Ann: Diamond Drill Results and DHEM Update, page-39

ASX: CCZ has reported massive sulphide intersections at their Cangai copper project with mineralisation of up to 45% chalcopyrite


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Castillo Copper Limited (ASX:CCZ)
Further high grade, massive suphide intersected at Cangai

Castillo Copper Limited has provided an update on its recently completed drill program at the Cangai copper project in NSW. Highlights of the announcement include the following.

*   Stage 2 diamond drill program completed – all holes intersected mineralisation.
*   High-grade intersection recorded at hole CC0036D – mineralisation of up to 45% chalcopyrite and 15% sphalerite (assays pending).
*   Down-hole electromagnetic (DHEM) survey results finalised, with several new and sizeable massive sulphide target conductors identified.
*   Those new targets highlight the potential scalability of the ore body at the Cangai copper mine and provide fresh targets to be optimised over the balance of the Phase II campaign.
*   The company is close to providing an update on metallurgical testwork currently being undertaken on stockpile ore in connection with the Noble Group MOU.

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Analyst comments:  another positive announcement from Castillo. The company clearly has an strong understanding of the geology at the project, highlighted by the fact that every drill hole intersected mineralisation. Moreover, the intersecting of new high-grade, massive sulphide mineralisation (CC0036D – 1.2 metres at 45% chalcopyrite and 15% sphalerite – assays pending) indicates significant high-grade potential at the project.

While the recently completed 36-hole diamond drill program is likely to result in a resource upgrade in the New Year, we believe the long-term potential for Castillo will arise from the discover of new lodes. The company has achieved good results in this regard with DHEM, a technique that has proved successful to date, most notably at Volkhardt's conductor 1 (intersect 11 metres at 5.94% Cu, 2.45% Zn and 19.1 g/t Ag).

Now, with seven current lodes identified, all no deeper than about 150 metres from surface, and four new targets below these defined lodes, we maintain our belief that the most likely scenario involves new high-grade discoveries arising from deeper drilling, which to date has been limited. We look forward to these targets being tested when drilling recommences in 2019.

Catalysts: despite the year drawing quickly to a close, Castillo still has a number of announcements pending. These include the following.

*   Assay results from hole CC0036D – given that it contained 45% chalcopyrite, these results are likely to be at a grade higher than previously reported at Cangai.
*   Noble Group MOU – further metallurgical test work is being undertaken on stockpile ore in connection with the MOU (these stockpiles have the potential to provide early cash flow for the company).
*   Resource upgrade – following the recently completed drill program, a resource upgrade is likely in the new year.

We maintain our assessment of Castillo as a SPECULATIVE BUY.