How Panoro Minerals is positioned for a copper up-cycle

By Peter Kennedy

Luquman Shaheen is bullish on copper. The Panoro Minerals Ltd. [PML-TSXV, Lima; PZM-FSE] President and CEO said the world has entered into an era where a lack of new projects is going to constrain the supply of the red metal.

In an interview with Resource World Magazine, Shaheen said the fact that the price of copper has jumped 60% in the past two years is a clear sign that the new cycle has already begun.

“We are headed to a growing copper supply deficit,” he said.

In keeping with that line of thinking, Peru-focused Panoro is hoping to bring two new copper projects – Cotabambas and Antilla – into production within the next few years. Both are located in southern Peru, one of the prime copper development districts in the world.

A preliminary economic assessment (PEA) announced in April 2015, indicated that Cotabambas could produce 143.4 million pounds of copper on an annual basis as well as 88,000 ounces of gold, plus 967,000 ounces of silver.

The PEA envisaged an open pit mining and flotation processing at a design throughput of 80,000 tonnes per day over a 19-year lifespan. The initial project cost was estimated to be US$1.38 billion.

However, the company recently launched a 5,000-metre drill program around a group of porphyry targets clustered around the current resource (Cluster 1).

Later this year, the company hopes to drill a an area known as Cluster 2 located further to the south and western side of the property in a limestone host rock where the company has identified skarn mineralization.

The aim is to add another three or four years of mill feed and identify enough oxide resources to add a SX-EW, heap leach component to the project.

“We hope to double the net present value [of the project],” Shaheen said. In doing so, he hopes to make the project more attractive to potential partners or outright buyers.

In a February 20, 2018 press release, the company said drilling on a mineralized porphyry known as Maria Jose in Cluster 1 was designed to focus on further delineation of oxide and sulphide copper zones identified during the 2017 drill program, where 15 drill holes confirmed continuity of mineralization over an area of 400 metres by 1,200 metres, and to cover over 450 metres depth.

Panoro says it is uniquely positioned because it has been able to advance its projects through the recent downturn in the exploration sector.

A January, 2016 streaming agreement entitles the junior to receive US$14 million spread over nine years from Silver Wheaton Corp. [SLW-TSX, NYSE] to fund expenses related to the Cotabambas Project. Under the agreement, Silver Wheaton agreed to make US$140 million in cash payments to Panoro for 25% of the payable gold production and 100% of the payable silver production from Cotabambas.

In addition, Silver Wheaton pledged to make production payments to Panoro of the lesser of the market price and US$450 per payable ounce of gold and US$5.90 per payable ounce of silver delivered to Silver Wheaton over the life of the project.

Panoro has said the precious metals stream represents only 8% of the total revenue of the Cotabambas Project based on the assumptions of a preliminary economic assessment.

Meanwhile, Panoro has launched a review of the Antilla Project. It said internal studies completed in 2017 have indicated that the Antilla Project may have stronger economics at a smaller scale with a mine plan focused on the high grade, near surface mineralization processed with a heap leach SX/EW process.

The Antilla Project hosts an indicated resource of 188.5 million tonnes at 0.40% copper, and 0.009% molybdenum at a 0.2% copper equivalent cut-off. On top of that is an inferred resource of 145.9 million tonnes of 0.28% copper and 0.009% molybdenum at a 0.2% copper equivalent cut-off.

Antilla is expected to be in production sooner that Cotabambas, mostly because the latter project has more exploration upside.

In January, 2018 Panoro closed the sale of a 100% interest in Kusiorcco copper-gold-silver project (also in Southern Peru) to HudBay Minerals Inc.  [HBM-TSX, NYSE] for up to US$5 million. Panoro said it has received an up-front cash payment of US$3 million from HudBay and will receive additional payments totalling US$2 million upon completion of certain milestones by Hudbay, which has granted Panoro a 2% net smelter return royalty on future mineral production.

The project covers 12 mining concessions and is located within 6 km of HudBay’s Constancia Mine. HudBay now holds just under a 12% stake in Panoro.

“We felt the most streamlined way for Kusiorcco to be permitted, explored and put into production would be with HudBay,” said Shaheen.  “That was the motivation,” he said.

In connection with the acquisition, HudBay agreed to exercise 2,060,484 common share purchase warrants of Panoro which were held by HudBay and exercisable at a price of 27 cents per share, for proceeds of $556,330. HudBay agreed to exercise the warrants prior to January 31, 2018.

On Wednesday, Panoro shares eased 5.71% or $0.02 to 33 cents. The 52-week range is 47.5 cents and 15 cents.