Palisade Research - Fri, Sep 30, 2016

Update - Carube Copper's Deal Of The Century

picture of forested hills in Jamaica

The whole notion of prospect generation centres on using "other people's money" across numerous exploration projects. The idea was derived by resource veteran, Rick Rule, from the concept mineral exploration is extremely capital intensive, and just 1 out of 3,000 mineralized anomalies became a mine.

To increase the chances of finding an actual mine, an explorer establishes a joint-venture (JVs) with larger companies that will pay cash for exploration in exchange for majority ownership. Prospect generators alleviate both capital spending and exploration, while retaining upside. The more JVs an explorer secures, the better chances of it finding a mine.

TSX Venture-listed Carube Copper (TSXV:CUC) did exactly that. It established a JV with OZ Minerals and was carried on its prolific Bellas Gate property. Over the next three years, OZ spent over $14 million in exploration with the program culminating with the announcement of blistering drill intercepts from the Connors and Provost Prospects:

At Connors

  • Hole DDH-CON-14-005 intersected 294m of 0.56% CuEq (0.41%Cu, 0.27 g/t Au), including 96m of 1.00% CuEq, (0.67%Cu, 0.58 g/t Au);
  • Hole DDH-CON-14-003 intersected 297m of 0.53% CuEq (0.40%Cu, 0.24 g/t Au), including 55m of 1.00% CuEq (0.67%Cu, 0.59 g/t Au).

At Provost

  • Hole PVT-16-002 intersected 339m of 0.34% CuEq (0.28%Cu, 0.12 g/t Au), including 10m of 1.79% CuEq (1.28%Cu, 0.90 g/t Au);
  • Hole PVT-16-001 intersected 82m of 0.46% CuEq (0.37%Cu, 0.16 g/t Au), including 29m of 0.63% CuEq (0.49%Cu, 0.24 g/t Au).

And in a very odd turn of events, with the project de-risked, OZ Minerals elected to withdraw from Jamaica. For any other prospect generator, this would be devastating news. It means the JV partner has concluded the project is essentially worthless and not worth pursuing. However, in this case, there is no arguing Bellas Gate is indeed a bonafide discovery, this facts is also confirmed by the CEO of OZ Minerals, Andrew Cole.

The official reason from OZ Minerals is that Bellas Gate is not the type of deposit it is looking for. From more research and digging on our end, it appears OZ Minerals is currently in transition and does not have the expertise or capacity to pursue the type of mineralization in Jamaica. Furthermore, the company has signed five partnerships over the last 12 months right in its backyard in South Australia, Western Australia and Queensland, even moving its head office from Melbourne to Adelaide to ensure its team can focus on its projects efficiently.

Intuitively, the company sold off a bit due to the withdrawal of OZ Minerals. However, we believe this is a strong entry point. Carube Copper was able to buy back Bellas Gate JV and five of OZ's licenses for $14 million, to be paid at commencement of commercial production. The company now owns 100% of a huge land package that contains an excellent mix of advanced targets with promising drill intersections to follow-up to over 30 untested blue sky targets. All of the properties have been covered by recent detailed airborne geophysics. It is important to note that while OZ Minerals spent $14 million to date, almost all the drilling has been limited to the Bellas Gate property. Even at Bellas Gate only 11 of the 20 or more targets have been drill tested.

We spoke to Carube's management team and it is business as usual. The team is currently reviewing the huge amount of data OZ Minerals generated and after this review they will decide whether the company will immediately seek a new JV partner or simply secure the funding to drill test some of the more exciting targets. Either way, Carube Copper remains one of the premier copper plays in our Palisade's portfolio.

Palisade Global Investments Limited holds shares of Carube Copper. We receive either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report is obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information. Do your own due diligence. publishes interesting contributor articles in addition to its own content. We have not verified any of the above details.

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