Deep-South Resources Advances on All Fronts While Drilling at the Haib Copper Project is in Full Swing
The spot price for copper continues to gallop higher. In fact, copper prices soared to their highest level in a decade a few days ago. This is providing an excellent tailwind for advanced copper projects that demonstrate robust economics. This is also very good news for Deep-South Resources Inc. (CA:DSM – $0.24, US:DSMTF – $0.19, GER:DSD – €0.14) as the Company is stepping up the pace to advance its 100%-owned Haib Copper project.
This week, Deep-South Resources reported that METS Engineering Group was selected to complete metallurgical testing for sample material from the Haib deposit. Based in Australia, METS provides a comprehensive range of services to assist Deep-South. Several phases of testing are planned to define metallurgical characteristics of sample material. This data will contribute to the design of an optimal processing circuit to maximize copper recovery. Crushed ore material may be expected to deliver a range of recovery efficiencies in a leach pad operation based on particle size variables. Metallurgical testing helps to establish the most efficient particle size to achieve greater copper recovery.
Another phase of work will investigate bio-assisted heap leach column testing. The program will evaluate performance improvements utilizing an agglomeration circuit. This work is directly tied to demonstrating the potential operating economics for a mining scenario.
Updated Resource Estimate in Process to Include Data from Recent Drilling Program
In tandem with the metallurgical efforts to quantify and qualify the economic potential for Haib, Deep-South is also moving ahead with an updated resource estimate for the project. As such, the Company announced that MSA Group of South Africa was selected to prepare the NI43-101 report for the project.
The currently defined resources for Haib are estimated at 3.12 billion pounds of copper (M&I) plus 2.9 billion pounds of copper in the inferred category of classification. The updated resource estimate will include the results of ongoing drilling work at Haib. Work commenced in March with two drill rigs currently active and about 2,000m of drilling completed so far. The program is scheduled for 10,000m of drilling. Samples from the first drill holes have already been submitted for lab assay and the first results may be expected shortly.
MSA will complete a structural geological model for the deposit to include three-dimensional analysis for each mineralogical domain of the overall deposit. Site visits to the property will be scheduled to verify data collection. The report will then evaluate the resource component for each domain as part of the calculation of the overall updated resource estimate for the project.
The above project metrics table, published in the latest PEA for Haib, gives a clear indication of the project’s attractive valuation. At a copper price of $4 per pound, the project has an after-tax NPV of US$1.648 million and an after-tax IRR of 42.1. Knowing that copper currently trades at around $4.50 per pound, it’s clear that the metrics have significantly improved further. Also good to know in relationship with those metrics, Deep-South Resources currently has a market cap of… C$33 million.
Approval for Trading on OTCQB Market Granted and Outstanding Debenture Issue Converted
Deep-South also reported that a listing was secured on the OTCQB Venture Exchange. Shares of the Company will now be eligible for trading in the United States. This is considered a milestone as it opens a much larger pool of potential investors to have easier access to trade the common stock. This in turn will improve liquidity and enable more efficient trading opportunities for investors.
In addition, Deep-South will apply to the Depository Trust Company (DTC) for DTC eligibility. This creates a simplified process for trading of the common shares with electronic clearing and settlement.
The Company also reported that a convertible debenture previously held by Teck Resources Ltd has been sold to a third-party investor. The structure of this offering enables conversion into common shares of Deep-South at a deemed price of 11.5 cents a share. This debenture was set to mature in August of this year. Accrued interest payable as of March 31 amounted to $60,962. Teck reported that it had been paid $398,117 for the transaction. The investor purchasing the debenture shall convert the offering into 3,913,730 shares of Deep-South upon closing of the transaction. Teck remains a significant minority shareholder of Deep-South, as it holds 22,579,608 shares, or about 15.7% of the common stock.
The Haib Copper project demonstrates appealing potential for mine development. A recently completed PEA presented robust economic assumptions to validate the project. Ongoing work programs, including the extensive drilling currently underway, continue to advance the project further along the value curve.
The caliber and reputation of the consulting firms that were recently appointed are important. MSA is an experienced consulting firm that is considered the leading provider of mineral exploration services in Africa. The updated resource estimate will involve a commitment to quality assurance and controls according to NI43-101 standards. In addition, METS is a highly regarded metallurgical consultant with global experience, working with a range of notable mining companies. Comprehensive metallurgical testing will contribute towards further evaluation of critical economic variables for the Haib project.
As these studies and test work are completed, Deep-South will build greater confidence in the viability of its mine development plan. A positive conclusion to the current drilling work will contribute to an upgraded resource estimate. Metallurgical testing and geological modeling will support the favorable outlook for successful mining operations. These reports will then be incorporated into a feasibility study for the project that is the next step towards a development decision.
Deep-South is aggressively moving ahead with its objective to present the Haib project as a legitimate candidate for mine development. The move to secure a domestic exchange listing for US-based investors will improve liquidity and attract new investors. Pending drill results may be another catalyst for increasing the share price. All of these factors contribute to build shareholder value. Smallcaps Recommendation: BUY.
|Smallcaps.us Advice: Buy||Price Target: $0.67||Latest Company Report (pdf)|
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