A Precursor to the Copper Movement: Two Key Red Metal Names

In our last Intrynsyc Quarterly, we mentioned that our short-term expectations for copper were improving on the account of operational disruptions in key South American producers and signs of Chinese economic recovery. To date, the potential for COVID-related halts continue to loom over key producers in the absence of a vaccine (despite some operators having temporarily averted employee walk-offs) and recent macro data from China has indicated a faster than expected recovery in manufacturing production and infrastructural spending– foreshadowed by a jump in base-metal demand over the last quarter. Assuming China and its peer economies do recover, the copper fundamentals look favourable in the long term as well. The decline of new copper discoveries in the past decade may bottleneck supply as longstanding trends such as the urbanization of developing areas, and novel proposals for massive copper intensive ‘green’ infrastructural developments in major economies sustain and create demand.

As was the case for gold and silver stocks earlier this year, we expect investor interest to slide down the size curve i.e. from seniors into juniors over time as spot copper rallies. In this report we provide an update on Pan Global Resources (PGZ-V), and present Kodiak Copper Corp. (KDK-V): a BC explorer with solid technicals and proven management.

Kodiak Copper Corp (KDK–V): Under the Radar Emerging Copper Discovery

Cu – Au: Southern BC | Market Cap $23.5 M | Exploration

Why You Should Own Kodiak Copper Corp

• KDK’s 100% owned MPD copper-gold porphyry project has been gaining traction after releasing a game-changing drill hole at the beginning of this year intercepting 102 m of 0.68% CuEq.
• We think this project has been overlooked and is poised to deliver compelling results demonstrating the potential for a major porphyry deposit.
• KDK provides access to a proven management team and an overlooked data rich property located in a safe jurisdiction with great infrastructure (all season road access and nearby grid power) – a rare combination of all the components we look for in a company that, in a market desperate for viable copper projects, makes us want to back even more.

About the Company

Kodiak Copper Corp is a Vancouver based junior exploration company focused on advancing their 100% owned MPD copper gold porphyry project (figure 1) located ~50 km north of CMMC’s Copper Mountain mine (584 Mt at 0.23% Cu and 0.1 gpt Au). KDK is backed by John Robins’ Discovery Group, co-founded by Chairman Chris Taylor (President and CEO of GBR), and led by Claudia Tornquist (former GM at RIO Tinto and former VP Business development at Sandstorm Gold).

Key Takeaways:

Lots of Smoke, But Where’s the Fire?

The MPD property is a data rich property with 129 drill holes completed from 1966 to 2014. Typically, we might consider this property drilled out or exhausted. However, KDK’s management has recognized an overlooked opportunity as much of the historic drilling was shallow. As our knowledge of porphyries continues to advance, we have come to recognize key geochemical signatures combined with advanced geophysical techniques which allow us to better vector towards finding the heart of deposits. Historic drilling was based on geophysics that didn’t penetrate deep enough. KDK’s management has applied new techniques, focused on systematic data compilation to develop a new targeting approach indicating the previous drilling was essentially only testing the upper part of the system whereas the real treasure is still untested at depth.

This theory was confirmed in January when KDK released results from their first drill program in November 2019 (1,766 m in 3 holes) intersecting 340.7 m of 0.33% Cu and 0.09 gpt Au (0.42% CuEq), which includes a higher-grade interval of 102.07 m of 0.53% Cu and 0.16 gpt Au (0.68% CuEq) (figure 2).

Increasing Grade and Alteration Intensity = Getting Hotter

Based on these initial results from KDK’s phase I drill program, the grade of mineralization increases with depth. Drilling also demonstrates an increase in alteration intensity progressing from propylitic alteration assemblage to an increase in potassic alteration assemblage. We would like to point out that the Gate Zone discovery hole was mainly outboard of the main centre of the porphyry (figure 3). We believe KDK’s new targets based on these new results combined with historical drilling and deeper geophysics will allow KDK to vector towards the main porphyry centre.

The new understanding of the alteration system is important because porphyries are large deposits with expansive alteration halo’s that can require a lot of drilling (as we have seen from historical drilling here) to vector towards the heart of the system. Initial results indicate the potential for an upright fully intact porphyry. Further drilling will continue to confirm this and this confirmation has the potential to catapult this project and company to be re-rated along with some its peers in BC that have moved beyond the discovery phase.

Not a One Trick Pony

Kodiak has recognized the increasing demand for copper in the future and thus has put together a portfolio of solid assets with similar traits as MPD. The 100% owned Mohave copper project is located in Arizona and initial geological similarities suggest a potential analogue to Freeport’s Bagdad Mine (2.5Bt at 0.32% Cu) located 33 km east. Exploration is scheduled in Q420 focusing on refining numerous untested geophysical and geochemical anomalies. Historic drilling is highlighted by 70.7 m of 0.30% Cu and 59.4 m of 0.49% Cu.

Conclusion

Initial results demonstrate that KDK could be on the verge of a major Cu-Au discovery coinciding with a macro outlook indicating the desperate need for viable copper projects. Earlier we highlighted the forthcoming demand for copper and lack of viable copper projects, thus we consider Kodiak Copper an emerging player that is hitting its stride at the perfect time of the cycle. We believe KDK is the next go to story in the base metals sector and poised to build value via the drill bit.

Catalysts
 

Figure 1: MPD property location map showing excellent infrastructure, numerous high-level Cu-Au drill intervals suggesting a large system with the potential for multiple porphyry centres. (Source: KDK website).

Figure 2: Gate Zone discovery holes below the limit of historical drilling demonstrates higher grade mineralization at depth. (Source: KDK website).

Figure 3: This figure demonstrates the significance of understanding the geological and alteration models of porphyries which will allow you to increase confidence in your targeting and drilling. Initial results indicate the Gate Zone is located proximal but still on the periphery (propylitic/pyritic halo zone) of the main mineralized system which will have increased veining and greater potassic alteration. (Source: KDK website).

Pan Global Resources (PGZ –V): Four Kilometres of Untested Strike Length – Signals Scale

Polymetallic Cu-Au: Iberian Pyrite Belt, Spain | Market Cap $56.6 M | Exploration

Why You Should Own Pan Global Resources:

World Class Discovery in the Making

The Escacena project is located on trend to world class deposits such as Boliden’s Los Frailes (90 Mt at 1.5% CuEq) 5 km to the east and First Quantum’s Las Cruces (43 Mt at 4.3% Cu) 17 km to the east and has shown a similar but a larger geophysical signature than the Las Cruces mine. Recent drilling has defined stacked lenses of VMS style mineralization that are open along strike and down dip over an area of 800 m which does not include the newly acquired Al Andalus property. Al Andalus is host to over three kilometres of compelling untested geophysical anomalies with a similar geophysical signature as the La Romana Discovery at Escacena. Note, the La Romana discovery along with a number of other discoveries in the Iberian Pyrite Belt made by testing geophysical anomalies.

About the Company

Pan Global Resources is focused on their 100% owned Escacena project in Spain and expanding the new VMS La Romana discovery. Pan Global’s President & CEO is Tim Moody, a highly experienced Geologist with 24 years of experience as Exploration and Business Development Director with Rio Tinto and a strong track record of discovery in Spain. PGZ is also backed by Patrick Evans (Chairman) who has a history of discovery leading to M&A as ex-CEO of Dominion Diamonds which was sold to Washington Companies for US$1.2B in 2017.

Key Takeaways:

The Right Tools for the Right Job

Pan Global Resources benefits from a technically savvy management team with extensive experience in the Iberian pyrite belt which has been a great asset in terms of advancing this project through systematic, methodical geological analysis. Geophysics can be a difficult tool to use in exploration because of the variability of results– however if done right can be serve as a very powerful targeting tool as seen at Escacena. PGZ took the time early on to refine their geophysical data to increase the quality of their targets. This high confidence in their targeting is evidenced by the success PGZ has had with their previous drill program intersecting high-grade mineralization in 6 of the 8 holes drilled by PGZ on this property (figure 4). This success is highlighted by the following results which are near surface (as shallow as 7.5 m depth) and show excellent continuity (200 m defined strike length); 29.5 m of 1.29% CuEq, 20.5 m of 1.50% CuEq, and 35.6 m of 0.73% CuEq.

Much of this targeting was based on historical drill results and recent geophysical surveys which outline multiple untested anomalies over a strike length of 4 km from this initial discovery. More locally however, coincident gravity, EM, and IP (main geophysical tools used for discovery) indicate stacked lenses of mineralization extending up to 600 m along strike and not closed off yet. As mentioned above 200 m has been clearly defined by drilling with a 75% hit rate (figure 5). The current phase III 3,500 m drill program will be stepping out targeting an upper plate of mineralization as well as a lower plate at 50 m centres to expand the size potential identified in the geophysics.

VMS Deposits = High Density = Attractive Acquisition Targets

Volcanogenic massive sulphide deposits are attractive acquisition targets due to the high density of mineralization packed into relatively small horizons which allows for lower operating costs and lower waste. PGZ has identified two different mineralized horizons (upper and lower conductor plates) with the potential for additional stacked lenses, a feature not uncommon to VMS deposits. What’s key is the different geochemistry of the two horizons and placement in the stratigraphy suggesting two different mineralizing events and potential for additional zones at depth or along strike. We would also like to highlight that compared to most of the other deposits in the region, mineralization at La Romana essentially comes to surface. One of the first holes drilled by PGZ intersected mineralization at less than 5 m from surface (29.5 m of 1.29% Cu). Other deposits in the region typically start at an average depth of ~200 m (figure 6). Shallow mineralization is very attractive indicating a low strip ratio and potential for extensions at depth (shallow 30-degree dip of mineralized horizons).

Starting to Check All the Boxes

Recent results from an initial petrology study demonstrates the polymetallic mineralization at La Romana is amenable to creating a clean copper concentrate from conventional processing. The dominant copper mineralization is associated with coarse chalcopyrite grains indicating that liberation of the ore can be achieved through conventional processing at a medium to fine grind size. Additionally, studies indicate low concentrations of deleterious metals signifying the attractiveness of the concentrate.

Conclusion

PGZ has built a very compelling story in our view based on recent drilling success, numerous high priority targets that have never been tested, widespread alteration indicating the presence of a large system, and its strategic location near three existing mines all with lower grades than PGZ. Drilling success continues to expand the footprint of mineralization signifying the potential for a world class ore deposit in the right geological setting adjacent to three other major deposits.

Catalysts
 

Figure 4: Upper and lower plate mineralization and conductors as defined from the initial drill program which intersected significant mineralization in 6 of the 8 holes drilled. System remains open along strike and down dip (Source: PGZ website).

Figure 5: Focus of the phase III program targeting 50 m step outs to define strike length and test the open-ended geophysical anomalies. (Source: PGZ website).

Figure 6: La Romana highlighted by near surface mineralization. Very attractive to have mineralization right at surface compared to other projects indicating a low strip and lots of potential for extensions at depth. (Source: PGZ website).

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