The copper bull market is in full swing. And in order to supply the world’s voracious appetite for copper, we are going to need every pound of copper we can find. Most of the copper that the big producers are counting on to help fill the growing supply/demand gap is found in mega development-stage projects that require billions of dollars in capex and long permitting timelines before they will ever produce any copper.
Much less common are brownfield copper projects that sit adjacent to fully permitted producing copper mines. Permitting a large-scale greenfield copper mine in an environmentally sensitive area of Alaska is a completely different proposition than permitting a brownfield copper project sitting right next to the largest open pit copper mine in Canada.
It is the above proposition (potential ease of permitting and relatively low capex) that gives GSP Resource Corp (TSX-V:GSPR, OTC:GSRCF) significant advantages that most other exploration stage copper companies do not possess. GSPR’s Alwin Mine Project is located two kilometers west of Teck’s Highland Valley Mine, the largest open pit copper mine in Canada.
The Alwin Project consists of 575 hectares of claims directly adjacent to Highland Valley, and it is worth noting that the Highland Valley open pit is expanding to the west, towards the property boundary with Alwin.
GSP Resources is imminently commencing a phase 2 drill program at Alwin to follow-up on the company’s successful 2,000 meter phase 1 program. Phase 1 drilling at Alwin managed to expand the mineralized footprint to the north and south of the historical resource (390,000 tonnes grading 2.5% copper, however, this resource is deemed not to be compliant with modern 43-101 standards), in addition to confirming the presence of shallow, high-grade copper as well as its potential for bulk tonnage mineralization.
Highlights from Phase 1 drilling at Alwin include:
Hole AM20-10E – successfully intersected the #1 zone and part of the unmined portion of the #6 zone and lastly, the #3 zone. The #6 zone intersection returned 0.81% copper-equivalent over 22.6 meters from 287.9 meters downhole, including an impressive 5.98% copper-equivalent, (4.6% Cu, 0.6 g/t Au and 80 g/t Ag) over 2.6 meters.
AM20-09 – from the surface intersected “Alwin” style mineralization grading 0.195% copper-equivalent over 36.6 meters including 1.05 meters grading 3.39% copper-equivalent and from 104.3 meters 0.198% copper-equivalent over 22.15 meters including 0.86% copper-equivalent over 4.55 meters.
In phase 2 drilling, GSPR will step out to the east and north of last year’s Hole 10E (Hole 10E was collared just north of the boundary with Highland Valley Copper). There is strong evidence that alteration and mineralization of the Highland Valley hydrothermal system extends westward onto the Alwin property, including an area of strong IP chargeability contours.
You can see the Alwin Property outlined above with the dark red oval (indicating strong IP chargeability contour) farthest to the left of the Highland Valley Copper Mine. The phase 2 drill program will consist of diamond drill testing of at least five deeper targets in the main Alwin Zone could be expanded depending upon market conditions (GSPR currently has ~C$1,000,000 in its treasury).
A recently completed 3D digital model of the Alwin Mine Project includes all known underground workings, separated into drift and declines, raises, cement filled, rock filled and open stopes and the numerous unmined copper+/- silver+/- gold mineralized portions of the 425 meters long by 275 meters deep by 150 meters wide zone.
The primary purpose of creating a 3D model is to generate spatially accurate drill targets into the unmined mineralized bodies as part of GSP’s goal of generating a bulk tonnage open pittable and/or block cave resource. Considering that the former underground mine used a 1.5% copper cut-off grade, with the potential for an open pit bulk-tonnage mining model and today’s copper price (and the potential for even higher copper prices in the future) it may be viable to economically mine the lower grade and smaller high-grade portions of Alwin that were ignored by prior underground mining operators.
Using some back-of-the-napkin math and inputting conservate average grade and resource size estimates, it’s not hard to envision the potential for a very rich deposit at today’s metals prices in the ground at Alwin. In a typical greenfield setting, a deposit with Alwin’s dimensions and grades would certainly garner some attention and warrant additional exploration/drilling, especially with the potential for uncovering a higher grade core zone that could make for a starter pit. Furthermore, Alwin’s location adjacent to the largest open pit copper mine in Canada makes it a unique project and significantly adds to its attractiveness
At US$5 per pound copper, Alwin has considerable value. A lot more value than the market appears willing to acknowledge so far. However, drilling success in the phase 2 program at Alwin will begin to force investors to take notice of this under the radar copper exploration/development story.
In addition, at its current C$7.3 million market cap GSPR shares represent an embedded call option on the price of copper; in the event that copper prices move above $5.00 and continue trending higher, Alwin’s tens/hundreds of million of pounds of copper sitting in the ground near surface become increasingly tantalizing (and profitable) to Teck. With Teck’s operating cost per tonne of ore at Highland Valley running at less than $10 per tonne, and Alwin’s close proximity to the Highland Valley crushing/milling facilities, Alwin’s existing unmined higher grade copper ore could be extremely profitable for Teck.
The trading float is extremely tight (12 million shares) and management holds a healthy 23% of GSP’s outstanding shares. Technically speaking, I expect some resistance between $.40 and $.50, however, a decisive breakout from this multi-month downtrending channel will target new all-time high share prices above $.75:
There is strong support in the $.25-$.30 area, and the potential upside reward from a $.40 entry is attractive relative to the downside risk.
Disclosure: Author is long GSPR.V shares at the time of publishing and may choose to buy or sell at any time without notice.
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