercise of the Over-allotment Option, at the Issue Price, for gross proceeds of approximately $10.2 million (the “Concurrent Private Placement”).
The Company plans to use the net proceeds from the Offering and Concurrent Private Placement for exploration and development at the Filo del Sol Project, and for working capital and general corporate purposes. A portion of the net proceeds have also been used to repay the amounts drawn under the Facility.
As of the date of this MD&A, assay results from only the first 20 RC holes of the 2017/2018 drill program have been received and the remaining assay results, covering 11 RC and 9 diamond drill holes, are expected to become available before the end of the second quarter. The results of the 2017/2018 drill program, once received in full, will form the basis for an update to the Mineral Resource estimate on the Filo del Sol Project, which is currently planned for completion during the third quarter, 2018.
The updated Mineral Resource estimate, together with the results of the other data collection and testwork disciplines undertaken during the 2017/2018 field program, will be incorporated into a PFS of the Filo del Sol Project, which is being led by Ausenco Engineering Canada Inc., and targeted for completion by the first quarter of 2019. The PFS will explore several opportunities identified in the PEA for unlocking value at the Filo del Sol Project, including:
- Evaluating unique processing methods to take advantage of the fast leach kinetics noted in metallurgical testwork completed to date, which could reduce project capital by recovering soluble copper through installing a conventional washing system for process feed after the crushing circuit. Further study of this option is planned and, if successful, the washing stage could eliminate the permanent copper and on/off leach pads and their associated materials handling systems, saving on capital and operating costs associated with these installations;
- Evaluating opportunities to optimize the mine plan and production schedules by smoothing out the production profile and bringing forward copper revenues; and
- Increasing metallurgical recoveries with further test work and optimization.
The analysis of alternative processing options and refinement of metallurgical recoveries is currently underway, using material collected during the 2017/2018 field program from diamond drill holes and surface trenches. The results of this current phase of metallurgical testwork are expected to be available in the third quarter of 2018.
With the recently completed PEA and a PFS currently underway on the Filo del Sol Project, together with a treasury of $18.1 million at March 31, 2018, the Company is well positioned to make strides towards advancing the Filo del Sol Project. The results of the PFS will guide the direction taken by the Company with respect to the Filo del Sol Project and may lead to further advanced studies of the Project.