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Deep South Resources is "scratching the surface" of a massive copper porphyry in Namibia

Snapshot

The project is arguably the oldest of its type in the world and one of the largest in Africa

Deep-South Resources Inc -

Quick facts: Deep-South Resources Inc

Price: 0.24 CAD

TSX-V:DSM
Market: TSX-V
Market Cap: $33.34 m
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  • A Tier 1 asset with robust economics
  • Excellent potential to increase and improve resource
  • Proven leadership team

What Deep South Resources does: 

Deep South Resources Inc (CVE:DSM) is advancing a wholly-owned world-class Haib copper project in low-risk, mining-friendly Namibia to feasibility stage.

The copper porphyry deposit, which sits within a 37,000 hectare (ha) property, is arguably the oldest of its type in the world and one of the largest in Africa.

The property lies close to the country's border with South Africa and 12 kilometres (km) to 15km east of an interstate highway. The Orange River, from which water can be pumped, lies 15km away.

The project already boasts an indicated resource of 3.1 billion pounds of the red metal, while 2.2 billion is classed as inferred and there is potential to expand the size and grade. 

The deposit defined so far covers a surface area of 2.6 square kilometres (sq km) and a depth of around 350 metres (m). There is a high-grade area containing 140 million tonnes.

The project is suitable for conventional low-cost bio heap leach processing, with recoveries of up to an impressive 96%. A preliminary economic assessment (PEA) in May last year underscored its credentials, pegging the after-tax net present value (NPV) at US$957 million with an internal rate of return (IRR) of 29.7%, using a copper price of US$3 per pound.

The aim is to site a processing plant 4km from the mine to be near regional infrastructure.

Deep South expects copper prices to continue to improve, due to a shortage of mines, strong demand for cathode in China, and the continued adoption of electric vehicles (EVs).

Deep South also has a 75% stake in the Kapili Tepe copper exploration project in Turkey, which comprises one mining license and two exploration licenses, which are both contiguous and adjacent to each other.

How is it doing:

In December, last year, Deep South unveiled the results of an update to its May PEA for the Haib copper project, which showed a dramatic improvement to the numbers, when using a higher copper price.

With copper now at around US$3.50 a pound, the net present value is lifted to US$1.3 billion, while the after-tax IRR goes to 42.1%.

Under the base model from last May, the project has a low capex of US$341 million and an after-tax payback of just over four years, with a 24-year mine life.

On the financing front, in October, the company closed a two-tranche placing, raising over C$2.4 million, and the following month, revealed it had struck a deal with Ferrodrill Namibia (Pty) over a drilling program at Haib.

The work will comprise 5,000m of diamond drilling, specifically focused on the high-grade area of the deposit uncovered by the company in 2019.

The idea is to fill in gaps and improve the average grade and expand the tonnage ahead of a potential measured resource estimate for this high-grade area.

Previous drill highlights in this area have included 56m at 0.76% copper and 74 parts per million (ppm) molybdenum (moly) from 18m in one hole and 40m at a grade of 0.64% copper and 75 ppm moly from 150m depth in another.

The company has also identified five new potential satellite targets at Haib, which could further boost the resource tonnage when drilled out. 

Deep South aims to carry out further metallurgical test-work in a bid to reduce operational costs and complete mining engineering design, environmental impact assessment and base-line studies.

What the analyst says:

Proactive analyst Dr Ryan Long has noted that a 'large proportion' of Haib's current resource comes from drilling down to a depth of just 75 metres (m) below surface, while the bulk of the resource estimate comes from drilling to a depth of 350m.

"The deepest drill hole at the project extends to a depth of c. 850 m below the surface demonstrating that the ore-body remains open at depth and that additional deeper drilling would allow the resource estimate to be expanded beyond its already substantial size," he said..

"In addition to the expansion targets at depth, a 12,000 m infill drill programme is expected to expand the 140 Mt high-grade zone, which would also increase the life-of-mine head grade," said Long.

Inflection points:

  • More drilling results for Haib project
  • Completion of environmental/engineering studies
  • Copper price moves

What the boss says:

In Deep South's last statement on the updated PEA with improved economics, chief executive Pierre Leveille said that "at a copper price of $3.50 per lb our Haib Copper project shows an after-tax NPV of US$1.3 billion and an after-tax IRR of 42.1%.

"Of note, our current market capitalization is only 0.8% of this NPV. We are highly encouraged by the solid copper market outlook and with the funds in-hand we are confident that our coming exploration and development program will bring strong added value in 2021 and onward."

Contact the author at giles@proactiveinvestors.com

Follow him on Twitter@Gile74

Read Ryan Long's initiation report: Highly Profitable Copper Project with Low Market Valuation

 

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Deep-South Resources names MSA Group as company to update the 43-101 on Haib...

Deep-South Resources (CVE: DSM) CEO Pierre Leveille joined Steve Darling from Proactive with news the company has picked the team that will produce an updated resource estimation for their Haib copper project located in the south of Namibia. Leveille telling Proactive the report will follow...

2 days, 10 hours ago

5 min read