Hot Chili Issues Quarterly Report for Q3 2024
PERTH, Australia, Oct. 31, 2024 /PRNewswire/ -
Highlights
Costa Fuego Copper-Gold Project Pre-Feasibility Study Progresses
All Costa Fuego Pre-feasibility Study (PFS) workstreams planned for completion in late 2024
Completion of hydrogeological drilling at the planned Tailings Storage Facility (TSF), as well as additional seawater and freshwater flotation trade-off test work has re-confirmed that optimal processing for Costa Fuego will be achieved using raw seawater
Metallurgical workstreams indicate potential improvements for both molybdenum flotation and copper oxide leach recoveries when compared to the 2023 Preliminary Economic Assessment (PEA)
Concentrate market studies confirm a reduction of long-term treatment costs (TC) and refining charges (RC) assumptions, when compared to the 2023 PEA
Improvement in long-term consensus commodity price forecasts for all potentially payable metals (copper, gold, molybdenum and silver), when compared to the 2023 PEA
Costa Fuego Environmental Impact Assessment Advancing
Completion of an additional winter-season environmental survey and commencement of a formal community engagement programme with local stakeholders and some indigenous groups
EIA document preparation underway in advance of planned submission in mid-2025
Huasco Water, A Growing Strategic Asset for Hot Chili
Hot Chili (80% ownership) and its partner, Chilean iron ore company Compania Minera del Pacifico (CMP, 20% ownership), continue to advance plans for a regional, multi-user, seawater and desalinated water supply business through its newly established company "HW Aguas para El Huasco SpA" (Huasco Water)
International engineering firm, ILF Group, appointed to complete regional Water Supply Business Case Study (PFS equivalent) for Huasco Water, due for completion in 1H 2025
Hot Chili's approach to potentially outsourcing its water infrastructure aims to provide capital cost savings and project finance optionality for the development of Costa Fuego
Exploration Activities Underway in Advance of Growth Drilling
Ground magnetic geophysical survey, surface soil sampling and surface mapping completed across the recently secured, 18,000-hectare Domeyko landholding, with results pending
Further regional consolidation opportunities being assessed, discussions advancing well
Cash Position of A$25.7 Million
Cautionary Statement, JORC Code (2012)
The Preliminary Economic Assessment referred to in this Report is equivalent to a Scoping Study under JORC Code (2012) reporting guidelines. It has been undertaken for the purpose of initial evaluation of a potential development of the Costa Fuego Copper Project in Chile. It is a preliminary technical and economic study of the potential viability of the Costa Fuego Copper Project. The PEA outcomes, production target and forecast financial information referred to in the Report are based on low level technical and economic assessments that are insufficient to support estimation of Ore Reserves. The PEA is presented in US dollars to an accuracy level of +/- 35%. While each of the modifying factors was considered and applied, there is no certainty of eventual conversion to Ore Reserves or that the production target itself will be realised. Further exploration and evaluation and appropriate studies are required before Hot Chili will be in a position to estimate any Ore Reserves or to provide any assurance of any economic development case. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the PEA.
Of the Mineral Resources scheduled for extraction in the PEA production plan, approximately 99% are classified as Indicated and 1% as Inferred. The Company has concluded that it has reasonable grounds for disclosing a production target which includes a small amount of Inferred Mineral Resources, as permitted under the JORC Code. There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the production target itself will be realised. The viability of the development scenario envisaged in the PEA does not depend on the inclusion of Inferred Mineral Resources. However, it is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Measured or Indicated Mineral Resource with continued drilling.
The Mineral Resources underpinning the production target in the PEA have been prepared by a competent person in accordance with the requirements of the JORC 2012. For full details on the Mineral Resource estimate, please refer to the ASX announcement of 31 March 2022. The Mineral Resource Estimate update released in February 2024 does not materially change the Mineral Resource inventory that formed the basis of the 2023 PEA, and no new scientific or technical information has been developed that would materially affect the outcome of the 2023 PEA and, therefore, the results and conclusions of the 2023 PEA are considered current and have been restated for this Report.
To achieve the outcomes indicated in the PEA, including reaching Definitive Feasibility Study ("DFS"), mine construction and production stages, funding in the order of US$1.10 Billion will be required, including pre-production and working capital and assumed financing charges. Investors should note that that there is no certainty that Hot Chili will be able to raise that amount of funding when needed. One of the key assumptions is that the funding for the Project will be available when required and on acceptable terms. It is also possible that such funding may only be available on terms that may be dilutive to, or otherwise affect the value of, Hot Chili's existing shares. It is also possible that Hot Chili could pursue other value realisation strategies such as debt financing, a sale or partial sale of its interest in the Costa Fuego Copper Project and/or Huasco Water, sale of further royalties and/or streaming rights, sale of non-committed offtake rights, and sale of non-core assets.
This Report contains forward-looking statements. Hot Chili has concluded that it has a reasonable basis for providing these forward-looking statements and believes it has a reasonable basis to expect it will be able to fund development of the Costa Fuego Copper Project. However, a number of factors could cause actual results or expectations to differ materially from the results expressed or implied in the forward-looking statements. Given the uncertainties involved, investors should not make any investment decisions based solely of the results of the PEA.
SUMMARY OF OPERATIONAL ACTIVITIES
Costa Fuego Copper-Gold Project Pre-Feasibility Study Update
During the quarter ending September 2024, the Company continued to focus on several development study workstreams for Costa Fuego's Pre-Feasibility Study (PFS) and Environmental Impact Assessment (EIA).
Metallurgy
Potential for improved molybdenum flotation recovery has been determined as part of final PFS metallurgy work programme, following review and analysis of previous flotation testwork. This higher recovery is expected to upgrade the value of molybdenum as a by-product credit in the PFS, when compared to reported values in the Company's 2023 Preliminary Economic Assessment (PEA) and increase the annual quantity of molybdenum concentrate projected to be produced.
Additional geometallurgical testwork was completed for acid-consumption analysis, to support predictive relationships between geological and alteration units at Productora and Cortadera for the planned heap and run-of-mine leach processing. Analysis is nearing completion and will enable optimisation of the throughput of the concentrator, as well as acid cost and recovery within the leaching circuit. Early outcomes indicate significant improvements in copper oxide leach recoveries can be achieved through increased acid addition, when compared to the 2023 PEA.
A final round of Locked-Cycle Tests further confirmed the quality of the Costa Fuego concentrates, with low levels of arsenic and other deleterious elements. Additional seawater and freshwater flotation trade-off tests were also completed and re-confirmed the planned concentrator would see optimal recovery using seawater.
Mining
Mine design for the four Costa Fuego mining locations (Productora, Cortadera, Alice and San Antonio) is in the final stages of review, incorporating all geological, geotechnical and mining information to confirm open pit stability and flow within the proposed block cave at Cortadera. Mine designs are currently being scheduled using MineMax and Panel Caving Block Caving (PCBC) software to optimise the mining and stockpiling sequence, utiliizing Costa Fuego's capital and operating cost framework.
Infrastructure
Infrastructure analysis and design continued during the quarter, with optimisation focussed on key infrastructure items including concentrator and the Solvent Extraction Electrowinning (SX-EW) plants, heap and dump leach pads, tailings dam storage facilities, and utility and access corridors between proposed mine sites and port facilities. Costa Fuego's utility and access corridor is planned to include access road works, seawater pipeline, power lines, concentrate transport route, port and rope conveyor.
Market Analysis
Assessment of the long-term copper concentrate market has indicated overcapacity in the smelter market, resulting in reduced global treatment costs (TC) and refining charges (RC) versus the assumptions used in the 2023 PEA. Current long-term TC/RC forecasts are materially lower than the USD $90/t concentrate TC and USD $0.09/lb Cu RC applied in the 2023 PEA for Costa Fuego. These conditions are expected to continue for an extended period given the relatively new smelter additions and few net additions to the supply of copper concentrate.
Long-term commodity price forecasts of all potentially saleable products used in the 2023 PEA for Costa Fuego have increased over the past 15 months reflecting continuing strong demand. When compared to the 2023 PEA, current long-term commodity price forecasts for copper (+9%), gold (+14%), molybdenum (+25%) and silver (+14%) all sit below spot prices and are likely to benefit the financial metrics for the forthcoming PFS.
Environment
Advancement of environmental workstreams during the quarter focused on developing Costa Fuego's Tailings Storage Facility (TSF) operational plan and design, including hydrogeological and environmental studies of the planned TSF footprint. An additional four groundwater monitoring boreholes for 228m were completed during the quarter in association with infiltration tests as well as surface litho-structural mapping of the TSF area (Figure 1).
This work was supported through engagement with Chilean regulators to discuss the planned TSF approach, with the work being presented to the regulator for initial feedback.
A site visit at Costa Fuego was held in July 2024, attended by several of the Company's Qualified Persons, key technical consultants, and the Hot Chili development team. Attendees reviewed processing, mining and infrastructure designs on location, having regard for environmental and social considerations identified through Hot Chili's baseline surveys and community engagement processes. Infrastructure designs will continue to be refined to optimise the Project footprint whilst minimising potential environmental risks and impacts, while endeavouring to ensure that the Project delivers net benefits to the surrounding communities and population.
In September 2024, the Company executed several small-scale, lease mining agreements with a number of local miners, continuing Hot Chili's ongoing support for local mining employment. Hot Chili is dedicated to supporting the community and advancing sustainable mining in the region.
Costa Fuego Environmental Impact Assessment Advancing
Hot Chili is in the advanced stages of preparing its EIA for Costa Fuego ahead of planned submission in mid-2025. During the quarter, the Company's environmental team completed another winter period environmental baseline study and Company's community engagement team held several meetings with indigenous and non-indigenous stakeholders as part of Hot Chili's formal community engagement programme. The Company has also commenced documentation of over a decade of work undertaken in the Huasco region in support of its planned EIA submission.
Exploration Drilling at Productora, Sterilisation for Mine Infrastructure
During the quarter, Hot Chili's exploration team completed two drill holes for 873m to test a high-sulphidation epithermal (HSE) target identified within the mine development footprint, adjacent to the planned Productora open pit. Drill targeting utilised recently acquired geophysical datasets (MIMDAS) to refine a mineralisation style which had not previously been explored at Productora (Figure 2).
No significant drilling intersections were recorded, with the target now sterilised for planned site infrastructure, allowing the Company to finalise the mine infrastructure layout for the planned PFS and associated EIA.
Alteration zonation identified in drill hole PRD0020 have indicated potential for future HSE targets at depth towards the main Productora mineralisation system. These targets will be reviewed and incorporated into the Company's regional exploration target pipeline.
Regional Exploration Programmes Advancing - Domeyko landholding
An extensive ground magnetics survey comprising of 1,755-line km's (100m spaced, north-south oriented survey lines) was completed in August 2024 at the recently acquired Domeyko landholding (Figure 2), to assist with targeting across this large 18,000-hectare landholding.
In addition, the Company's exploration team continued to complete a major regional soil sampling and surface litho-structural mapping campaign at Domeyko (Figure 3 - 6). Approximately 1,181 soil samples and 76 rock chip samples have been collected across the Domeyko landholding to date, with assays returned for approximately 70% of the soil survey and 80% or rock chip samples collected to date.
Several encouraging results up to 3.5% copper, +10g/t gold and +100g/t silver have been returned from individual rock chip samples collected to date (Table 1). Of the 60 results returned so far, 10 samples recorded copper grade above 1.0%, 8 samples recorded gold grades above 0.5g/t and 4 samples recorded silver grades above 10g/t. Further rock chip results are pending.
Table 1. Domeyko rock chip samples returned in Quarter 3 2024, sorted by Cu%
Sample ID
East
North
RL
Cu %
Au ppm
Ag ppm
Mo ppm
M-48
319294
6791247
960
3.82
4.9
7.3
9
M-59
321708
6788289
972
3.46
0
22.3
1
M-35
318444
6791381
966
2.43
0.9
1.3
14
M-27
317493
6786330
875
2.42
0.3
0.9
6
M-31
319804
6786255
1047
1.72
0.1
8.9
25
M-55
319681
6789121
916
1.62
1.2
15.7
1
M-34
319025
6791473
969
1.4
1.9
1.3
12
M-45
319506
6791565
975
1.32
0
2.2
15
M-60
324159
6789542
1068
1.27
0.1
100
1
M-44
318329
6791572
982
1.25
10
4.8
1
M-57
318953
6790026
861
0.68
1.5
10.3
4
M-02
324378
6785903
1103
0.45
0
0.6
32
M-20
324463
6785778
1124
0.45
0
1.1
17
M-56
319614
6790239
881
0.42
0.2
1.4
3
M-16
324750
6785851
1121
0.41
0
0.1
1
M-13
324448
6785903
1115
0.35
0
1.2
11
M-47
319594
6791054
939
0.34
1.6
7.7
4
M-03
324335
6785889
1104
0.32
0
0.7
3
M-22
324528
6785708
1099
0.3
0
0.7
2
M-23
324688
6785540
1137
0.3
0
0.5
4
M-52
320020
6783421
1075
0.27
0.1
2.8
1
M-12
324178
6785910
1107
0.26
0
1.1
50
M-04
324277
6785844
1100
0.25
0
2.6
2
M-25
324583
6785649
1140
0.24
0
0.4
37
M-51
319273
6784143
996
0.24
0
1.8
0
M-17
324738
6785857
1119
0.17
0
0.2
3
M-01
324396
6785918
1105
0.16
0
2.2
17
M-14
324395
6785812
1116
0.16
0
0.4
23
M-07
324272
6785904
1110
0.15
0
0.2
4
M-09
324193
6785908
1088
0.14
0
0.5
73
M-18
324458
6785879
1117
0.12
0
0.5
38
M-30
319754
6786242
1033
0.12
0
1.8
37
M-46
319490
6791618
938
0.12
0.1
1
3
M-19
324480
6785834
1121
0.11
0.2
0.3
10
M-24
324627
6785627
1137
0.11
0
0.4
20
M-49
319190
6791171
948
0.11
0
0.3
3
M-06
324278
6785901
1110
0.1
0
0.9
13
M-21
324329
6785829
1118
0.09
0
0.3
10
M-10
324246
6786002
1137
0.08
1.5
5.4
70
M-05
324252
6785818
1109
0.07
0
0.4
54
M-08
324378
6785787
1124
0.06
0
0.6
12
M-15
324756
6785849
1121
0.06
0
0.5
0
M-39
318079
6790875
924
0.04
0
0.1
3
M-50
316024
6786640
832
0.04
0
0.2
0
M-58
318645
6790067
849
0.04
0
1.1
7
M-26
324478
6785667
1146
0.03
0
0.1
35
M-29
319638
6786195
1016
0.02
0
0.1
1
M-36
318406
6791480
962
0.02
0
0.3
1
M-43
319155
6791499
971
0.02
0
0.6
1
M-11
324147
6785914
1107
0.01
0
0.1
4
M-28
319252
6785709
978
0.01
0
0.2
1
M-32
319427
6786305
1031
0.01
0
0.2
1
M-33
316373
6789867
847
0.01
0
0.1
1
M-37
318363
6791526
965
0.01
0
0.1
0
M-40
318182
6790921
937
0.01
0
0.2
1
M-38
318294
6791487
974
0
0
0.1
1
M-41
318324
6790962
954
0
0
0.2
1
M-42
318363
6790862
936
0
0
0.1
0
M-53
320352
6783143
1168
0
0
0.1
0
M-54
321197
6786075
1041
0
0
0.3
0
The Company is well advanced in its regional exploration assessment of Domeyko ahead of prioritising targets for initial drill testing.
Table 2 - Drill Holes Completed for Costa Fuego in Quarter 3 2024
Prospect
Hole ID
North
East
RL
Depth
Azimuth
Dip
Results
Productora Hydro
PROMW06
6827010
326460
597
42
0
-90
NSR
Productora Hydro
PROMW07
6826927
323821
550
36
0
-90
NSR
Productora Hydro
PROMW08
6826921
322951
526
84
0
-90
NSR
Productora Hydro
PROMW09
6830173
325356
616
66
0
-90
NSR
Productora Lithocap
PRD0020
6822550
322430
776
432
250
-60
NSR
Productora Lithocap
PRD0021
6822705
321788
664
440.7
90
-60
1m@ 1.3% Cu from 215m
Note: NSR, no significant intersection recorded. Only minor mineralisation encountered in sterilisation drill hole PRD0021
SUMMARY OF CORPORATE ACTIVITIES
Huasco Water, A Growing Strategic Asset for Hot Chili
Hot Chili announced on 8th July 2024, the establishment of a new subsidiary water company - Huasco Water - and commenced transfer of water assets previously held by Hot Chili's subsidiary Sociedad Minera El Águila SpA (80% Hot Chili, 20% CMP). The launch of Huasco Water (80% Hot Chili, 20% CMP) leverages Hot Chili's first-mover advantage to potentially supply future water demand for communities, agriculture and new mining developments in the Huasco Valley region of Chile.
In August 2024, Huasco Water appointed international engineering firm ILF Group to manage Huasco Water's regional Water Supply Business Case Study, which is well underway and due for completion in H1 2025 at a level of detail and confidence similar to a PFS.
The pre-feasibility level Water Supply Business Case Study is focussed on the initial stages of potential water supply to the Huasco region, being:
Establishing sea water supply for Costa Fuego at a minimum scale of 600 Litres per second (l/s) by 2028. Hot Chili is positioned as a potential foundation customer and negotiation for a water off-take agreement is planned to commence in late 2024; and
Establishing scalable, desalinated water supply for third parties in the Huasco Valley region at an initial scale of up to 1,300 l/s from 2030 onwards. Potential customers include projects like CMP's Las Colorados as well as other community, industrial and non-mining projects.
Huasco Water controls the only active granted maritime water concession and most of the necessary permits to provide non-continental water supply to the Huasco Valley, following over a decade of permitting advance for Hot Chili's coastal range Costa Fuego copper-gold project.
A conceptual study completed by Hot Chili in February 2024 (see announcement dated 26 February 2024) outlined potential for significant economic, environmental and social benefits for a variety of potential customers in the Huasco Valley, especially given growing community and regulatory opposition to continental water extraction in the Atacama, and the long lead times involved in securing maritime concessions and associated permitting in Chile.
Hot Chili is in discussion with potential water off-takers in the Huasco Valley and is also engaging with potential infrastructure partners in relation to the potential financing and development of Huasco Water's future industrial water infrastructure.
Hot Chili's approach to potentially outsourcing its water infrastructure aims to provide capital cost savings and project finance optionality for the development of Costa Fuego.
Cash Position and Capital Structure Changes
As of 30 September 2024, the Company had cash of A$25.7 million and no debt.
The operating expenditure for period ended 30 September 2024 included payments for exploration and evaluation of $4.1M. Included in this amount was $3m related to the advancement of the Pre-Feasibility Study and the Environmental Impact Assessment. $1.1M was spent on exploration activities on the Domeyko landholding.
The investing expenditure for period ended 30 September 2024 included payments for tenements of $1.9M, relating to landholding Option Agreement payments (including US$1 million Option payment for El Fuego).
The following summarises the Company's securities on issue:
151,420,450 ordinary fully paid shares
1,850,001 AUD$2.25 options expiring 30 September 2024
1,259,789 options at CAD$1.85 expiring 31 January 2025
1,914,000 options at AUD $1.50 expiring 24 July 2026
5,429,240 service and performance rights.
Additional ASX Disclosure Information
ASX Listing Rule 5.3.2: There was no substantive mining production and development activities during the quarter.
ASX Listing Rule 5.3.3 - Schedule of Mineral Tenements as of 30 September 2024
The schedule of Mineral Tenements and changes in interests is appended at the end of this activities report.
ASX Listing Rule 5.3.4: Reporting under a use of funds statement in a Prospectus does not apply to the Company currently.
ASX Listing Rule 5.3.5: Payments to related parties of the Company and their associates during the quarter per Section 6.1 of the Appendix 5B totalled $163,000. This is comprised of directors' salaries and superannuation of $163,000
Health, Safety, Environment and Quality
Field operations during the period included geological reconnaissance activities, reverse-circulation drilling, diamond drilling, core-testing and logging, field mapping, and sampling exercises across the major Cortadera and Productora landholdings, as well as new tenements at Domeyko. Activities on new tenements are run from the Productora or Cortadera operations centres and their safety statistics are included under the figures for all projects.
There were no Lost Time Injuries (LTI) during the quarter.
Hot Chili's sustainability framework ensures an emphasis on business processes that target long-term economic, environmental and social value. The Company is dedicated to continual monitoring and improvement of health, safety and the environmental systems. There is no greater importance than ensuring the safety of our people and their families.
Table 2. HSEQ Quarter 3 2024 Performance and Statistics
Deposit
Productora
Cortadera
All Projects
Timeframe
Q3 2024
Cum.²
Q3 2024
Cum.²
Q3 2024
Cum.²
LTI events
0
0
0
6
0
8
NLTI events
0
4
0
6
0
11
Days lost
0
0
0
152
19
263
LTIFR index
0
0
0
21
70
19
ISR index
0
0
0
522
1
626
IFR Index
0
48
0
41
0
45
Thousands of man-hours
9.1
83
2.9
291
18.8
420
Incidents on materials and assets
0
1
0
0
0
1
Environmental incidents
0
0
0
0
0
0
Headcount¹
29
11
14
32
12
51
Notes: HSEQ is the acronym for Health, Safety, Environment and Quality. LTIFR per million-manhours. Safety performance is reported on a monthly basis to the National Mine Safety Authority on a standard E-100 form; (1) Average monthly headcount (2) Cumulative statistics since April 2019.
Tenement Changes During the Quarter
During the quarter, Sociedad Minera La Frontera SpA ("La Frontera") claimed two mining exploration concessions ("CF 10" and "CF 11"), which are in the process of being constituted. Also, some mining right names were standardised with a (-) symbol and six mining rights (Santiago A 1-26; Porfiada XII 1-60; Porfiada A 1-40; Porfiada F 1-50; Cortadera 6 1-60; and Chilis 10 1-38) were reduced in size due to mining right conversion into exploitation leases.
The Company's existing tenements are detailed in the table below.
Table 3. Current Tenement ('Patente') Holdings in Chile as at 30 September 2024
Cortadera Project Tenements
License ID
HCH % Held
HCH %Earning
Area (ha)
Agreement Details
MAGDALENITA 1/20
100% Frontera SpA
100
ATACAMITA 1/82
100% Frontera SpA
82
AMALIA 942 A 1/6
100% Frontera SpA
53
PAULINA 10 B 1/16
100% Frontera SpA
