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You can feel sympathy for Canadian mining insiders who woke up in July to find out that Altius Minerals (LSE:0UHC) had brought in UK-listed Chesterfield Resources (LSE:CHF)  on a massive potential copper site in Labrador. Regular followers of Chesterfield Resources will know it from its strategic alliance with FTSE 100 gold specialist Polymetal International (LSE:POLY), but Labrador is a big step into big time copper for this small cap miner.

Copper is a base metal which is already on a roll at the moment but we expect the price of copper is just going to get higher. Why? Because the globe wants to build massive new infrastructure to support the development of its net zero energy ambitions. To do that will require copper, and lots of it. There is no real substitute.

Good copper finds will trade at a premium

Larger miners are known to be scrambling around for decent copper stakes. Canada is considered to be one of the best mining jurisdictions for copper at the moment, and within Canada, Labrador’s Central Mineral Belt is one of the sweet spots. Chesterfield Resources has moved to secure the entire central basin of the Central Mineral Belt and has over 250 copper prospects identified within the Seal Lake Basin. This is around 300 square kilometres of prime, under-explored copper country.

“I think we have plenty of copper here,” says Chesterfield Resources Executive Chairman Martin French. “This is the kind of project a major mining company would probably pick up.” This is certainly a much larger project than the company’s existing operations in Cyprus.

As with some other prospective new copper sites – e.g. those being looked at by Wedgemount Resources (CSE:WDGY) in British Columbia – the Seal Lake Basin has been explored in the past, but in a very cursory fashion. Investors need to understand that the last great base metals mining boom ended in 2011, and there has been no real prospecting on much of these parcels since.

Why is the Adeline project so interesting for miners?

The Adeline project that Chesterfield Resources is now preparing to explore is big – it has a licence area that is 44km long and the copper is showing on or near the surface. Altius Minerals and Chesterfield moved quickly to acquire the stakes around the site to prevent the usual ‘me too’ opportunists, and should the results from initial exploration prove positive, provide a potential larger acquirer with a gift-wrapped package with no smaller players to consider. “A major miner will want to control the whole thing,” French observes.

Chesterfield is working with Altius Minerals, which is a TSX-listed company with C$700m market cap. It is a project generator, in a similar vein to UK-listed Cloudbreak Discovery (LSE:CDL), sourcing interesting mining projects on which it can work with trusted partners. It was Altius which brought Chesterfield in on the strength of the existing Chesterfield geological team.

Chesterfield has secured a 100% project acquisition deal from Altius, with payment in 10% equity and 10% in 20p three year warrants. There are no earn-in payments. Altius will retain a 1.6% royalty and becomes a strategic partner on the project, helping Chesterfield to design and manage the project.

The Adeline project is impressive in its scale – the license area is the same size as the huge Chambishi basin mining zone in Zambia. It was last explored by Playfair Mining in 2011, using satellite imagery and wildcat drilling.  Only 24 holes were drilled. Playfair found 7.9m @ 1.76% Cu. The site has been visited a number of times, first by Forbisher – Kennco in 19511-56. It was this exploration that yielded 4.5m @ 2.5% Cu.

What happens next?

Chesterfield Resources has completed its comprehensive field program and is in the process of re-valuating geophysical and geochemical data. It has generated an initial target list and has sought and been granted approval by local First Nation councils.

Chesterfield has confirmed it will be seeking a second listing in Canada in support of the project so Canadian investors should expect to see that coming through shortly. French was at pains to dispel rumours of further private placements in the UK.

Shareholders also get a Cyprus gold stake

What we have not discussed here are the Cyprus mining operations the company controls, with considerable exploration stakes around the Triodos Mountains in Cyprus, where Chesterfield has been looking for gold. This is known to be the main area of interest for the company’s biggest shareholder, Polymetal International. French confirmed what many miners have been experiencing this summer, namely that assay results have been delayed due to COVID, but they are expected imminently.

Finally, we would say that Chesterfield Resources does look incredibly cheap at this price. Exciting news flow coming out from either Cyprus or Canada is going to reverse this stock very quickly.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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