Gold Fields (NYSE: GFI; JSE: GFI) may invest $48 million to advance Torq Resources’ (TSXV: TORQ) early-stage Santa Cecilia copper-gold project in Chile, according to a preliminary joint venture agreement.
Gold Fields, which has 15.5% of Torq, would spend the amount over six years to acquire three-quarters of the 32.5-sq.-km project in the Maricunga belt, the companies said on Thursday. The deal is expected to close with Torq shareholder approval in November, they said.
“We believe this option with Gold Fields is the best way to advance the project for Torq in the current market conditions,” Torq chairman and CEO Shawn Wallace said in a release. “The proposed option terms and intended exploration program schedule will see significant new investment in the project in a timely manner.”
The potential deal shows another example of gold majors expanding exposure to copper for its energy transition demand.
Gold Fields also holds 18% in Chakana Copper (TSXV: PERU), which is advancing the gold-copper-silver Soledad project in Peru. Barrick Gold (TSX: ABX; NYSE: GOLD) is developing the giant Reko Diq in Pakistan while pledging to enter the “premier league” of copper producers. Newmont (NYSE: NEM; TSX: NGT) bought Newcrest last for its gold and copper assets in one of the largest deals in recent years.
Gold Fields also has the Salares Norte mine in Chile, where it’s ramping up production after first gold in April. The company is the seventh-largest gold producer with 2.4 million gold-equivalent oz. produced last year. It operates other mines in South Africa, Ghana, Peru and Australia. South Africa’s $164 billion state pension fund, the Public Investment Corporation, increased its stake to 20% last month.
The Torq-Gold Fields proposal for Santa Cecilia includes two stages. The first could see Gold Fields acquire 51% of Santa Cecilia after spending $18 million on exploration and other expenses within 30 months from closing. A $6 million investment would garner a 10% stake. Torq could buy back the 10% for the same amount if Gold Fields wanted to leave.
The second stage is for a further 24% in the project for $30 million over 42 months. If one company’s share is diluted to less than 10%, its ownership interest in the joint venture is to be converted into a 2% net smelter royalty capped at $20 million, the companies said.
Santa Cecilia, located about 100 km east of the city of Copiapo, is beside the Norte Abierto project owned by Barrick and Newmont. Its two deposits, Caspiche and Cerro Casale, contain a measured and indicated resource totalling around 44 million oz. of gold and 11 billion lb. of copper, making it the world’s fourth-largest undeveloped gold project.
In May, Torq reported drilling at Santa Cecilia cut 120 metres grading 1.33 grams gold per tonne and 0.1% copper from 376 metres depth in hole 24SC-DDH-005. It included a quartz vein returning 2 metres at 47.9 grams gold from 414 metres downhole.
Torq also holds the early-stage Margarita iron oxide-copper-gold project about 65 km north of Copiapo. Drilling at the Falla 13 target there in 2022 cut 90 metres grading 0.94% copper and 0.84 grams gold and a separate 98 metres of 0.94 grams gold and 0.68% copper. Last year, crews found a parallel mineralized structure 200 metres west of Falla 13 intersecting 42 metres at 1.1 grams gold and 0.48% copper.
“The option agreement best positions the company and its shareholders to capitalize on both the Santa Cecilia project with a major partner as well as focus on the highly prospective Margarita project where there is encouraging copper and gold grades from surface and excellent access to infrastructure,” Wallace said. “The Margarita project offers near term, expansive discovery potential that is both near surface and in a favorable location.”
Shares in Torq Resources were flat on Thursday at C$0.09 apiece in Toronto, valuing the company at C$12.4 million. They’ve traded in a 52-week range of C$0.08 to C$0.54.
