Initial Assay Results From Haib Copper Project Confirm High Expectations

The spot price for copper has established a new all-time high. Money flow is now re-entering junior resource stocks amidst a renewed bull market for commodities. This is all good news for shareholders of Deep-South Resources Inc. (CA: DSM – $0.22 & US: DSMTF – $0.19 & GER: DSD – €0.13), the 100% owner of the Haib copper porphyry project in Namibia. The Company is also attracting speculative interest following the commencement of a significant exploration program at Haib. The objectives to confirm a higher grade deposit area and increase drill density could build further economic value to this advanced development prospect.

Deep-South reviewed historical drilling work and developed an exploration model suggesting that higher-grade, nearly vertical structures existed within a larger overall deposit. Geologists studying the data believed that potential had been previously overlooked because the historical drilling was also aligned vertically. Therefore the Company opted to complete a series of angled drill holes aligned towards other sections of the deposit to the northwest and southeast. This orientation provides a better opportunity to intersect these structural targets. Potential extensions of the defined deposit area could also be confirmed as the drilling continues laterally. With the first batch of assay results in hand, it appears that Deep-South has been successful in both objectives.

This week, Deep-South provided some encouraging assay results that support the potential for a higher grade copper-molybdenum zone to be defined. Analysis for the first batch of five drill holes has been completed and the results indicate that higher grade structures have been encountered as expected. More than 800m of drill core was logged and sampled from these first five drill holes.

Higher Grade Copper Mineralization Encountered Along With Attractive Molybdenum Values

Initial drilling focused on the Central zone of the deposit. Copper mineralization was successfully encountered in each of the five drill holes from this batch. Drill Hole HM01 was halted after a very shallow interval due to a broken drill rod. However, higher grade sections of copper-molybdenum mineralization were reported in other drill holes.

An interval of 152m was reported in HM06 bearing an average of 0.47%CuEq. In HM07 an interval of 128m was mineralized with an average grade of 0.57%CuEq. Higher grade structures were also confirmed within HM07 and HM10 including one zone extending 12m with an average of 1.05%CuEq. The presence of significant molybdenum content within the higher grade structures is also a benefit to improve the overall economics for these areas with a valuable by-product.

A 3D model for the Haib deposit area was presented by former operator Teck Resources, compiling data from previous exploration work. LeapFrog geotechnical software analysis outlined five distinct pit zones with an average grade of at least 0.04% copper. Deep-South used this model in planning for the current drilling work. The first targets selected in this batch of drill holes were aligned to continue through the deposit and extend laterally into areas where limited data was available.

While the grades encountered are attractive, lateral extensions of the deposit zone were also confirmed. Three of the drill holes extended from Pit 2 to confirm new mineralized zones. Of these, HM08 was aligned to the northwest and the adjacent Pit 3 deposit area. The assay results revealed that a continuity of higher grade mineralization is present between these two deposits areas. In addition, mineralization was encountered right from surface, which is another favorable setting for the overall economics of an open-pit mining operation.

Substantial Drilling Program Continues On Schedule

Two drilling rigs are now in operation at Haib with a total of 10,000m of drilling work scheduled for this program. In addition to the five holes for which assay results have been reported, core from six more completed drill holes has been sampled and sent for analysis. Two more drill holes are currently in process. Approximately one quarter of the budgeted drilling work has now been completed.

The ultimate objective for this current round of drilling is to advance the Haib Copper Project towards a potential resumption of mining activity. An NI43-101 resource estimate for the historic project was prepared in July 2017. The porphyry copper deposit amounts to 457MT @ 0.31%Cu Indicated, plus a further 342MT @ 0.29%Cu Inferred.

Deep-South now aspires to upgrade the overall resources for the project, while also defining higher grade sections that may serve as a starter pit. Following the completion of the program and the receipt of all assay results, an updated NI43-101 resource report will be calculated. MSA Group of South Africa has been appointed as the consultant qualified to prepare this update.

The steady flow of additional assay data from ongoing drilling work will increase drill density and the upgrade confidence of the estimate. New discovery zones are anticipated as well. Deeper targets have been selected down to 350m below surface, in order to test the vertical extension of the overall deposit. Based on the first assay results, it’s already fair to say that this enormous copper deposit will emerge as an even larger mining prospect.

Knight Piesold Consulting Appointed to Conduct Scoping Study at Haib

This week Deep-South also reported that another consulting firm has been selected to complete economic studies to advance the project. Knight Piesold is a multinational consultant based in South Africa. The firm specializes in mine engineering services with more than 100 years of operations in support of resource development projects. Deep-South has appointed Knight Piesold to complete scoping studies that will contribute towards the advancement and optimization of the Haib project.

A water scoping study will be completed to review options for surface and groundwater sources. This will involve economic considerations and environmental processes required for sustainable mining. Another study will investigate renewable power sources as part of the infrastructure for a mine development. This will consider economic and technical considerations along with environmental concerns and permitting. In addition, a technical review of the proposed leach pad design will be completed. The study will focus on key variables related to the performance of the leach pad, including size and design, water balance and risk factors. Recommendations will be presented to support efficiency and safety of recovery operations.

Environmental considers remain a very important part of the mine development process. An Environmental and Social Impact Assessment (ESIA) study must be prepared for the project. This will serve as a plan to achieve ESIA guidelines, addressing specific milestones and scheduling.

Knight Piesold will provide expertise to review critical aspects of mine development and operations. This will provide greater clarity as Deep-South advances towards a decision to resume mining at Haib. The necessity to address environmental concerns is an important component on the path to mine development. Deep-South is demonstrating its commitment to operate in compliance with environmental obligations. The studies will also contribute to efficient planning and optimization for the project.

Conclusion

The revitalized Haib Copper Project appears to offer robust economic potential. Previously defined resource areas of the deposit, along with the prospect of new discovery targets, provide a very favorable setting for development of an open-pit mining operation. Deep-South is advancing the project with clear objectives that will create further shareholder value. This first batch of assay results has achieved a promising start for the program.

Haib ranks among the most promising undeveloped copper deposits in Africa. With a Preliminary Economic Assessment already in hand demonstrating robust potential for development of the deposit, the rising copper price regime builds the fundamental case. In tandem with studies to define economic parameters, the Company is also working with consulting partners to address environmental issues and critical operating considerations. The investigation of various options and presentation of clear guidelines and recommendations will enable a much more efficient path toward development.

Deep-South is an attractive junior in a very bullish market environment. The favorable outlook for this Company will continue to grow as further successful results are reported. Moreover, the achievement of regulatory approvals and permitting is essential. By appointing prestigious consulting firms to complete studies and demonstrate compliance with sustainability priorities, Deep-South is laying the foundation to advance Haib further along the value curve.

Deep-South is ideally positioned as one of the few junior mining companies with ownership of a multi-billion pound copper asset. The market is starting to recognize this outstanding potential. Shares of the Company have more than doubled in value during the last six months, but this is just the beginning. As drilling work continues the prospect for positive results will contribute further speculative interest. The completion of studies in support of development will also build a stronger value proposition for the project. Smallcaps Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $0.67	Latest Company Report (pdf)
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