www.cexr.cl No.

34 / January 2016
Project Masglas
4 Showcase:
Antucoya West 5 acquires Inmet
portfolio 8 Orbit acquires
drilling firm
Captagua
10 Exploration
News

Through the storm

SQM has become leading player in greenfield exploration in Chile

T
he market conditions have been
far from ideal but four years on
since SQM (NYSE: SQM)
launched its initiative to increase
exploration of its huge mining claims in
northern Chile, it is beginning to bear
fruit.
The nitrates, iodine, potash and lithium
producer is Chile’s largest holder of min-
eral claims, controlling around 2M hec-
tares spread across the country’s fore-
most mining districts in Regions I, II and,
to a lesser extent, III.
SQM’s primary interest has been the
overburden of caliche which provides the

raw material for its production of ni-
trates and iodine. But below the first few
meters of caliche, the bedrock has signifi-
cant potential for metallic mineralization,
especially copper and gold. As a matter
of fact, it was SQM who in the late 90s
discovered within its mining property the
Antucoya copper project, which it later
sold to Antofagasta plc (LON: ANTO).
Region II, SQM’s heartland, is also home
to around a fifth of global copper produc-
tion, including giant deposits such as
Codelco’s Chuquicamata and Radomiro
Tomic, BHP Billiton’s (LON: BLT) Spence
and Escondida and Antofagasta plc’s
(LON: ANTO) Centinela district.
SQM´s initiative to increase metallic ex-
ploration is based in two strategies: (1) in
-house geological exploration team to
explore the mining property and (2) met-
Much of SQM’s large portfolio of mining claims is unexplored for metallic mineralization.
“Up to 70,000m of drill-
ing for metal explora-
tion alone could be car-
ried out on SQM prop-
erty next year, up from
40,000m during 2015.”
Daniel Jimenez, SQM
Photo: SQM
al business development team to engage
explorers to invest in metal exploration
in SQM ground. This allows increasing
the chances of making a significant metal
discovery.
Daniel Jimenez, SVP of Exploration, ex-
pects that up to 70,000m of drilling for
metal exploration alone could be carried
out on SQM property next year, up from
40,000m during 2015.
“This is really significant given the state
of the market,” he says.
SQMs in-house geological team are likely
to drill around 30,000m of that, testing
around 16 targets.

© 2015 Chile Explore Report All Rights Reserved

 www.cexr.cl No.34 / January 2016
Feature

Led by former Teck and BLT exploration

manager Ricardo Gonzalez, the team of
eight geologists began operating its own
truck-mounted drill rigs – a Reverse Cir-
culation machine and a Diamond Drilling,
both available to carry on with its explo-
ration program for 2016.
These machines allow SQM to have low
exploration costs, with high utilization
rates due to the amount of targets to be
drilled and allowing them to keep within
a budget of US$5M for 2016. Following
RC drilling, SQM moves onto diamond
drilling to improve understanding of the

Photo: Cochilco
geology below the crust. The team then
decide whether to carry out more ad-
vanced exploration themselves or offer
the property to third parties.
“Gonzalez has brought an important

change to how we are carrying out own
exploration, with new people and new
ideas,” says Jimenez.
As well as drilling targets, SQMs explora-
tion team dedicates significant time in
the field to assessing new prospects in
order to generate new targets. Last year,
SQM identified 25 new targets across its
portfolio.
Since 2012, SQM has been negotiating
and signing option agreements with a
series of companies to explore this
ground, much of which has not been ex-
plored for metallic mineralization in
modern times. The efforts of securing
exploration alliances with third parties, is
being led by PhD Darryl Lindsay, a Cana-
dian geologist with vast experience in
exploration in Chile and South America
as well as the Junior´s industry at the
Toronto Venture Exchange.
Today SQM has agreements in place with
seven firms, ranging from tiny juniors
and private equity firms to some of the
world’s largest mining companies.
SQM is exploring the area itself and forming JVs with third parties.
“AN have been geniuses
in attracting companies
to the land they have
optioned and the num-
ber of meters they will
drill is incredible.”
Daniel Jimenez, SQM
With much of the initial reconnaissance
now completed, the agreements are ex-
pected to trigger a huge increase in
spending in greenfield mineral explora-
tion on SQM property, just as the rest of
the mining industry is reducing explora-
tion budgets in order to cut costs.
The remaining 40,000m of drilling will be
Photo: SQM
carried out by its partners.
These include Capstone Mining (TSX: CS),
which has an option to earn 70% of up to
50,000h in the 350,000h Providencia
property, 50km E of Taltal, centering on
a magnetite-rich IOCG porphyry target,
similar to CSs own Santo Domingo find.
High Power Exploration (private), Robert
Friedland’s advanced geophysics ven-
ture, has an option to explore the Conico
project, in Region II, between Chuquica-
mata and Spence. Funded by Swiss in-
vestment firm Iskandia Capital, HPX
hopes its patented Typhoon technology
can light up any major geological struc-
tures lying between outcrops of
porphyry copper stockwork.
But perhaps SQMs most innovative part-
ner has been Arena Minerals (TSXV: AN)
which, after signing one of the first JV
agreements, has marketed its currently

© 2015 Chile Explore Report All Rights Reserved 2


Feature
Image: Arena Minerals
Junior Arena Minerals has formed JVs with B2 Gold, JOGMEC and Teck.
100,000h Atacama property to a series
of well-funded partners, including B2
Gold (TSX: BTO), the state-owned Japan
Oil, Gas and Mineral Exploration Compa-
ny (JOGMEC), and Teck (TSX: TCK). Be-
tween them the firms have committed to
spending more than US$56M exploring
their respective SQM claims over the
next six years.
“AN have been geniuses in attracting
companies to the land they have op-
tioned and the number of meters they
will drill is incredible,” Jimenez says.
Drilling has already begun on JOGMEC
and TCKs properties following a 1.5km x
1.5km grid.
“If there’s something sizable there we
are going to find it,” AN CEO Will Randall
told CER in October. AN still has 3 pro-
spects (covering 15,000h) available to
option to third parties.
However, in the current stormy climate
for mining, not all of SQMs agreements
have prospered. Endeavour Silver (TSX:
EDR) which was in line to earn up to 75%
of the El Inca property, 250km NE of An-
tofagasta, withdrew from the option in
late 2014, as the firm reacted to the
slump in the silver price.
Australian junior Estrella Resources (ASX:
ESR) negotiated an option to explore the
© 2015 Chile Explore Report All Rights Reserved
www.cexr.cl
“There is a conviction
that the company must
persevere…then it will
just be a question of
time before we have a
really significant
discovery.”
Daniel Jimenez, SQM
256,000h Altair property, including land
adjacent to ANTOs new Antucoya mine,
but ran out of money last year. As a re-
sult, no exploration work has been car-
ried out during the last 12 months. New
management are currently trying to liqui-
date its Chilean subsidiary.
The mining industry’s current troubles
have impacted ongoing interest in SQMs
portfolio. In 2015, three JVs were signed,
down from 5 in 2014. But the latest
agreements are with more financially
solid partners which are more likely to
fulfill on their spending commitments.
No.34 / January 2016
“We have not consciously changed the
type of company we partner but natural-
ly we are now signing more with opera-
tors than traditional juniors” says
Jimenez.
His team are now preparing an updated
property portfolio to offer potential part-
ners when they visit the PDAC Annual
Convention in Toronto next March. This
is expected to contain around 120 tar-
gets, up from 90 available a year earlier.
SQM also plans to put the information
online so as many as potential partners
as possible can see it.
According to Jimenez, SQMs attraction is
not only access to property with signifi-
cant geological potential which has not
been explored for metallic minerals in
decades but also a huge range of target-
types that could interest every size of
company and every geological speciality.
The sharp increase in spending on miner-
al exploration on SQM ground comes
after one of the most difficult years in
the firm’s history. Both long-time CEO
Patricio Contesse and Chairman Julio
Ponce left during 2015 amid an investiga-
tion into irregular funding of political
candidates. Contesse, the only executive
responsible for the payments, according
to SQM, remains under house arrest.
The company is also locked in an arbitra-
tion process with economic development
agency CORFO which could see it lose
access to the Salar de Atacama.
Ponce has now put his stake up for sale
which trigger a change in control of the
firm; so far, only CITIC CLSA Capital Mar-
kets Limited, one of China’s largest in-
vestment banks, has officially expressed
interest.
These developments initially caused ap-
prehension among potential partners,
but this has largely subsided, says
Jimenez. And SQMs new leadership re-
mains just as committed to exploiting its
potential in metallic minerals.
While other companies have slashed
spending on exploration, Jimenez says
his team always has managed to secure
its proposed budgets.
“There is a conviction that the company
must persevere…then it will just be a
question of time before we have a really
significant discovery.”
CER
3
 www.cexr.cl No.34 / January 2016
Project Showcase
Available Exploration Alliance Area: Antucoya West
Greenfields exploration within a brownfields district
The Antucoya West porphyry and adjacent prospects including This area and additional mineral concession in the district
Colupo, Dania and Ivannia, lie within an intrusive complex of are available for option under an exploration and joint venture
granodioritic to tonalitic porphyries and dacite dikes that are agreement.
emplaced within andesitic volcanic rocks of the Jurassic La
Negra Formation. Post mineralization gravels, partly cemented
by nitrates, regolith and gypcrete cover most of the prospect
areas. Copper mineralization is present as fracture fillings in
structures containing tourmaline veins and breccia. Oxide cop-
per minerals observed are atacamite, brochantite, chrysocolla,
and cuprite. Copper sulphides are also present (chalcopyrite
and chalcocite).

Scout drilling of 47 RC holes totaling 4381 metres; additional

data includes regional aeromag, surface sampling, approxi-
mately 20 line-km of Gradient IP, relict sulphide studies and
petrology. A second round of drilling on the Colupo area to-
taled 3509m in 9 RC holes. Results include:
HOLE ID FROM TO SAMPLE ID CuT_% CuS_%

ARCO-02 45 46 13153 4.56 3.42

ARCO-02 52 53 13160 4.94 3.37

ARCO-02 53 54 13161 4.56 2.82

ARCO-03 2 3 13202 3.32 3.01

ARCO-04 17 18 13278 3.59 2.89

ARCO-04 59 60 13322 3.65 1.17

ARCO-07 82 83 12930 3.23 3.13

ARCO-09 32 33 14938 5.84 4.91

Contact: metal-business@sqm.com
ARCO-10 31 32 28996 7.75 3.73 Daniel Jimenez Darryl D. Lindsay, PhD, Tomas Esguep
Senior VP of PGeo Metal Business
ARCO-10 32 33 28998 3.69 3.28 Exploration Manager Metal Development Engineer
daniel.jimenez@sqm.com Business Development tomas.esguep@sqm.com
ARCO-11 14 15 29085 3.00 2.94 +56998223038 darryl.lindsay@sqm.com +56966373482
+56966488511
ARCO-11 56 57 29129 3.57 3.22

© 2015 Chile Explore Report All Rights Reserved 4

 www.cexr.cl No.34 / January 2016
Feature

A buyer’s market
Industry crisis creating opportunities for newcomers

A
s mining companies rush to cut
costs and deleverage straining
balance sheets, they could be
throwing the baby out with the
bathwater. That is the hope of a new
breed of investors in mining who are
picking up assets at bargain prices which
were not even up for sale at the peak of
the commodity boom.
Last year, Audley Capital acquired the
Mantos Blancos and Mantoverde copper
mines in Region III from Anglo American
(LON: AAL) for an initial US$300M. Their
bet is that they can squeeze more value
and lower costs from the aging opera-
tions than a behemoth like AAL – they
should have the right man in charge: as
AALs head of copper from 2009 to 2013,
John MacKenzie will know where the
treasure is buried. Auryn Mining has options and claims covering 10,000h at the Altos de Lipangue project.
Barrick Gold (TSX: ABX) recently sold its
70% stake in the Spring Valley project cyclically to everything that is happening
and the Ruby Hill mine to Waterton Pre- “We are acting comple- in the world,” says Masglas executive
vious Metals Fund II Cayman LP for chairman Maurizio Cordova.
US$110M. Another deal with Kinross tely counter-cyclically to Buying in the down-cycle has not only
Gold (TSX: K) should close in the coming allowed Masglas to acquire assets cheap-
weeks as ABX strives to cut its debts by
everything that is hap- er but also to benefit from lower drilling
US$3B. pening in the world.” and personnel costs compared to just a
But smaller deals involving less advanced few years ago.
projects are also underway. Late last year Maurizio Cordova, In total, the projects (Platon, Mali, Posei-
Masglas Americas Corporation, a private
firm backed by Peruvian capital, acquired
Masglas Americas don, Aguilucho, Condor, San Jose, Fortu-
na, Deseo-Maite-Aquiles, and Llano) cov-
nine exploration properties in Region III er 30,000h, largely located near oper-
and VI from First Quantum Minerals selling assets to reduce debt. ating mines or significant projects in
(NYSE: FQM) for an undisclosed sum. The nine projects are either too small or some of Chile’s top mining districts.
FQM picked up the portfolio when it ac- not sufficiently advanced to interest “It’s no mean feat to access so many con-
quired Inmet Mining in 2013 for US$5B, FQM. But they could offer opportunities solidated properties in important dis-
largely for the giant Cobre Panama pro- to patient capital prepared to wait for tricts,” says Cordova.
ject, now in construction. With copper the promised recovery. Critically given the current environment
prices now at seven year lows, the firm is “We are acting completely counter- for metals prices, the projects are largely

© 2015 Chile Explore Report All Rights Reserved 5


Feature
located in Chile’s coastal range, closer to
critical infrastructure and with potentially
much lower capital costs than mines built
high up in the Andes.
“There is a total disconnect between pro-
jects that work now and projects which
require much higher prices – the latter
are going to disappear,” Cordova pre-
dicts.
San Jose is typical. The 3,300h property
near Vallenar in Region III has strong po-
tential for an IOCG-type deposit and is
well-placed between CAP’s (SSEV: CAP)
Los Colorados iron ore mine and Antofa-
gasta plc’s (LON: ANTO) Astillas projects.
Inmet has already carried out 215km lin-
eal of ground magnetics, 53.7km lineal of
dipole IP geophysics and drilled 2,700m.
“All together, quite an interesting pro-
ject,” says Cordova. Masglas now plans
to send its geologists to carry out prelimi-
nary field assessments over the coming
© 2015 Chile Explore Report All Rights Reserved
www.cexr.cl
weeks with the aim of determining po-
tential drill targets for 2016.
The team also has to work through an
immense quantity of data for the portfo-
lio. Cordova estimates that Inmet and
predecessors invested in excess of
US$15M exploring the projects, or sever-
al times the amount he agreed to pay for
them.
The Inmet portfolio is not the only pro-
“People are letting go of
some really excellent
opportunities.”
Maurizio Cordova,
Masglas America
No.34 / January 2016
ject on Masglas’s books. Working
through 100%-owned subsidiary Auryn
Mining Chile, the group is also assessing
the mineral potential of the Altos de Li-
pangue property in the Metropolitan Re-
gion.
Auryn already holds an option over
4,000h owned by Medinah Minerals, an-
other for 2,400h through LDM Nuoco and
a third for 600h with a related entity.
Through the options and the acquisition
of another 4,000h by Auryn, Cordova and
his team have managed to consolidate
ownership of the whole property.
Although drilled only sporadically over
the past 15 years – due to the divided
ownership and disputes between part-
ners – Auryn believes the project has the
potential for a significant mineral discov-
ery, with low capital costs given its prox-
imity to Santiago.
Led by principal geologist Luciano Bo-
canegra (ex-Hochschild Minerals), the
firm is assessing a series of opportunities
across the property, including high-grade
epithermal gold veins, signs of a strata-
bound copper deposit and, further down
the hill, tourmaline breccia.
Bocanegra is leading the assessment of
the Fortuna/Merlin sites at the center of
the property, which includes the Fortuna
de Lipangue mine that produced gold-
copper concentrates during 1950s-1970s
from ore grading up to @ 20g/t Au.
Through mapping, trenching and system-
atic sampling, Auryn has extended
6

Feature
Pegaso Negro, Altos de Lipangue
around 400m of known veins to over
5km. The focus is now on checking the
continuity of these veins and the exist-
ence of blind veins through geophysics.
Auryn recently acquired an adjacent
property linked to a mining permit which
could allow them to begin small-scale
operation if sufficient ore is identified.
Another priority is the Pegaso Negro site
which contains significant evidence of a
© 2015 Chile Explore Report All Rights Reserved
www.cexr.cl
“There is disseminated
mineralization all over
and we continue to
find more – We could
be begin talk about a
porphyry system.”
Luciano Bocanegra,
Auryn Mining Chile
porphyry copper mineralization, includ-
ing a tourmaline breccia and disseminat-
ed chalcopyrite.
Samples from an intrusive breccia at the
site graded @ 0.4% Cu & 0.3g/t Au.
“There is disseminated mineralization all
over and we continue to find more – We
could be begin talk about a porphyry sys-
tem,” Bocanegra explained.
Exploration is being overseen by consult-
No.34 / January 2016
High grade veins in the Caren mine
ant geologist Aquiles Alegria (previously
with ANTO), who recently sent rhenium-
bearing molibdenite at the site for chemi-
cal dating at a laboratory in Canada. If
the molybdenite proves younger than
other mineralization, as Alegria suspects,
it could have important implications for
the potential size of any deposit uncov-
ered.
Finally, work is continuing to identify
mineralization at the Dos Marias site.
Previous work concentrated on near-
surface veins but geologists now believe
they are in the presence of a stratabound
-type copper deposit similar to others in
Central Chile’s coastal range.
“Dos Marias has exactly the same miner-
alization as Lo Aguirre but development
has been blocked for all this time by the
ownership,” Bocanegra says.
Although the Masglas group already has
a significant work ahead of it during
2016, Cordova says their ambition is not
sated. With dozens of small and medium-
sized mines under threat of closure from
the drop in metals prices, the team is
looking for operations which could bene-
fit from an injection or a new strategy.
“People are letting go of some really ex-
cellent opportunities,” he notes.
CER
7
 www.cexr.cl No.34 / January 2016
Drilling News

Orbit captures Captagua

O
rbit Garant Drilling Inc (TSX: A provider of services to some of Chile’s OGDs strengths in underground drilling
OGD) has acquired local drill- largest mining companies for more than and computerized monitoring and con-
ing firm Captuagua Ingeniería half a century, Captagua has 17 drill rigs trol technology.
in the biggest deal in Chile’s and around 180 employees and generat- “We are creating a strong, comprehen-
drilling sector since the start of the ed revenues of CLP9-13B (C$17-25M) sive drilling services offering for the Chil-
downturn in the industry. over the last three years. ean and South American markets,” not-
OGD, one of the largest drilling compa- As well as general surface drilling, Cap- ed Alexandre.
nies in Canada, will issue 1.825M shares tagua specializes in drilling water wells, OGD, which has 226 drill rigs and 880
to Captagua’s owners NALAC S.A. and and supplying specialized piping and employees in Canada, Chile, Mexico and
Inmobiliaria y Constructora Lo Bar- equipment for pumping, operating and West Africa, has been present in Chile
nechea S.A., worth approximately maintaining water wells. This range of since 2014 when it secured its first drill-
CLP1.077B (approximately C$2.1M). It capabilities offers a good complement to ing contract in the country.
will also assume Captagua’s net debt of
approximately CLP1.094B. The purchase
will be adjusted to reflect any cash re-
ceived by Captagua after closing from
specific invoices, valued at approximate-
ly CLP330M.
OGD plans to move its own base of oper-
ations and staff in Chile into Captagua’s
headquarters in Santiago once the deal
is completed with Captagua senior man-
agement and employees remaining in
place to maintain continuity of opera-
tions and preserve key customer rela-
tionships.

“We are creating a

strong, comprehensive
drilling services offering
for the Chilean and
South American mar-
kets.”
Eric Alexandre, Orbit
Garante
The all share deal comes at a substantial
discount to Captagua’s book value – giv-
en total assets worth more than CLP7.9B
and book equity of over CLP3.8B – re-
flecting the hard times in Chile’s drilling
industry as spending on mineral explora-
tion has dried up.
However, OGD is looking ahead to a re-
covery in the mining industry towards
the end of the decade. CEO Eric Alexan-
dre said the combined business would
form a platform to increase its presence
in Chile and throughout South America.

© 2015 Chile Explore Report All Rights Reserved 8

 www.cexr.cl No.34 / January 2016
Interview

Searching for the Northern Lights

PDAC meets again, seeking optimism

T
hese are grim times for mineral
exploration. Commodity prices
are down, mining companies are
slashing jobs and investment and
the hopes of a swift recovery have largely
faded.
Spending on mineral exploration is ex-
pected to have fallen 20% during 2015,
matching sharp falls the previous two
years. Many juniors have gone bust or
are struggling to survive.
Despite the gloom, thousands will still
flock next March to the Metro Conven-
tion Center in Toronto’s financial district
for the Annual Convention of Canada’s
Prospectors and Developers Association,
the world’s largest mining event.
Attendance at the convention inevitably
fluctuates with metals prices, the main
determinant for spending on mineral
exploration. With prices of many com-
modities at their lowest point since the More than 20,000 visitors are expected to attend the 2016 PDAC Convention in March.
global financial crisis erupted in 2008, Thanks to mining, Canada is a major in-
visitor numbers are likely to be down “If you have good vestor in the region. In recent years, in-
from the peaks of almost 30,000 seen in vestment has gone the other way. Nickel
2012. But still PDAC president Rod Thom- management and producer Inco is now part of Brazilian
as is confident that this year’s event will mining giant Vale. In his day job, Thomas
match the 23,500 who attended in 2015. projects and a history of is general manager of Votorantim Metals
For many PDAC is a chance to catch up
with colleagues in an industry where a
doing of good work, in Canada.
This year, Chile, Ecuador and Peru will be
change of job frequently means relo- there are opportunities Mining Country Sponsors of the conven-
cating to the other side of the world. tion, with dedicated seminars and con-
for financing.” ferences to highlight their geological po-
PDAC president Rod tential to investors.
While many attending the PDAC this year
Thomas will be looking for commiseration amidst
the gloom, there is still long term opti-
mism about the future, especially in met-
the premier networking place…if you can als facing looming supply gaps like cop-
only attend one conference in 2016, this per.
is the one not to be missed,” Thomas “If you have very good management and
told CER recently. projects and a history of doing of good
Far from being a Canadian affair, PDAC is work, there are opportunities for financ-
one of the world’s most international ing,” says Thomas.
mining events. Last year, the convention The event is certain to attract investors
drew visitors from 116 countries. hungry for the chance to pick up assets
South America is of course an important at a fraction of the price they were
player at the convention, reflecting the offered just a few years ago.
global importance of its mining industry. “There are some bargains out there to be
Last year, four South American countries had,” he notes.
(Argentina, Brazil, Chile and Peru) were And if they are out there, they will proba-
“It’s among the ten largest delegations at the bly be at PDAC.
PDAC president Rod Thomas convention by number of visitors. CER
© 2015 Chile Explore Report All Rights Reserved 9