Avrupa Minerals Severely Undervalued; Drilling At Alvalade Has Commenced
(PresseBox) - With a second wave of COVID-19 in full swing now across the globe, Avrupa Minerals (TSXV: AVU) has finally commenced drilling at its flagship copper-zinc Alvalade project in Portugal, which is operated together with JV partner MATSA (joined company of Trafigura and Mubadala, 2 commodity giants). Delays due to permitting of land and water caused a 5-week setback, but although such limited delays aren?t uncommon in mining, it is good to have things arranged and get into action.
Avrupa and MATSA are focusing first on the Sesmarias massive sulfide discovery, and have planned to drill 7-8,000 meters over the coming months at Sesmarias and at other targets around the Alvalade license.
A first hole of over 500m has just been completed, with the assays expected in mid-to late January 2021.ious Avrupa drilling, as well as several historic, pre-Avrupa drill holes collared in the Sesmarias area.
The drill crew has taken time off for the year-end holidays, but will set up in January to continue to drill at northern end of the Sesmarias massive sulfide mineralization, targeting both strike-length and dip-length extensions of the copper-zinc-iron sulfide zone.
The re-logging of previous drilling provided new and better insights into potential targets for new, additional mineralization, and the currently ongoing drill program will test this expansion potential, among other goals. ant mineralization, but the targeting is complicated and needs time and experience to unravel the mystery.
Avrupa previously outlined four target zones around the massive sulfide discovery at Sesmarias, beyond downdip targets along the actual mineral lenses, Lens 2, Lens 8, and Lens 10.
As Lens 8 has seen the least amount of development, the first holes are intended to extend Lens 8 north west towards the area of the Northern Deep targets, from now on being called the Brejo area. Besides drilling, Avrupa and MATSA have other exploration tools at their disposal. Since I consider the historic resource estimates at Lousal from the former mining days (roughly estimated at 20-30Mt) low hanging fruit, I am particularly interested in the helicopter-supported VTEM electromagnetic survey, which will commence any day now, covering a large part of the Alvalade License.
For your understanding, the historic Lousal Mine is located at the southern part of the Monte da Bela Vista target panel (green star).
It is anticipated that results from the geophysical program will assist in delineating further massive sulfide targets, particularly in the license area between Sesmarias and the historic Canal Caveira massive sulfide deposit, located at the north end of the license. anticipate the survey to possibly last 1-2 weeks longer.
As a reminder, the current work program is fully funded by MATSA. MATSA can initially earn a 51% interest in the Alvalade Experimental Exploitation License property by completing funding requirements set out in the JV agreement between the companies. MATSA may then increase their interest in the Project to 85% by preparing a bankable feasibility study.
Notwithstanding a second wave of COVID-19, and Trump trying to cause as much trouble possible for Biden before surrendering the presidency, the Chinese economy seems to have recovered, and is picking up steam which is translating into increasing copper imports and production at smelters, which in turn, besides any ongoing strikes at LatAm copper mines, results in higher copper prices, as can be seen in this chart by Macrotrends:
Copper prices are even closing in on 8-year highs set in 2012, much quicker than I thought, although I must say that the steep rise to multi-year highs can?t go on forever. I cannot imagine there not being any disruptions in copper demand, now with Europe going into staged lockdowns, the US undoubtedly following suit as their policy isn?t as stringent or effective, and other parts of the world probably suffering as well. The economy of China is still for a considerable part export driven, so a decrease in exports will sustain a dent in copper demand. On the other side, the quick and seemingly successful development of COVID-19 vaccines by multiple pharmaceutical giants is a strong and very positive signal, which could bring a halt to the upcoming lockdowns shortly. In that case, I view any correction, being it copper demand and pricing, or stock markets, as shortlived. The Biden presidency has a colossal stimulus package standing by, which will undoubtedly kick in when stock markets could start to waver, or might even be used preventively.
Zinc, the second most important metal for Avrupa, has been on fire as well lately, as can be seen here in this chart of Kitco:
I predicted US$1.20/lb levels for next year a few months ago, but it is already trading at US$1.27/lb Zn. As explained before in my last article about Avrupa, the zinc market is much more complex as it is controlled by zinc smelters, who can singlehandedly influence zinc pricing and supply. As a reminder, according to the International Lead and Zinc Study Group (ILZSG), a platform formed by the United Nations, consisting of all major producing countries and industry players in the lead and zinc sector, several mines could experience problems to nameplate capacity again, but global supply for refined zinc metal will exceed demand significantly in 2020 (620kt), and for 2021 this surplus is expected to be 463kt. In my view, this will prevent the zinc price to go to the lofty 2018 levels, topping even US$1.60/lb Zn levels briefly at the time.
These developments regarding base metal prices are obviously positive for Avrupa, and will encourage MATSA to probably funnel much more money into the project, depending on drill results of course.
As a reminder, the Sesmarias discovery combined with the Lousal historic resources/workings is the obvious target for MATSA, as it generates a 40-50Mt resource potential (Sesmarias 10 Lense is guesstimated by me in an earlier article to contain about 19-20Mt, Lousal a potential 20-30Mt, both guesstimated at 1% Cu or better). Avrupa and MATSA are looking to see if Sesmarias, Lousal and also Monte de Bela Vista, all several kilometers apart from each other, could form a district scale system. In an earlier article about Avrupa, I calculated JV project/NPV potential estimates for the company at many multiples of the current share price (C$0.035 now vs. C$0.29-0.45 at FS stage, unconsolidated, (at)US$3.00/lb copper, US$1.20/lb zinc). Even the rock bottom cash compensation for the Avrupa interest per the JV deal (C$10M) is almost a 3-fold of the current market cap, and as this compensation has been negotiated with metal prices
This is all very much forward thinking of course, so let?s focus again on the present. Since Avrupa and MATSA had to wait 5 more weeks before they could commence drilling, there was more time to do re-logging, sampling and other detective work on old core. I asked CEO Paul Kuhn on the current state of affairs, and he was happy to give me
Re-log historic Avrupa-drilled Sesmarias core with MATSA to integrate their knowledge of the Pyrite Belt into the overall understanding of the massive sulfide deposit (remember that they have three operating Pyrite Belt mines in Spain, and at least one new un-announced discovery in the same rocks).
Paul Kuhn (PK)(Oct): We are continuing with this work and have expanded it outwards to several other very attractive zones around the old Lousal Mine, Monte da Bela Vista (7-10 kms north of Sesmarias), and around the old Caveira Mine, a further 10 km north of Lousal.
PK (Dec): This work will continue until drilling re-starts in mid-January.
Initial logging and possibly sampling of historic core prior to Avrupa?s involvement at Alvalade.
PK (Oct): MATSA discovered at least eight holes drilled a long time ago around Lousal and Caveira.
PK (Dec): For the moment, we are still at three locations.
Considering use of ionic leach geochemistry, to help identify and follow the trend of the Sesmarias mineralization.
PK (Oct): We have proposed doing this, at least in a first trial orientation survey of some 500 samples.
PK (Dec): Access permits are in place, but drilling and drill-related work are taking priority over any other tasks.
Review all of the old Lousal Mine data and geology in order to consider new drill targets. million metric tonnes of massive sulfide remaining within the old Lousal workings?
PK (Oct): Continuing work here seems to point to that possibility.
Review old core from the Monte da Bela Vista stockwork zone to see where the ore deposit may be hiding. MBV is located 1.5 ? 2 km north of Lousal, giving us over 9 km of strike length in this district.
PK (Oct): As soon as we finish with Sesmarias, we will tackle the MBV core.
PK (Dec): The new work that we have been doing is closely related to what we will see at MBV.as work will be quite helpful in future work at MBV and Lousal.
Review the old Caveira Mine data and drilling.
PK (Oct): This is the same as at Lousal.
PK (Dec): However, Sesmarias work is taking big priority right now.
Review and compile exploration data for the rest of the license, as there are lots of targets to be explored.
PK (Oct): We are really concentrating on Sesmarias, Lousal, and Monte da Bela Vista right now.bout halfway between Caveira and MBV. PK (Dec): The VTEM survey will give us a whole new package of targeting data!
Drill targeting with the hope of starting drilling by the beginning of September.
PK (Oct): We were delayed in starting up by general pandemic considerations impacting, for example, holiday seasons. al area, most likely in November.
PK (Dec): Obviously now we are up to speed in the program.area and on into the Brejo zone.
While MATSA is doing most of the heavy lifting at Alvalade together with the geologists of Avrupa, Kuhn has some more time on his hands now and is looking for other interesting projects. It is anticipated after the upcoming 4 to 1 share consolidation at the end of December, which has been approved at the latest AGM being held on December 14, 2020, that the company could raise more money easily, at a share price which is more interesting for funds, which already indicated their interest. Avrupa is still trading at rock-bottom prices (market cap of just C$3.8M) which at least in my view isn?t entirely justified considering developing fundamentals:
According to Kuhn, a new raise is being discussed for January-February. On a closing note: COVID-19 isn?t going by unnoticed in Portugal, but fortunately a complete lockdown isn?t in the cards yet. Especially the area Avrupa is working in is very remote, and drill/helicopter crews can work very independently as they have brought in all materials by themselves, all paid for by MATSA.
Conclusion
Finally, Avrupa has been able to get all necessary drill-related permits, and the first drill hole has been completed at Alvalade, with drilling continuing in mid-January next year. The airborne VTEM survey is about to begin, and will hopefully and likely bring in lots of targets, as can be expected with several historic mines and remaining historic resources being present. After a 4 to 1 roll-back, new funds could come in within a few months, making it possible for Avrupa to look into other projects as well. Alvalade, being an intensively-drilled and mined brownfield project in the past with 40-50Mt copper/zinc potential, could be brought back to life on the hands of JV partner and powerhouse MATSA, especially with copper prices riding at 7-year highs, and as such Avrupa represents an interesting investment opportunity in my view, but is still hovering at very modest prices.
I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.
Disclaimer:
The author is not a registered investment advisor, and currently has a long position in this stock. Avrupa Minerals is a sponsoring company. All facts are to be checked by the reader. For more information go to www.avrupaminerals.com and read the company?s profile andors prior to making any investment decisions.
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Datum: 22.12.2020 - 01:11 Uhr
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