Categories: Base Metals
Topics: General Base Metals

RSD at Beaver Creek Interview Series: Chakana Copper (TSX-V: PERU) CEO David Kelley & Mickey Fulp, the Mercenary Geologist

Gerardo Del Real: This is Gerardo DelReal with Resource Stock Digest here at the Beaver Creek Precious Metals Summit. I'm joined today by the Mercenary Geologist, Mr. Mickey Fulp, and President and CEO of Chakana Copper (TSX-V: PERU)(OTC: CHKKF), Mr. David Kelley. Gentlemen, how are you?

David Kelley: Great.

Mickey Fulp: Well, you can't beat this.

Gerardo Del Real: You can't beat this. It's absolutely gorgeous out here.

Mickey Fulp: Isn't it? Yeah.

David Kelley: Yeah.

Gerardo Del Real: David, I have to imagine you're pretty happy. You had some pretty spectacular results today that I want Mickey to dig into a little bit.

David Kelley: Yeah.

Gerardo Del Real: Some high grade, I believe it's 32 or 33 meters of nearly 6 grams per tonne gold equivalent and nearly 4% copper equivalent, within a broader intercept of 144 meters that was 0.88 grams per tonne gold with, obviously, some copper and silver credits there.

David Kelley: Yeah.

Gerardo Del Real: Impressive. Mickey and yourself were having a conversation off air, digging into the details of the release, and I found it fascinating and I thought we'd have Mickey join us to kind of dig into it a bit.

So first, could you provide an overview of the news today? And then, Mickey, let's dig into it.

David Kelley: Yeah, we've got this 20,000-meter drill program that's been ongoing since the end of June. The goal of that drilling program is to do two things; infill drilling on known, mineralized breccias, and also do a lot of target drilling on new targets that we've developed.

The release that came out today is a new zone. It sits off the east of Breccia Pipe 5. So it's related, it's near a known breccia pipe. But it was a structural intersection and it was a zone that we had great interest in from the model that we've developed. We put two holes down there and hit a very large intercept, much larger than the original intercepts on the breccia pipe with higher grade profile.

We don't know yet if it's a new breccia pipe that's intersected the other one or if it's the downward zonation of the same breccia pipe, but it's a really exciting result to get high grade to go with the favorable results we already had at Breccia 5.

Gerardo Del Real: Now when you say east of Breccia Pipe 5, how far east?

David Kelley: It's just a within a hundred meters. It's in the immediate proximity, which if you recall, we talked about Breccia 1. We discovered our blind breccia pipe on the edge of Breccia Pipe 1. So we know that whenever you're around one of these mineralized breccia pipes, exploring in and amongst the edges of that breccia is a really important strategy.

Gerardo Del Real: Now, Mickey, you're a geologist. David, of course, is a geologist. I'm not. So I can read a news release and get the surface stuff and I can ask about true widths and the geometry of the ore body and then how far the step out was and what was around it and where the mineralization started. But dig a little deeper for me.

What are the things that you look for as a geologist when you get a news release that says 144 meters of nearly a grand per tonne gold and within that, some very high-grade gold and copper.

Mickey Fulp: Well, number one, the first thing you want to look at is individual metals and contents. So 0.88% copper, 0.88 grams per tonne gold. So that gives you a good mix right there. So I found it interesting the way you convert those to copper equivalents and gold equivalents. And this goes back to the entire thing, which is your immediate premise, I think, or what you drilled before is 60% of the value of all this stuff is in gold versus copper. And that relates to the fact you said 6 grams per tonne gold equivalent, 4% copper equivalent.

And the other thing I asked David immediately was, okay, let's look at this thing and plan and see how thick it is actually. So what was it? 144 meters?

David Kelley: Yeah.

Mickey Fulp: But you're drilling pretty steep holes and the pipes are basically vertical structures. Now they have a plunge to that, a trend of that, not exactly vertical, but they'll have a plunge to that mineralization. So you told me 70 meters true thickness, more or less.

David Kelley: Yeah, that's about right.

Mickey Fulp: That's thick.

David Kelley: Yeah.

Mickey Fulp: That's certainly a mineable zone.

Gerardo Del Real: With those types of grades.

Mickey Fulp: Right. The other thing that I would want to know is how much of that is the ring zone, the annular zone because that's where your real high grade and maybe you could elucidate a little bit on that.

David Kelley: Yeah. You know we just have three holes in the zone, but in this new zone we're seeing to the high-grade margin zones, which we've seen before at Breccia 1. And that adds considerable value because the margin zones can be in the 3 to 5 copper equivalent or 4 to 6 gram gold equivalent grade range and within a much larger broader good grade zone. So it's good that we're actually seeing this high grade.

Mickey Fulp: And so there's a geological reason for that. As that is the porosity permeability of those annular zones, the rocks more broken up, therefore the fluids have more ingress into the rock. So you get more fluid flow around the rings at these things. So you essentially end up with a high-grade annular zone, a ring zone around what is turning out to be really thick mineralization all the way through the center of the pipe too.

Gerardo Del Real: Let's take the bird's eye view of the forest instead of the tree. And let's talk about the concept behind exploration at the Soledad Project because we have frankly over 20 breccia pipes.

David Kelley: Yeah.

Gerardo Del Real: Right. And so I noticed in this release you had results from some infill drilling which were successful.

David Kelley: Yeah.

Gerardo Del Real: You had some exploration drilling, which frankly didn't hit.

David Kelley: Yeah.

Gerardo Del Real: And then you had this spectacular intercept that obviously you're going to follow up on.

David Kelley: Yeah.

Gerardo Del Real: How do you discard targets that you don't get results from quickly and efficiently?

David Kelley: Yeah. I mean drilling obviously is the best way to see what's at depth. We've drilled 6 pipes out of 23 confirmed pipes so far. Four of those pipes are strongly mineralized and two aren't. Now we're still trying to understand why the two are not mineralized. It's beautiful breccia. It has quartz, tourmaline and pyrite and one the pipes has pyrite crystals the size of your fist but it's not carrying the gold and the copper and the silver. Why we don't know. We're going to find that out.

If our hit rate continues the way we are going, four out of six is not bad. If we can continue doing that, then the project's going to develop in the way that we want it to, which is to have multiple mineralized breccia pipes with vertical extensive mineralization in their close proximity to each other and an integrated mining infrastructure that serves multiple pipes to be mined at the same time.

Mickey Fulp: I want to comment about that. The geography is ideal for that.

Gerardo Del Real: That was my question. You've been to the site.

Mickey Fulp: Yeah, so I've been there, I've looked at it and that's really the key. And I knew this from looking at your 3-D aerial view of the thing to begin with. Very steep country, not radically steep, fairly high altitude. But the beauty of it is these are vertical pipes that can be accessed by tunnels periodically all the way down the bottom of the valley.

So essentially what you would do in a mining scenario, you have a big couple of haulage addicts and you mine up and drop the stuff down. So you've got gravity working for you the entire time and that's pretty special. So the geography of this project in Peru is ideal. And the other thing that's ideal, and I'm a shareholder so I'm biased, is every good geologists knows that grade is king and this project has grade.

Gerardo Del Real: Yeah.

Mickey Fulp: That's the first thing you need to look at.

Gerardo Del Real: And good grade of course leads to good margins typically if you do it right.

Mickey Fulp: Well that's it. Yeah, exactly.

Gerardo Del Real: One and one equals two, right?

Mickey Fulp: Yeah.

Gerardo Del Real: Excellent.

Mickey Fulp: Absolutely.

Gerardo Del Real: Community relations. How are those?

David Kelley: Community relations are really good. You know, we're in an established mining district. There's an active mine immediately to the east and the people that work in that mine live in the community on the west or the east side.

We've got a very active community relations program with the three immediate communities in terms of social benefits and enhancements that we make to the communities. We're putting a roof on a church right now. We've helped with their agricultural, water supplies and that type of thing. It's a really good place in Peru, in particular, to be because mining is really been a fabric of that region for a long, long time.

Gerardo Del Real: Mickey, what would you say to speculators that discard an entire country because of maybe a couple of negative news articles without exception. Right? And so I get a lot of commentary from people in the business that just say stay away from Peru. And I try to tell people mining is a very localized, kind of like real estate local.

Mickey Fulp: Mining was within the social fabric of Peru and has been since the Incas or before. So a lot, some of these discoveries have been made over the last, what, 20 to 30 years, or 20 years for certain, are by following old Inca roads, wherever the Incas were going for their gold. Well let's go back and say there are certain parts of Peru that are not mining friendly, but it's like any country.

Gerardo Del Real: Like Mexico, like the U.S, like anywhere in the world. Right?

Mickey Fulp: Yeah, yeah, exactly. Same thing in the U.S.

Gerardo Del Real: Absolutely.

Mickey Fulp: Are you going to go to California to mine when you can go next door and you're welcome? Probably not, but so I feel very comfortable in Peru. Now realize that I lived in Peru for a period time, so I know the culture, I speak some Spanish so I can get around very well. But this area in particular, it's been a mining community now for 20 years. So there is a contingent of people that are miners and...

Gerardo Del Real: Understand the mining culture.

Mickey Fulp: Understand mining cultures.

Gerardo Del Real: Excellent.

Mickey Fulp: Longer than 20 years, but 20 years ago basically was when Barrick came in a big way.

Gerardo Del Real: Sure. Chakana Copper, David has a market cap today I think of sub-$20 million Canadian.

David Kelley: Yeah.

Gerardo Del Real: You're in the process of a 20,000-meter drill program. I believe you've completed just over 4,000 meters.

David Kelley: Yeah.

Gerardo Del Real: How much cash is in the treasury?

David Kelley: We have $10.1 million as of today.

Gerardo Del Real: So for half of your market cap is backed by cash right now.

David Kelley: Yeah, exactly. So we're fully funded for this 20,000-meter program, which will take us through the first resource estimate. We were starting up metallurgical programs with Goldfields input, obviously our strategic investor that came in in May of this year. They're really happy with the project in terms of the progress we've made and the results that we're producing. So we're really excited about what's happening with Chakana Copper and the Soledad project.

Gerardo Del Real: Mickey, you're a shareholder.

Mickey Fulp: Well, I have some stink bids in right now. What was it, about about a month ago or 6 weeks ago, maybe the stock hits all time low, I think $0.195.

Gerardo Del Real: Had a large seller hitting the market.

Tell me what you like about the project and then I'm going to ask you to tell me what the company needs to prove to you to keep you as a shareholder. Start with the first question, what do you like about it?

Mickey Fulp: Well, it's got a new discovery with a previously unexplored target for this kind of deposit, breccia pipes. The targets before were always porphyry coppers, deeper. It's got grade. It's in a mining community in a mining friendly state in a mining friendly country. And it's got grade, the grade is tremendous here. And so that's probably what first attracted me to the project.

I'm a shareholder. I'm trying to buy more. Maybe the stock went up today. Maybe my stink bids didn't get filled, but it's a stock that I want to move on more of, especially at these prices right now.

Gerardo Del Real: Tell me what David and Chakana is going to have to do to keep you as a shareholder and to keep you patient and watching his exploration.

Mickey Fulp: Well, I have a trading methodology when stocks double, when my cost basis double, I sell half and take all my money off the table and I would intend to do that at Chakana. I'm averaging down right now with trying to buy at this price, but eventually I would expect Chakana Copper, if they are successful, to get taken out by a bigger mining company. And so that's what I'm looking for.

Number one, I want to sell half, take all my money off the table as the stock continues to appreciate. I'll sell into that market, but I want to make sure that I've got some stock at the end when they get taken out by the major and that assumes they have continued success. They're a ways from that, probably quite a ways from that right now, and you probably want to be at quite a ways from that because you still got a deposit to prove up.

Gerardo Del Real: Yeah. Excellent. Mickey, if people want to follow your work, where can they find you?

Mickey Fulp: Mercenarygeologist.com. Join almost 7,000 subscribers. It's free. So the price is right, can't go wrong there. And @mercenarygeo, we've got 52,000 Twitter followers.

Gerardo Del Real: Fantastic. David, ChakanaCopper.com?

David Kelley: Yeah, that's it.

Gerardo Del Real: Gentlemen, a pleasure.

David Kelley: Thank you.

Mickey Fulp: Thank you, Gerardo.