Junior explorer Freehill Mining (ASX: FHS) has tripled the size of its Yerbas Buenas magnetite project in Chile with the acquisition of an 80-hectare adjoining tenement.
The company emerged from a trading halt this morning to announce the addition of Arenas XI 1/20, located directly to the south and adjoining the existing Yerbas Buenas project area.
Speaking with Small Caps, Freehill chief executive officer Peter Hinner said the acquisition provides “considerable upside” and a “significant opportunity” to expand the size of the YB6 magnetic structure, which is the subject of an upcoming drilling program to establish a JORC mineral resource.
“It was like the five or six holes we drilled in the top end of this structure formed a big arrow that pointed south, saying to drill south of the [tenement] border,” he said.
Freehill has described the acquisition as “strategically important” as the area contains a significant extension to the high-grade 1.1km long YB6 magnetic structure identified during the company’s maiden drilling program in late 2018.
Assay highlights from this reverse circulation program included an 18m intersection of near pure magnetite less than 50m from the surface.
The new acquisition effectively expands the magnetic footprint of the YB6 structure from 9.6ha to more than 29ha.
“The ground magnetics footprint on this newly acquired tenement is exactly the same, so we expect to get similar grades,” Mr Hinner said.
According to Freehill, major features of the structure extension include an overburden primarily comprised of mineralised sand cover that it sits on gently sloping ground.
In addition, the company said this extension area would require a simple pre-stripping process that could “potentially generate enough revenue to offset the cost of pre-stripping”.
“The whole area is quite unique, geologically. It looks like a sand dune but it’s essentially iron sands overlaying a hard rock magnetite,” Mr Hinner said.
“Typically, in hard rock magnetite the overburden can be 20-40m thick. This is about 12-14m, so the magnetite that we take out of the sand looks as if it will be able to pay for the cost of the pre-stripping.”
“The company can now begin a process of confirming the continuity of high-grade iron mineralisation, in what is turning out to be a very large structure,” Mr Hinner added.
“Further, having Compania Del Pacifico S.A., a subsidiary of Chile’s largest iron ore producer situated down the road and what could shape up to be an extensively large structure, provides Freehill with additional future upside,” he added.
Capital raise and drilling program
At the end of August, Freehill completed a $2.6 million capital raise with intentions to progress the Yerbas Buenas project to a pre-feasibility study.
The company said the raised funds would be used for a planned drilling program and a major expansion of the current magnetite mineral resource estimate, as well as to acquire “further highly complementary surrounding tenements”.
Arenas XI was acquired from parties associated with Freehill’s former contract miner, Lacerta Mining & Finance SpA, as partial consideration for the resolution of the contract for mining services.
The tenement is now held 100% by Freehill through its wholly-owned Chilean subsidiary San Patricio Minera SpA.
“Finalising the acquisition following a well-supported capital raise leaves Freehill well positioned to integrate Arenas XI into the planned drill program commencing in the near term,” Mr Hinner said.
“The acquisition triples the size of the [YB6] structure subject of the company’s planned program as it seeks to establish a JORC resource.”
Mr Hinner added that the company hoped to achieve a “considerably larger” resource than the maiden estimate.
“The one last year focused on our trial mining area so it was a relatively small area but what we were quite happy about was that the JORC resource that we got on the maiden [estimate] essentially corresponded very well with the undiscounted exploration target tonnage,” he said.
Mr Hinner said Freehill anticipated the drilling program to commence in “several weeks”.
“At the moment we’re preparing applications to the Chilean department of mines … we’ll definitely be finishing that drilling program this year,” he said.
The drilling program will also incorporate a diamond drilling component to test for copper mineralisation in two large induced polarisation structures identified in April.
“The development strategy is to get to a point of final investment decision to build a purpose-built magnetite plant and produce concentrates to either sell to a pellet feed down the road or export – that’s a very quick path to revenue generation,” Mr Hinner said.
However, he said if the company can prove it has copper mineralisation in the IP targets, then it will “probably quickly follow-up with another drilling program that specifically targets copper.”