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By Team Ace Investors
Company Overview
Azure Minerals ("AZS" or the "Company") is a Western Australian-focused mineral exploration company. Azure remains focused on the rapid exploration of its flagship Andover Ni-Cu Project. The company’s project portfolio comprises of Andover Nickel-Copper-Cobalt project (60% Azure / 40% Creasy Group), Turner River Gold project (70% Azure / 30% Creasy Group), Barton Gold project (100% Azure), Meentheena Gold project (70% Azure / 30% Creasy Group) and Coogan Gold project (70% Azure / 30% Creasy Group). The Turner River project covers 450km2, located near De Grey Mining's (ASX: DEG) Mallina project which hosts gold resources of 2.2Moz plus the large-scale Hemi gold deposit. The Barton Gold project contains 200km2 in the exciting gold-rich Kookynie Gold District with nearby past production and current resources totaling +4Moz gold. The five exciting, well-located, high-quality gold and nickel-copper-cobalt (Ni-Cu-Co) projects provide Azure with significant upside and development potential. The company is led by an experienced technical and management team with proven mineral deposit discovery and project development credentials. Importantly, the advanced-stage Andover Project provides shareholders with exposure to the vital, high-value nickel, copper, and cobalt battery metals required for a clean and green energy future.
Investment Rationale
Azure delivered maiden mineral resource estimate for Andover Ni-Cu deposit
On 30 Mar 2022, the company announced the maiden Mineral Resource Estimate (“MRE”) for the Andover Deposit (“Andover”), the first prospect drilled in the Andover Project (“Project”) (60% Azure / 40% Creasy Group) located in the West Pilbara region of Western Australia. The Andover Deposit is estimated to contain 4.6Mt @ 1.11% Ni, 0.47% Cu, and 0.05% Co for 51.7kt of contained nickel, 21.7kt of contained Copper, and 2.29kt of contained Cobalt at a cut-off grade of 0.5% Ni (JORC 2012). This includes a high grade resource component of 2.0Mt @ 1.41% Ni, 0.49% Cu and 0.06% Co at a cut-off grade of 0.9% Ni. A robust resource with over 80% of the Mineral Resource Estimate is classified as an Indicated category. The exploration team has excelled in having delivered the first resource only 18 months after starting exploration, while also discovering and now drilling significant nickel and copper sulphide mineralization at several other prospects within the project area. it’s likely that additional mineral resources will be defined at the nearby Ridgeway (6.3m @ 3.59% Ni in ANDD0134, 4.9m @ 3.5% Ni in ANDD0128, and 4.5m @ 3.95% Ni in ANDD0045; refer ASX 15 March 2022), Seaview (7.0m @ 1.35% Ni; refer ASX 7 April 2021) and Skyline (results to be announced) prospects. The MRE was completed by CSA Global Pty Ltd ("CSA Global") based on 104 holes drilled between 2018 and 2021, consisting of 102 diamond (DD) and two reverse circulations (RC) holes for 44,267m. All holes were assayed where they intersected mineralization lodes, and for any internal waste and external lengths for several meters outside the lodes. Drillholes were nominally spaced 50m by 50m, typically oriented within 020° of orthogonal to the interpreted dip and strike of mineralization.
Strong drilling results from the Ridgeline deposit identified two parallel, northwest-plunging shoots of semi-massive to massive sulphides containing high-grade nickel mineralization
The Ridgeline mineralized system comprises at least two mineralized horizons intersected over an east-west strike length of more than 500m and to depths between 200m and 500m below the surface. On the southern horizon, drilling has identified two parallel, northwest-plunging shoots of semi-massive to massive sulphides containing high-grade nickel mineralization. Both shoots host thick central cores of sulphide accumulation that represent structurally-controlled depositional sites. Widths and grades of mineralization increase towards the center of each shoot. Additionally, the third shoot of high-grade massive and semi-massive nickel and copper sulphide mineralization has been intersected on the northern horizon. Extensional and infill drilling at the Ridgeline deposit continues to return intersections of Ni-Cu-Co sulphide mineralization containing high grades of nickel and copper. Additionally, multiple holes have intersected substantial quantities of visible disseminated, heavily disseminated, matrix, semi-massive, and massive nickel and copper sulphide mineralization for which assays are awaited. Visually, the sulphide mineralization consists of pyrrhotite-pentlandite-chalcopyrite and spot readings utilizing the handheld pXRF confirm the presence of nickel and copper.
The sale of Azure’s precious and base metals in Mexico to allow focus on its flagship Andover Ni-Cu Project in Western Australia
On 27 July 2022, the company completed the sale of its Mexican precious and base metals projects to Bendito Resources Inc (“Bendito”) for a combination of cash and shares valued at A$20 million (the “Transaction”). Bendito is a mineral acquisition and development company focused on progressing late-stage exploration and development projects through the feasibility stages to production. In February 2021, Azure commenced a strategic review of its 100%-owned Mexican portfolio, including the Alacrán silver-gold-copper and Oposura zinc-lead-silver projects, to determine how best to optimize the value for Azure shareholders, given Azure's focus had pivoted to its exciting WA nickel, copper and gold projects, which includes the advanced-stage Andover Ni-Cu Project. The outcome of the review was a decision to divest the assets and Argonaut PCF was appointed to conduct a sales process, which attracted significant global interest. The transaction will allow Azure to focus on developing its flagship Andover Ni-Cu Project in Western Australia. In connection with the Transaction, Azure will receive A$10 million in cash and A$10 million worth of fully paid ordinary shares in Bendito ("Bendito Shares") in two tranches within 18 months. At the closing of the transaction ("Closing"), Azure received an immediate cash payment of A$4 million and was issued 11,200,000 Bendito Shares (approximately 20% of the issued capital of Bendito and valued at A$4 million). The second tranche of A$6 million in cash and A$6 million worth of Bendito Shares is payable to Azure within 18 months of Closing. For completeness, Azure noted that after the shareholder approval on 29 June 2022, Azure and Bendito agreed on a variation to the structure of the consideration payable to Azure. The variation had the effect of bringing forward A$2 million of the Bendito Share component to Closing, and deferring A$2 million of the cash component to be paid in the second tranche (within 18 months of Closing).
Delivered positive metallurgical test results from Ridgeline Nickel deposit with high-grade nickel concentrate and copper concentrate
The company recently provided an update on the metallurgical testwork program and process design for the Andover Deposit together with metallurgical testwork results from the Ridgeline Deposit, at the Andover Project (“Project”) (60% Azure / 40% Creasy Group) located in the West Pilbara region of Western Australia. The metallurgical testwork provides Azure with sufficient technical data and confidence to continue with the Scoping Study and move the Andover Project towards a development decision. The Ridgeline Deposit returned excellent metallurgical testwork results, delivering separate high-grade nickel concentrate (13% Ni grade with 80% recovery) and copper concentrate (25.5% Cu grade with 77% recovery). A single representative ‘master’ composite sample from the Ridgeline Deposit was prepared to complete initial metallurgical and comminution testwork using the flowsheet that had been developed for the Andover Deposit. Excellent results were received with separate nickel and copper concentrates successfully produced. The nickel concentrate graded 13.0% at a recovery of 80% and the copper concentrate graded 25.5% at a recovery of 77%. Comminution testwork was consistent with that completed on the Andover Deposit, and results indicate that the Ridgeline mineralization is slightly softer than the Andover Deposit. The data obtained from this program was used to design a process flowsheet that will produce separate nickel and copper sulphide concentrate at the Project. A testwork program was designed to test the variability of individual styles of mineralization that have been identified across the Andover Deposit and to build on the information obtained from the Stage 1 testwork program. Flotation of nickel into separate nickel concentrates was successful in all samples, with high concentrate grades (>20% Ni) achieved at the intermediate stage. Final nickel concentrates graded up to 15.7% Ni and recovered up to 80% of the nickel. Selective flotation of copper into a separate copper concentrate was also successful and final copper concentrates graded up to 25.5% Cu and recovered up to 80% of the copper. Metallurgical and comminution testwork for both the Andover and Ridgeline Deposits was completed using the same process flowsheet. The amenability of the mineralization from both the Andover and Ridgeline Deposits to be processed using the same methodology allows for a hub and spoke mining and processing model to be deployed at the Project, where ore from multiple sources would be processed through a single process plant.
- Ridgeline Deposit returned excellent metallurgical testwork results delivering separate high-grade nickel concentrate (13% Ni grade with 80% recovery) and copper concentrate (25.5% Cu grade with 77% recovery)
- Andover Deposit and Ridgeline Deposit testwork used the same flowsheet, confirming the ability to process multiple ore sources from the Andover Project through a single standardized processing plant
Scoping Study level metallurgical testwork and process design are now complete
Azure completed 19 drill holes for a total of 8,566m during the June quarter. Most of the holes targeted the Ridgeline Ni-Cu-Co sulphide deposit, undertaking extensional and infill drilling for resource definition purposes, which will be the second mineral resource for the Andover Project. After the June quarter, Azure reported positive assay results from several Ridgeline drill holes and the visual identification of numerous significant mineralized intersections (for which assays are awaited). Additionally, exploration continues to generate and define more drill targets. Project-wide geological mapping and rock chip sampling programs and surface electromagnetic surveys are in full swing, focused on a detailed exploration of the Southern Mineralized Corridor between Andover and Seaview and reconnaissance exploration to better define this prospective horizon further to the northeast. Drilling continues to focus on extending and defining the Ridgeline deposit, to support the production of a Mineral Resource Estimate. Following the completion of the Ridgeline drill-out, drilling will recommence at other known occurrences of Ni-Cu-Co sulphide mineralization at Seaview and Skyline and follow up anomalism at Atrium and Pipeline. Meanwhile, field work continues to generate and refine additional exploration targets. Project-wide geological mapping and rock chip sampling programs and surface electromagnetic surveys are in full swing, focused on better defining the SMC between Andover and Seaview and reconnaissance exploration to better define this prospective horizon further to the northeast. SMC contains a visually distinctive intrusive rock that hosts all nickel-copper-cobalt (Ni-Cu-Co) sulphide mineralization. Azure is well-funded with approximately $14 million in cash following the completion of the Mexican sale.
ACE’s Recommendation:
Azure Minerals (ASX: AZS) is a Western Australian-focused mineral exploration company. Azure remains focused on the rapid exploration of its flagship Andover Ni-Cu Project. The advanced-stage Andover Project provides Azure's shareholders with exposure to the vital, high-value nickel, copper, and cobalt battery metals required for a clean and green energy future. On 27 July 2022, the company completed the sale of its Mexican precious and base metals projects to Bendito Resources Inc (“Bendito”) for a combination of cash and shares valued at A$20 million (the “Transaction”). The transaction will allow Azure to focus on developing its flagship Andover Ni-Cu Project in Western Australia. The company recently provided an update on the metallurgical testwork program and process design for the Andover Deposit together with metallurgical testwork results from the Ridgeline Deposit, at the Andover Project (“Project”) (60% Azure / 40% Creasy Group). The metallurgical testwork provides Azure with sufficient technical data and confidence to continue with the Scoping Study and move the Andover Project towards a development decision. The Ridgeline Deposit returned excellent metallurgical testwork results, delivering separate high-grade nickel concentrate (13% Ni grade with 80% recovery) and copper concentrate (25.5% Cu grade with 77% recovery). Metallurgical and comminution testwork for both the Andover and Ridgeline Deposits was completed using the same process flowsheet. The amenability of the mineralization from both the Andover and Ridgeline Deposits to be processed using the same methodology allows for a hub and spoke mining and processing model to be deployed at the Project, where ore from multiple sources would be processed through a single process plant. We believe that the recently announced MRE at the Andover Ni-Cu Project and positive metallurgical results from the Ridgeline Nickel deposit provide a cost-effective way to develop the Andover Ni-Cu Project. We would like to recommend a SPECULATIVE BUY rating on the stock.
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