Freehill Mining anticipates assays from Yerbas Buenas magnetite project

Magnetite explorer Freehill Mining (ASX: FHS) is awaiting assays after completing a drilling campaign at its wholly-owned high-grade Yerbas Buenas project in Chile, with a maiden resource expected before the end of March.

During the December quarter, Freehill completed 24 reverse circulation holes for 4,300m at the project, with depths ranging from 150m to 250m.

In addition to analysing the iron content in the samples, test work will also evaluate the total magnetite yield.

While assays remain pending, indicative grades were estimated using magnetic susceptibility metres – boosting Freehill’s confidence in the mineralisation’s high-grade nature.

According to Freehill, drilling at the project’s southern structures revealed about 15m of sand cover followed by more than “170m of effectively continuous high-grade magnetite material”, with mineralisation remaining open to the south.

Drilling also validated the anomalies the magnetic ground survey had identified – increasing confidence in other untested anomalies that have been delineated across the project.

“Yerbas Buenas is shaping up as a significant Chilean magnetite project with established offtake agreements and third-party processing operations available to us only 30km from site,” Freehill chief executive officer Peter Hinner noted.

In anticipation of the positive assay results, Freehill has begun planning its second drilling campaign which is scheduled to kick-off in the June quarter and will focus on anomalies in the project’s northern section.

Yerbas Buenas

The Yerbas Buenas project encompasses 400 hectares within Chile’s world-class iron ore and copper belt and is close to major infrastructure including highways, cities, ports and power.

Yerbas Buenas is only 15km from the region’s oldest iron ore mine as well as numerous copper, gold and magnetite operations.

In addition to magnetite, Yerbas Buenas is also prospective for copper and gold. In the coming months, Freehill plans explore the project’s copper and gold potential further.

Offtake locked-in

Unlike other projects with a pending maiden JORC resource, Freehill has confidence in the ore at Yerbas Buenas as it has been supplying it to one of Chile’s largest iron ore producer’s subsidiaries.

A small demonstration plant has been established at Yerbas Buenas and trial mining has been undertaken since mid-2017, with Compania Minera Del Pacifico purchasing the project’s magnetite concentrate to supplement its own ore at the nearby Romeral pellet feed plant.

By October 2018, magnetite pre-concentrate and concentrate sales to Compania Minera Del Pacifico had generated US$2.33 million for Freehill.

The company is now using a mining service company to carry out the trial mining and processing in return for a royalty based on 4% of the sales revenue.

According to Freehill, the benefit of using the mining service company conserves its current cash reserves and allows it to continue shipping limited quantities of magnetite to Compania Minera Del Pacifico’s pellet feed plant.

In addition to purchasing Freehill magnetite concentrate, Compania Minera Del Pacifico provides Freehill with ongoing technical support.

Trial mining has also provided Freehill with necessary operational, geotechnical and operating cost insights, which can feed into future feasibility studies.

Board amasses more experience

As Freehill advances Yerbas Buenas, it recently added Wayne Johnson to its board as a non-executive director. Mr Johnson joined the company in the December quarter and brings his 30 years’ business and financial experience across Australia, New Zealand and North America.

Mr Johnson will collaborate with managing director Peter Hinner, chairman Ray Mangion, chief financial officer Paul Davies and non-executive director Samuel Duddy.

Combined, the board has multiple decades’ experience across mining, metallurgy, engineering, business management and finance.

Topping up cash reserves

As it gears up to fast-track exploration at Yerbas Buenas, Freehill has launched a non-renounceable rights issue to raise around $3 million before costs.

Under the issue, shareholders are offered one new share for every two held at a price of $0.015.

Additionally, $1.73 million of notes were converted to equity by sophisticated investors under the same terms of the entitlement offer.

Speaking with Small Caps Mr Johnson said the conversion of notes to equity by sophisticated investors demonstrates the confidence experienced investors have in the commercial viability of Yerbas Buenas.

Mr Johnson said the next 12 months would be “transformational” for Freehill as exploration at Yerbas Buenas progresses and other opportunities are evaluated.