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Copper and Gold Stocks

Written By Brian Hicks

Posted May 6, 2008

Many investors are surprised to learn that large copper mines often recover considerable amounts of gold and other metals as a byproduct of operations. This gold often generates hundreds of thousands of dollars per day in gross cash-flow for public copper production companies, making them copper and gold mining stocks.

Prominent examples of these large copper/gold mines include the Bingham Canyon mine in Utah. Bingham Canyon is owned by Rio Tinto (NYSE: RTP, LSE: RIO, ASX: RIO) through Kennecott Utah Copper and contains roughly 7.5 million ounces of gold, producing over 500,000 ounces per year.

The world’s largest copper and gold mine in terms of recoverable reserves is Freeport McMoRan’s (NYSE: FCX) massive Grasberg mining complex in Indonesia. The Grasberg mining complex is estimated to contain over 48 million ounces of gold and has produced up to nearly 25,000 ounces of gold per day! At $1,000 per ounce, that’s $25 million gross per day! And that’s just from the mine’s gold credits!

It’s no surprise that these types of mines have proved to be amazing profitable to the companies who own and operate them. So when we see extra-ordinary copper and gold drill assay results, we pay attention.

The Chliean Copper and Gold Stocks You Need To Know About

About a year ago we began to closely follow the exploration efforts at Exeter Resource’s (AMEX: XRA, TSX-V: XRC) Caspiche copper/gold project, located in the prolific Maricunga Belt of Chile.

Exeter’s 100% earn-in Caspiche property is situated 10 kilometers north of the joint-owned Barrick Gold (NYSE: ABX, TSX: ABX)/Kinross Gold (NYSE: KGC, TSX: K) Cerro Casale deposit, which contains about 5.4 million ounces of gold. The property is also 15 kilometers due south of the Kinross’ Refugio mine, which contains 22.9 million ounces of gold and 5,800 million pounds of copper.

In May 2007, Exeter Resources reported an impressive drill assay intersection from the Caspiche property that really caught our attention. It graded 0.9 g/t gold and and 0.25% copper over a nice wide 304 meters from a down hole depth of only 40 meters.

More recently—March 28th to be exact—the company reported even better drill results from the project. Diamond drill hole CSD-015 returned 632.1 meters grading 0.70 g/t gold and 0.28% copper from a down hole depth of 58 meters.

And now, we’re pleased to see that the company has recovered the best copper/gold bearing intersection to date from the Caspiche project.

Last Wednesday, Exeter Resources reported that diamond drill hole CSD-016 intersected a full 718.75 meters grading 1.0 g/t gold and 0.38% copper.

Take it from us, CSD-016 is a pretty impressive drill hole. In fact, in order for you can really appreciate how significant the latest drill result is, let us attempt to assign a value to it.

At current prices of US$872 an ounce, the value of gold in a one tonne block of ore grading 1.0 g/t would be worth US$28.04. Putting in the copper credits—with current prices at US$3.87 per pound—adds another US$32.42 into that same tonne, for a total value of US$60.42 per tonne.

In other words, the current value of metal contained in one tonne of ore that graded 1.0 g/t gold and 0.38% copper is US$60.42.

Comparatively, the value of the metal contained in diamond drill hole CSD-015 is US$40.93, at current spot prices. Additionally, it’s important to remember that CSD-016 is almost 100 meters longer than CSD-015 at over 700 meters.

A Simplified Way to Compare Drill Results 

When comparing drill holes, we often simply multiply the width of the mineralized intersections to the value of metals in a tonne of ore to come up with a so-called working comparative value.

For example, the ore found in hole CSD-016 is worth US$60.42 per tonne. Multiply that by the intersection width of 718.75 meters, and you come up with 43,426.875.

This number does not represent a monetary value. Rather we use this number for comparative reasons only.

Now let’s compare hole CSD-016’s working comparative value to the working comparitive value of hole CSD-015.

As we just mentioned the value of the metal contained in CSD-015 is US$40.93 per tonne. Multiply that by the intersection width of 632.1 meters, and you come up with a working comparative value of 25,871.853, which is significantly lower than hole CSD-016’s working comparative value. This would suggest that hole CSD-016 is a better, more highly-valued drill intersection.

The extent of the orebody and consistency of mineralization will be defined by further drilling. Nonetheless, these drill holes appear to be the beginning of a very significant mine complex.

Exeter’s target at Caspiche is a dual target analogous to that at Cerro Casale. This would include a near surface copper/gold potential heap leachable orebody underlain by porphyry gold-copper orebody expected to require conventional flotation to separate a gold-copper concentrate.

We will continue to follow the progress of Exeter’s Caspiche project in future issues of Gold World.

Good Investing,

Gold World Staff