I thought I would throw together a quick summary of what I like about Hot Chili given all the negative posting recently with no focus on how good our company actually is.
I have mentioned why copper as feel if you are reading this then you know the Macro events driving the Cu market and more need to decide why you should pick HCH as your horse in the race.
Excuse the formatting.
The nuts and bolts:
Current SP: $0.038
Current SOI: 3,108,196,315
Current MC (Undiluted): $118 million
Options/Performance Rights/Con Notes Outstanding: 642,447,798 (~$12 mil in option conversions if converted)
Outstanding Vendor Payments: USD$32mil (~AUD$41.5 mil)
Absolute Fully Diluted SOI (assuming $41.5 mil raised at currentSP): 4,842,749,376
Absolute Fully Diluted MC: $184 million
Cash on Hand 31 March: $9.53million
Location/Geography/Infrastructure
.
·Hot Chili (HCH) is located within 100km of Porto Huasco a fully operational port on the coastline of Chile
·HCH is located within 25km of Vallenar with a population of over 50k and a skilled workforce
·Whilst still high above sea level relative to Australian projects, HCH is in the Chilean ‘coastal ranges’ with an elevation of 800m whereas a lot of our South American peers are above 2000m
·Water and Power Easements already within 20km of project
·The land is on private land with no native title concerns
.
Environmental
.
·HCH has already secured (salt) water rights for extraction relating to the Costa Fuego project and salt water has been proven to be able to be used in the processing of the combined Costa Fuego resource… Water is almost priority 1 in Chile.
·Project is located within close proximity of several large solar power plants/arrays
·No Arsenic in resource which whilst ticking environmental boxes also reduces processing costs.
.
Resource
.
·Cortadera at 456mt with 0.37% Cu (0.46% CuE) is already the largest resource held outside of a Major on the ASX with significant increases already announced by extension drilling over the past 6 months (more on this later)… this resource was derived from approx. 60,000m of drilling – in comparison Rio’s recent Winu resource which is of similar size is based on approx. 150,000m of drilling
·Productora again offers both a bulk tonnage 273mt with 0.44% (0.52% CuE) with an NPV of $1.1 Billion and IRR of 38% (at spot) or High Grade Satellite Option to tie in with the below satellites
·San Antonio / Valentina (El Fuego) – Whilst relatively unknown at this stage can likely be expect these to contribute between 8-10mt @1.5% CuE
·SZ – Whilst the most unknown of the 4 projects it is potentially the most exciting with a signature twice the size of the Cortadera discovery – exploration is ongoing here with initial first pass drilling due to commence this CY.
·Total IGV of all resources currently US$35 billion
·On the above projects HCH has the option to move to between 80 and 100% of the tenements (importantly 100% on the Cortadera tenements) by paying the outstanding vendor payments (mentioned above).
.
An updated PFS is currently underway with completion due for Q3 2022.
Recent Drilling
Subsequent to the release of the maiden Cortadera resource, HCH has embarked on an aggressive 40,000m drilling campaign to increase both the High Grade Core of Cortadera and increase the over all resource size, results released subsequent to this (in order of release):
.
·CRP0052D – 382m @0.4% Cu and 0.1 g/t Au (incl. 80m @0.6% Cu & 0.2 g/t Au)
·CRP0061D – 813m @0.4% Cu and 0.1 g/t Au (incl. 318m @ 0.6% Cu & 0.2 g/t Au)
·CRP0046D – 114m @0.5% Cu and 0.2 g/t Au AND 185m @0.5% Cu & 0.2 g/t Au)
·CRD0080 – 836m @0.4% Cu and 0.1 g/t Au (incl. 436m @0.5% Cu & 0.2 g/t Au)
·CRP0088D – 410m @0.5% Cu and 0.2 g/t Au (incl. 144m @0.8% Cu and 0.3 g/t Au) – Assays remain pending on EOH
·A further 5,900m of drilling was pending as at 16 June.
Importantly all results above have either proven extensions to the High Grade core OR returned high grade results in areas previously modelled as low grade.
.
Additionally drilling has also proven that the 4 Cuerpo’s likely join at depth with further drilling required to determine the significance of this.
Peers
HCH does not have many (any?) peers on the ASX with the closest potentially being either CLA or XAM but given their locations (Philippines and Mongolia) I have excluded them from these comparisons.
.
.
Los Andes the closest peer on a price perspective holds a ‘stalled’ project with significant Environmental and Local Population issues (hence the low EV to Cu) - All info is taken from recent company reports/presentations
I understand there are downsides to ANY investment but I have chosen not to spend time on these as no doubt others will be happy to point them out to me but in a short summary I would see them as such (in no particular order):
.
• Slow Drilling speeds and result turnaround
• Management inability to meet stated timelines
• 100% ownership of projects not achieved
• Relatively high SOI (I dont see this as an issue but some do)
• Loose share register with at least one T20 selling into every volume event
• Chile politics (previously a strength) and potential for taxation changes
• No recent buying by management given depressed share price (MB and CE do hold significant holdings)
Why wouldnt a major want to come on board for $30-$40 mil, take a place on the board and in one swoop remove half the issues listed above? If it was a $40mil investment I would love to see $35 mil in equity and $5 mil in a brokered block trade to remove Taurus (but maybe thats dreaming)
Happy to hear others thoughts on this all.
(20min delay)