Centenera Mining, Forward Progress in a Bad Market

posted in: Argentina, Copper, Gold | 0

{Please see disclosures at bottom of page}

Centenera Mining Corp. (TSXV: CT, OTCQB: CTMIFhas accomplished a fair amount in the past few months, but the market doesn’t seem to care (not even a little bit!).  Notably, most juniors are sitting on their hands waiting for better market sentiment and the renewed availability of exploration funding.   

However, there has been big news for Centenera; it has entered into an agreement with Yamana Gold (C$2.7 billion market cap) whereby Yamana has been granted an option to acquire an initial 70% interest in the Company’s Organullo gold project in Salta province, in northwestern Argentina.  

Centenera’s 100%-owned Organullo is a decent gold project, and it’s not even Centenera’s flagship asset.  Make no mistake, the project has the potential to host a large, bulk-tonnage gold deposit.  However, significant drilling will be required to fully investigate that potential.  Under the terms of the agreement, all property expenditures will be funded by Yamana, (Centenera will be free-carried during the entire option period).  

Organullo is a relatively advanced exploration projecexplored in the past by several companies, including Triton Mining Corp., Northern Orion Explorations Ltd., Newmont Mining & Cardero Resource.  The project has 43 historical drill holes totalling 8,174 m of diamond & reverse circulation drilling.  A report from June, 2012, resulted in potential (conceptional) exploration target tonnages & grades. 

To earn 70% of Organullo, Yamana must spend at least US$5 M on exploration, plus pay Centenera a total of US$1.25 M in cash (over several years).  Centenera is free carried all the way through a Preliminary Feasibility Study (“PFS”).  That PFS must contain a minimum combined 1 M Gold Eq. ounces in the Measured & Indicated (M&I) categories.  In my opinion, it’s not likely that Yamana is in this for just a million ounces.  I imagine that a company the size of Yamana must see the potential for multiple-million Au Eq. ounces.  Further, Yamana already has producing mines in Chile & Argentina. 

Yamana also has a top-up right to acquire an additional 5% (to a 75% Interest) by making a cash payment = to US$3 per Au Eq. ounce of M&I in the PFS.  So, if a PFS were to contain 1.0 M Au Eq. M&I ounces, Yamana could elect to increase its interest from 70% to 75% for an additional payment of [US$ 3 x 1.0 M = US$ 3.0 M].  

That would imply a future project valuation of US$ 60 M, 25% owned by Centenera Mining.  25% of US$ 60 M = ~US$ 15M = ~C$20 M.  Discounting back that ~C$20 M at 15% for five years nets out to ~C$10 M for Centenera’s 25% stake.  To reiterate, that discounted ~C$10 M assumes the minimum 1.0 M Au Eq. M&I ounce threshold for a qualifying PFS. 

If Centenera were to be diluted to under 10%, they would retain a 2% NSR, of which 1% could be repurchased for US$5 M.  Of course, this is all meaningless if Yamana does not find enough gold to justify continuing to explore.  However, with Centenera’s market cap roughly C$ 3M, there’s some interesting optionality at play.  

In other largely ignored news, in September, Centenera signed a binding letter agreement granting it the right to acquire up to a 100% interest in 6 precious metals properties from Tres Cerros Exploraciones S.R.L.  The Properties are all located within the highly prospective Deseado Massif in Santa Cruz Province, Argentina, and together comprise ~32,900 hectares.

This acquisition gives Centenera a meaningful foothold in this important mining & exploration district,” stated Keith Henderson, Centenera’s President & CEO.  “This package of properties was carefully targeted by Tres Cerros.  Tres Cerros is an Argentinean company founded by a group of exploration geologists with extensive experience in the Deseado Massif and who have been involved in several discoveries over the last few years including Cerro Moro, Mina Martha, Joaquin & Virginia deposits.  Tres Cerros’ geologists have been featured various times on the front cover of The Northern Miner for making gold & silver discoveries in this mining district.

CEO. Henderson continued, “For precious metals it is possibly the highest-ranked exploration destination in South America and, with a relatively short history of mineral exploration, the discovery potential is expected to be extremely high.  Senior mining companies such as AngloGold Ashanti Ltd, Panamerican Silver, Yamana Gold and Goldcorp are exploring in the region.

That’s two important press releases, correct me if I’m wrong, but not just news, but good news…. yet the share price sits at a 52-week low.  It’s tax-loss selling season so there are hundreds of small cap junior miners trading at or near 52-week lows, but how many of those have reported recent good news?  But wait, there’s more.  We haven’t even come to the flagship project.

The crown jewel asset and primary focus of Centenera is the 100% controlled, near-surface Esperanza copper-gold project — (formerly known as the Huachi project) — an outcropping Cu–Au porphyry system with a blockbuster discovery that included a drill hole intersection of 353 meters grading 0.49% Cu Eq., (incl. 243 m at 0.57% Cu Eq. & 88 m at 0.69% Cu Eq.).  Mineralization started at surface, is shallow and is open in all directions and at depth.  {Even better results are listed below}

Esperanza is in San Juan province in northwestern Argentina, sitting at an elevation of between 2,800 and 3,250 meters, relatively low compared to work being done in the high Andes.  The project is 35 km from existing power lines.  Proximity to key infrastructure is absolutely critical for mining bulk tonnage porphyry deposits.   

The above listed assets (Organullo and the 6 newly secured precious metals targets) are arguably worth more than Centenera’s entire market cap, which again sits at about C$3 M.  Yet, Esperanza alone is potentially worth a multiple of that market cap.

For more information on the Esperanza project, please check out these 2 articles I wrote about Centenera Mining Corp(TSXV: CT, OTCQB: CTMIF) earlier this year. Here’s a teaser on what readers will find…. This was the Company’s May 8th drill result at Esperanza.  These strong grades and wide intervals start at surface. 

Article #1

Article #2

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER](together, [ER]) about Centenera Miningincluding but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Centenera Mining are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this interview was posted, Peter Epstein owned shares in Centenera Mining and the Company was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.