Encounter Resources (ENR)ENCOUNTER Resources has been one of the...

Encounter Resources (ENR)

ENCOUNTER Resources has been one of the few exploration juniors not hit by the mass exit of support for the sector's junior players. It was headed that way as its slump to 16c a share on April 16 indicated, notwithstanding enthusiasm for its 2013 field season at its Yeneena copper project in Western Australia's Paterson province.

However, Encounter has since bounced to 25c, for a $30m market cap, because that enthusiasm rubbed off on to the Luksic family's London-listed Chilean copper producer, Antofagasta Minerals.

One of the world's biggest copper producers, Antofagasta has signed a farm-in agreement under which it could earn a 51 per cent interest in the most advanced prospects at Yeneena in return for spending $US20m over five years.

It is kind of funny that one of Chile's biggest copper producers is now looking for more of the red metal in Australia's outback while our own BHP is now pretty much restricting its copper hunt to the Andean copper belt in Antofagasta's backyard.

Anyway, Antofagasta is cementing its Yeneena deal by taking up a $2m placement of shares at 21c each in Encounter, giving it a 7.5 per cent stake in the Perth-based explorer.

That will rank it behind the Melbourne boutique investment fund, Eye Investment, which held 9.9 per cent of Encounter before the placement to Antofagasta.

Both are banking on the potential for Yeneena to yield a big-tonnage Zambian-style copper system beneath the 5m-20m of sand covering the region that previous explorers could not "see through" like modern day explorers with their whizz-bang bits of remote sensing tools.

Encounter has been at it for four years and has generated a lot of smoke with its BM1 and BM7 copper discoveries at Yeneena. The 2013 field season is all about confirming the big-time potential suggested by smoke.

This year's program has just kicked off and first results will be to hand in the next month or so. The joint venture covers only 40 per cent of Encounter's ground at Yeneena.

The remaining 60 per cent stays wholly owned with Encounter, and now that funding issues are behind the company it can be expected that the

early-stage potential of the northern areas in particular will get a tickle up.

There is optionality for Antofagasta in the Yeneena hunt in that it must spend $US3m, with expenditure in the remaining years optional.

Having said that, should Yeneena shape up as hoped, the all-up $20m earn-in will be reached in a flash.

http://www.theaustralian.com.au/business/opinion/elenas-spirit-stalks-flinders/story-fnciil7d-1226631799343