Solaris Resources (TSX:SLS) Could be at Centre of Mining Industry M&A Frenzy

Mining Industry

Acquiring new projects and discoveries can make the mining industry exciting, but it is also an important and crucial aspect of the business that continues to make it successful. Major mining companies are always on the lookout for new and upcoming projects to potentially acquire in order to increase production. This allows the industry to continuously flow and change, and allows miners to invest in new resources to be able to grow and replenish production levels.

One rapidly progressing project in southeastern Ecuador is the Warintza Project, being advanced by Solaris Resources (TSX:SLS; OTCQB: SLSSF). On January 18, 2022, the company announced its fourth major copper discovery at its Warintza Project through maiden drilling at the Warintza South target, one of five targets of outcropping copper porphyries within a 7km x 5km porphyry cluster. This was the first hole ever drilled at Warintza South and it returned a long interval of well-mineralized copper porphyry. The drill core and recent mapping and sampling have given the company important vectors for follow-up drilling once additional access and infrastructure are established. Discovery highlights include:

  • SLSS-01 was the first hole ever drilled at Warintza South, which is an entirely separate porphyry deposit, located approximately 3kms south of the Warintza Central zone that has been the focus of the Company’s resource expansion drilling efforts to date
  • SLSS-01 was drilled vertically and returned 606m of 0.41% CuEq¹ of continuous porphyry copper mineralization from near surface, within a broader interval of 755m of 0.36% CuEq¹, marking a significant new discovery on the Project
  • Warintza South is reflected by a high conductivity anomaly over twice the size of Warintza Central, illustrating the very broad proportions of this newly discovered porphyry system, with approximate dimensions of 2.5km x 2.0km x 0.7km
  • SLSS-01 targeted an exposure of leached capping within this anomaly; an ongoing program of detailed sampling, including an additional 265 soil samples and 131 rock samples, significantly expanded the geochemical anomaly and shifted its core to the northeast (Figure 1)
  • Follow-up drilling targeting the interpreted core of the porphyry system is set to commence after additional drill platforms are prepared based on this recent mapping and sampling work refining the target and a dedicated exploration camp is set up to support a ramp-up in activities
  • Warintza South marks the fourth major copper discovery within the 7km x 5km Warintza porphyry cluster, with the adjacent Yawi and Caya targets still to be tested, as well as other recently generated targets within the broader land package to be revealed in a forthcoming update

The Warintza property is adjacent to a national highway that connects it to Pacific ports, is supplied by clean and inexpensive hydroelectric power, and lies at low elevation with an abundant supply of freshwater, as well as having access to low-cost labour. All of which are primary drivers of billions of dollars of capital cost savings.

The grade, scale, and setting is what makes Warintza special as the project benefits from excellent infrastructure and is situated in one of the only mining jurisdictions globally that has been cutting taxes and royalties, streamlining permitting, and generally making the environment more attractive to global mining investment. This property could be a hot commodity for many of the major mining companies in the copper sector in the potentially near future.

Resource Estimate Excitement Driving the Stock

Over the last year, drilling At Warintza has been aimed at expanding the size and increasing the confidence in the mineral resource at the Warintza Central deposit. Drilling has consistently intercepted long intervals of high-grade copper mineralization, with assays returning up to 1% copper-equivalent at or near-surface and extending to greater than one km to depth. An updated mineral resource estimate is due to be completed in Q1 2022 which is anticipated to demonstrate a high-grade starter pit and could distinguish Warintza as one of the best copper projects globally.

Once an updated resource estimate is released, investors then have an idea of the scale and scope of the project, and can value the company based on the underlying asset. Solaris could then take that inventory at Central and demonstrate to industry the potential to double or triple it through the nearby adjacent discoveries which all show a similar footprint, if not larger, than that of Warintza Central. In this case, a junior mining company with a solid copper project with growth and scale could potentially be looking at a multibillion-dollar payday if it successfully sells its asset to a major mining company.

Ongoing Deals

In early August of 2021, major multinational mining company Glencore acquired a 9.9% interest in junior copper miner Hot Chili Ltd. The companies entered into an agreement for a $14.4 million strategic investment, specifically focused on their ongoing copper exploration at Costa Fuego in Chile.

Costa Fuego’s copper and gold project is on its way to being a globally significant, low-altitude development and with the help of Glencore’s investment, this goal is much closer in reach.

This investment will ultimately allow the junior mining company to study and research Costa Fuego’s potential as Glencore has expertise in project development and production.

This is the goal for major mining companies, as they look for projects like Warintza or Costa Fuego as takeover targets to then develop and bring to production. With new copper projects more scarce than ever, this is a critical strategy for the copper mining industry.

The copper M&A cycle has begun, demonstrated by Sandfire’s $1.9 billion acquisition of MATSA (September 2021), Capstone’s purchase of Mantos (November 2021), Lundin Mining’s proposal to acquire Josemaria (December 2021), among others, and Solaris Resources could be the next best copper take-out development story.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.