BIG and deep
Hercules Metals (BIG.V) released the results of drill hole HER-25-25 which tested a new MT conductivity anomaly in what the company calls the Southern Flats area. The results were solid: 177 meters of .66% CuEq within 271 meters of .51 CuEq. I’ve waited a few days to write this simply because I wanted to weigh the investment implications of this hit in a very hot copper market.
The Izee Olds Ferry terrane suture copper rush was kicked off by BIG’s blind porphyry hit back in 2023. That hole graded .84% Cu over 185 meters and took BIG’s shares from $0.20 to a brief high of $1.25 and brought in a 23 million dollar strategic investment from Barrick.
Hercules has struggled from that high spot. The Mt. Cuddy ground is challenging to drill and the porphyries (and there seem to be a cluster) are deep. HER-25-25’s pay zone starts at 871 meters down a nearly vertical hole. A little over half a mile underground.
The market greeted the news with a $0.10 pop with two million shares traded in a couple of days. BIG had confirmed that its Izee/Olds Ferry suture was host to significant copper mineralization. It also confirmed that that mineralization was a long way from surface.
Last May I wrote about a very technical news release BIG put out detailing the theoretical work done by a porphyry specialist, Jamie Wilkinson. Wilkinson’s hypothesis was that the copper deposit at Mt. Cuddy was “telescoped” and was similar to the huge Resolution copper deposit in Arizona. Resolution is jointly owned by Rio Tinto and BHP. It grades 1.5% copper and is estimated to contain 1.7-1.9 billion tons of mineralized rock. That rock starts nearly a mile underground.
A very experienced junior resource CEO pal of mine, commenting on the initial BIG discovery, said, “It’s going to take ten years and 100 million dollars to prove up a resource, if there is one there at all".
The boards lite up with armchair mining engineers opining on the possibilities of “block caving” half a mile underground. Er, yes. That’s what two giant mining companies are going to do at Resolution. But note that the grade at Resolution is pretty much 3X the grade at Mt. Cuddy and the companies have spent billions of dollars drilling to prove up the 1.7-1.9 billion tons of mineralized rock. The exploration work at Resolution started in the 1990s and continues to this day. Deep (and expensive) shafts have been sunk. At least two billion dollars have been invested with production several years away.
It is a sobering thought when you are looking at decent, but not spectacular, grades from a couple of holes.
I hold shares in Hercules. Not a huge position and one which I am about even on. The question is whether or not to hang on to those shares. BIG has definitely established that there is copper to be found at the suture of the Izee and Olds Ferry terranes. Good news for BIG, Scout and a number of other companies which rushed to stake claims around the Mt. Cuddy project all the way up the Snake to the Mineral suture and the Bayhorse (BHS.V) suture.
HER-25-25 hit a fault 1100 meters down and Hercules elected to end the hole despite being in increasingly encouraging geology. It is already drilling a step out hole 200 meters to the west. The theory is that the good results from 25-25 suggest that there is a copper porphyry just a little deeper. This theory is supported by the low conductivity disclosed in last year’s MT survey. Staying in the company until the results from HER-26-01 seems the smart thing to do. Hitting the porphyry would likely bring the grades up to, and perhaps beyond, Resolution levels.
But, realistically, like Resolution, that potential porphyry looks to be nearly a mile underground. My CEO pal’s 100 million, ten year estimate is likely wrong by several hundred million dollars. BIG has already raised 77 million dollars.
A major will want to know there actually is a porphyry and have a rough idea of the grade and size of the deposit. Which will require dozens of 1500 meter drill holes in what seems to be difficult ground. It can be done but is Hercules the company which will do it?
Copper is trading very close to its all time high. Even a hint of a deposit on the scale of Resolution will be attractive to a major even at depth. Against that is the sheer cost and time involved in defining such a deposit.
Hercules has begun to establish a solid case for copper porphyries at at least one of the sutures of the Izee and Olds Ferry terranes. Making the economic case for mining those porphyries is a long road. A road which would be shortened by a spectacular result from HER 26-02. So I will stick around for those results.
Barrick walked away from its 23 million dollar investment in Hercules. I’m not ready to walk away from my more modest stake.
(Disclaimer: I hold shares in Hercules Metals which I may sell at any time. This is not investment advice. Do your own due diligence. Call the CEO.)