Gerardo Del Real,
Editor
April 13, 2022
Editor’s Note: With both copper and gold primed to make new all-time highs in this new commodity supercycle, companies with pounds and ounces in the ground, exploration upside, and the technical acumen to unlock that value will thrive. Azucar Minerals (TSX-V: AMZ)(OTC: AXDDF) checks all those boxes.
I spoke with CEO Morgan Poliquin about the compelling risk/reward upside Azucar presents and how the company plans to unlock value for shareholders.
Enjoy,
-Gerardo
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the president and CEO of Azucar Minerals, Dr. Morgan Poliquin. Morgan, it's been a bit. It's great to have you back on. How are you?
Morgan Poliquin: I'm excellent, thanks. Happy to be on. How are you?
Gerardo Del Real: I am excellent as well. Thank you so much for asking. Let's get right into it.
I absolutely love being early to a story that presents compelling risk-reward parameters and deep, deep value. And in the case of Azucar, I've been very early, right? I've been a supporter of the stock for several years.
You have a resource that was published right in the midst of the COVID pandemic, and I think it was overlooked. You have 2.6 million gold equivalent ounces across all categories. It should be noted that a good portion of that is in copper. You're drilling, you have a new target, and yet here you are with a market cap, sub-$9 million Canadian.
Can we talk about the drilling that's underway? But first, can we get into a brief overview of the El Cobre project which I've been to, but I'd love for you to provide the context on it.
Morgan Poliquin: Yeah, thanks so much. Yeah, I remember very well our trip when we were drilling in the Norte Zone. And the Norte Zone is one of a number of zones of porphyry mineralization over about five kilometers.
Just to back up, porphyry, this style of deposit, there tends to be larger bulk tonnage deposits hosted in granitic-like intrusions. Sometimes they form one big deposit and in some places there's kind of a district with multiple different intrusions that are mineralized.
That's the case at El Cobre where we have five kilometers and many different porphyry intrusions and associated mineralization. The Norte Zone was the first one where, in 2016, we made a significant discovery with long intervals that worked into the resource there of gold-focused mineralization, I would say. The value given current prices, more than 50% of the value is in gold and that's great for porphyry. But they're known for copper.
And so the resource, you quoted it there in the indicated, we've got at the base case cutoff, we've got just under 47 million tonnes of gold equivalent; it's 0.77 grams per tonne. But in copper equivalent, using the same ratios, it's 0.61% copper equivalent. So pretty significant 64 million tonnes at the same cutoff. In the inferred category, it was 0.52% copper equivalent and 0.66 gold so weighted towards gold value per tonne, but copper and gold together.
But that was just one of the targets. So we stepped out from there and started to drill a number of the other targets over this five kilometers. Then, of course, COVID hit. Previous to that, Newcrest (TSX: NCM)(OTC: NCMGF) had come in as a shareholder for 19.9%. Then, we kind of stepped back and had a broader view of the project and were looking at where all of this might be going. A few holes were drilled outside of these target areas and we released the resource.
COVID actually allowed us to kind of step back, as I said, and look at this bigger picture. What I really felt like is that these multiple zones over five kilometers, we might not really understand if there's a central major focus for the mineralization that we have yet identified. I just had the feeling that perhaps these zones we're working on might be just part of a bigger picture.
So we did some really interesting cutting-edge scientific work. And I can tell you the details on that if your listeners would be interested. But we defined an area where we think a lot of the focus is coming from, and it's an area that we hadn't drilled before. It turned out that it's associated with a big area of hydrothermal alteration and a big deep geophysical target and we thought, well, this is maybe what's causing a lot of the mineralization we're seeing in this big area. So we just started drilling that — so a brand new target.
Gerardo Del Real: You mentioned Newcrest and you mentioned them coming in and taking a 19.9% interest. I mentioned value at the start of this conversation, and just to be clear, the market cap right now, as it sits, is just under $10 million Canadian. I think right around $9 million Canadian, actually.
Newcrest came in and paid $19 million for a 19.9% interest. I'm no mathematician and I consider myself a relatively simple human being, but if I round up to 20% and I multiply that by five and it's $19 million, so they basically vetted the project. They looked at it and they thought that 20% of this project was worth $19 million, which would lead someone to believe that their due diligence ballpark, that this project had a reasonable valuation of right around $100 million Canadian. So the market cap is a 10th of where Newcrest assessed it years ago. And, I should say, I believe this was before the resource, correct?
Morgan Poliquin: That's absolutely right. Obviously, it was early days of drilling and there was a lot of focus on the new discovery.
I think from there, as I say, that was the spring of 2018 and there might have been some reasons. It was a little slow after that because we had kind of held off our exploration program as we spun out a new company, which was Azucar from Almadex (TSX-V: DEX)(OTC: AAMMF) and so there was some elements in there that I think brought eyes away from the project for a period of time. Then, not long after that, we had COVID, and it was kind of more of a bit of a regional approach as opposed to being really target-focused. So I'm not really sure that people really noticed the resource coming out, as you noted earlier.
So it's been a rough little patch but we used that time to try to do this higher-end science to understand these zones. Because the reality is, we have multiple zones across the property… and are all of them going to be extended at depth and be major porphyries? Typically, in these camps, that can happen where many of these intrusions work out to be significant zones. But oftentimes, it's one of them that winds up being the biggest one.
I noticed that seems to be the case at Newcrest’s Cadia project, which is, again, a gold-copper porphyry in Australia where they have multiple zones. A couple of them worked out to go to depth and be really big; especially one, their Cadia East, which I think is over 3 billion tonnes. It took them 25 years in that camp, I think, to flush it all out and figure it out. We hope to do it a little faster. But it just goes to show how these systems, from their surface manifestation, can grow at depth.
So we wanted to figure out, well, is there a smarter way to figure it out as opposed to drilling everything; one of these zones with really deep holes, is there a smarter way of kind of selecting it? We feel that the study we did last year could be the key and it certainly worked in other districts around the world. It's fairly new technology and it defined an area, like I say, that had many other overlapping reasons to drill it, as it turns out. But it seems to be a real hotspot with this mineral chemistry method. So that's part of it.
The other part of the project I really want to highlight is that this is an unusual exploration setting because we are in probably one of the best areas in terms of infrastructure I've ever worked in. We’re about 10 kilometers from a power plant with power lines and highways, potential deep sea ports nearby, rail and gas lines. So this is a really fabulous place to develop a bulk tonnage-type of deposit with us being just a couple hundred meters above sea level with great accessible terrain.
Gerardo Del Real: You have a resource in place. It's robust. It's gold and copper. The exploration upside is phenomenal. You've had a market cap that could be justified in the C$100 million range, not the C$9 million range where it's at today. We know in this space, Morgan, that things turn quickly and one hole can remind the market of exactly what it is that you have here. Drilling is underway. Is that accurate?
Morgan Poliquin: Drilling has just gotten underway and, obviously, this is the first hole into a new target area so really feeling our way into this huge new target we've defined. But, as you say, it's hopeful to me that people will recognize what we have here already in this camp by being aware of the project through our drilling program and noticing that we've got a resource already and many other targets that have had significant results. So people will hopefully recognize that this is a big porphyry project with lots of potential and a major new target with drilling underway.
Gerardo Del Real: Copper is at US$4.70 a pound. Gold seems primed to get back above the US$2,000 level here soon. Can't think of a better time to go and expand an already robust resource and possibly tap into that feeder system. Morgan, exciting times! Thank you so much for the update. I appreciate it.
Morgan Poliquin: Thank you very much. Really appreciate it, too.
Gerardo Del Real
Editor, Resource Stock Digest