Lara's Resource Study Shows Project Potential

Source: Adrian Day 10/21/2024

Global Analyst Adrian Day focuses on the eagerly awaited resource estimate for Lara Exploration Ltd.’s (LRA:TSX.V) Planalto copper project, and how it might develop. He also looks at recent announcements from some other companies on his list.

Lara Exploration Ltd. (LRA:TSX.V) released its long-awaited resource estimate on its Planalto copper project in northern Brazil. Overall, the study demonstrates the project’s potential. Though at first blush the size and grade — 48 million tonnes (indicated) at an average grade of 0.53% copper — might seem to lack excitement, the project has several attractive features, and most importantly, this is only an initial resource estimate, with an additional 154 tonnes in the inferred category (at a 0.36% copper grade) with substantial gold as well (over 300,000 ounces, though at low grade).

This puts it in the top 10 copper discoveries of the last decade. Big copper discoveries are rare. Lara’s team has made four discoveries since 2011, including Cukaru Peki (Timok) in Serbia. Significantly, the low-grade material lies between two levels of higher grade, meaning that it will have to be mined to get to the lower-level high grade.

It can be stockpiled for future processing at higher copper prices or could be put into the mill. The ore is near surface, with a low strip ratio. The deposit is very sensitive to higher copper prices, but significantly, the pit shape changes hardly at all if a lower cut-off grade were to be used.

A Straightforward Project in a Pro-Mining Region

Planalto is located in the Carajás, Pará State, a mining and farming district with an experienced workforce, pro-mining population, and excellent infrastructure. There are several operating copper mines in the area. BHP is selling some smaller nearby mines, and potentially Planalto could be acquired by the buyer to enhance their presence in the region. Planalto lies in flat farmland, on a highway, and with power. In all, it will be easy to permit and easy to build, with a much shorter timeline to production than copper mines in most other locations. These are all significant favorable factors for the project.

There are other targets near Planalto on the Lara ground that have not been explored yet. Adjacent Divisa, which has a larger magnetic footprint than the Planalto deposit, has had only one drill hole.

Lara is completing a PEA, which is expected before the end of the year. This will provide an understanding of the economics, after which Lara intends to do more drilling, initially on infill drilling, to upgrade the inferred ore to the indicated category.

Planalto’s Sensitivity to Higher Copper Prices

This drilling, probably early spring next year, would cost about $2 million. With payments coming in and a very low G&A, Lara has the cash to complete the PEA and the infill drilling campaign. It then has other possibilities to enhance the deposit, including drilling the nearby silica cap, and perhaps other nearby targets. There is a good presentation on Planalto on the company’s website.

Planalto is not the only arrow in Lara’s quiver, not by a long chalk. The company has nine royalties, minority interests in two mines, two JVs with large mining companies, and 18 projects in total, mostly in gold and copper, with one phosphate project, mostly in Peru and Brazil.

Continue to buy.

Fortuna on Track for Annual Guidance

Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) reported third-quarter gold-equivalent production down from the second quarter and year-ago quarter, with gold lower but in line with estimates, while silver was below and base metals above estimates.

The company is on track to meet annual guidance, now at 75% of the mid-point of guidance. The flagship asset, Séguéla, is producing 35% above design rates, although grades were just a little lower due to mine sequencing.

Yaramoko in Burkina Faso also produced above expectations, again with lower grades.

The local Ministry of Mining has assured Fortuna (and other large miners) that licenses for companies that follow the mining law are not at risk, following the military president’s speech last weekend. This was what we expected.

Yaramoko, though a large part of Fortuna’s production, has a two-year mine life, so it is not a significant part of the long-term future.

Fortuna is a long-term Buy.

Osisko on Track With Improving Balance Sheet

Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) had a good production quarter, just a smidgeon below consensus estimates. Unlike Fortuna, it did not provide asset-by-asset numbers. It finished the quarter with over CA$58 million in cash after a CA$27 million credit facility repayment and nearly CA$81 million remaining on the facility.

With undrawn credit, it has over half a billion in available liquidity. It is tracking towards the lower end of full-year guidance, revised after the leach pad failure and mining stop at Victoria’s Eagle Mine, one of Osisko’s larger royalties.

Osisko trades at a modest discount to intermediate royalty peers, and will likely close the gap (and even move to a premium given its low jurisdictional risk) as development assets progress towards production, but we would not chase at this price right now.

Barrick Not Settled Agreement With Mali

Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) has received a demand from the Mali government for over US$500 million in back taxes and dividends, according to a Reuters report quoting unnamed sources.

This follows Barrick saying that it and the government had “agreed to find a resolution” on a future split of revenues and settlement of all past disputes.

Barrick disclosed in its 2023 annual report that Mali was seeking over $400 million for unpaid back taxes, which it denied. In response to the Reuters article, a Barrick spokesman said, “We are still in the process of negotiation and will let you know once the agreement is settled.” It seems CEO Mark Bistow’s earlier comments were premature (though strictly accurate).

Hold.

Midland’s Partner Steps up Lithium Build

Midland Exploration Inc. (MD:TSX.V) moved up after Rio Tinto agreed to acquire lithium miner Arcadium at a 90% premium to the stock price. Arcadium has two development projects in James Bay, adjacent to Midland ground, where Rio is aggressively exploring in a regional alliance.

Rio’s CEO Jakob Stausholm said it plans to establish “world-class lithium hubs” in Quebec, and that it wanted to accelerate Arcadium’s stalled projects, adding “Within Rio, we can.” Rio has already spent $7.5 million on Midland’s alliance, including a significant $6 million on one deposit, Galinée, which would suggest they are finding something.

Buy.

TOP BUYS this week, in addition to the above, include Nestlé SA (NESN:VX; NSRGY:OTC), Kingsmen Creatives Ltd. (KMEN:SI), and Altius Minerals Corp. (ALS:TSX.V).

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Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Lara Exploration Ltd., Fortuna Mining Corp., Osisko Gold Royalties Ltd., Barrick Gold Corp., Midland Exploration Inc., and Altius Minerals Corp.
2. Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with All. I determined which companies would be included in this article based on my research and understanding of the sector.
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Adrian Day Disclosures

Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. www.AdrianDayGlobalAnalyst.com. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2023. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.

( Companies Mentioned: ABX:TSX; GOLD:NYSE, FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE, LRA:TSX.V, MD:TSX.V, OR:TSX; OR:NYSE, )

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