BHP Circling… Micro Cap Neighbour to Drill Mammoth Targets

PUBLISHED: 06-02-2014

Olympic Dam – you might have heard of it? BHP’s prized multi-billion dollar mine site in South Australia? The monstrous mega-mine that spews out copper, uranium, gold and silver – it’s in the newspaper nearly every day. One tiny $3 million explorer has just identified IOCG drill targets next door to Olympic Dam ... right under BHP’s nose. “IOCG” stands for Iron Oxide, Copper and Gold – an IOCG deposit is a type of metal deposit comprised of intertwined iron oxide, copper and gold mineralisation. These deposits are known for their highly valuable concentrations of minerals and can lead to giant mines – like Olympic Dam. As well as BHP, this junior company is surrounded by multi-billion dollar, multi-national mining conglomerates. We are talking Rio Tinto, Fortescue, Oz Minerals, Vale and Teck. Not only that, this microcap prospector has a real shot at discovering a significant silver deposit in outback Australia in the coming months. High impact drilling in the Northern Territory is just around the corner, at one of the most exciting silver targets we have ever stumbled across. In just one of many prospects, this company boasts surface silver assays of 4.5kg per tonne (at current prices, that’s the equivalent of 70 grams / tonne of gold), and 10% copper. Add to this a swathe of other potential targets over 20 tenements comprising 2,000 km 2 . We were thoroughly impressed when we first came across this little explorer’s high grade exploration results, and other projects surrounded by multi-billion dollar, multi-national mining conglomerates. Then we checked the market cap... we were expecting something much larger. This explorer, rubbing shoulders with the world’s most powerful mining giants, drilling in weeks below impressive surface results – is currently valued (or should we say undervalued!) by the market at just $3 million. At first we thought it was a typo! And to top it off, it’s all steered by management that drove another microcap silver explorer in the same region to a market cap of $70 million. The Next Small Cap is proud to introduce:

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Core Exploration
ASX:CXO

CXO are a tiny $3 million exploration company, with prime tenements in highly prospective areas of both the NT and SA. There are two key catalysts for CXO investors to look out for early this year:

  • Drilling in the next few months at the Blueys Prospect at Albarta, NT – this is the big one for us, and it’s happening soon... stellar silver grades of 4.5kg per tonne silver, and 10% copper at surface... imagine if drilling discovers “grades at depth”?
  • BHP’s imposing IOCG discovery at Roxby Downs – CXO have released drilling targets next door, and the mineralisation BHP found may well continue into CXO’s tenement, only 10km away.

Regular readers of our sites will be familiar with our long-standing interest in reporting on high potential stocks that we uncover.

Our Track Record:

Did you receive our recent report on Segue Resources ? Since this report was released, SEG has been up 100%.

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

CXO – Next Door to Olympic Dam

When we heard that CXO controlled swathes of hugely sought after exploration ground, amongst numerous super majors, has a super low market cap that limits downside, and super high surface grades of silver, copper and gold... It got our attention. CXO’s tenements sit directly next door to BHP’s Olympic Dam – a giant IOCG deposit. IOCG stands for iron oxide, copper and gold – an IOCG deposit is a type of metal deposit comprised of intertwined iron oxide, copper and gold mineralisation. IOCG ore bodies are big... really big... generally containing between 10 million and 4 BILLION tonnes of ore, at copper grades up to 5% copper and gold values of around 3 grams per tonne – along with the iron, and often uranium. The tremendous size, simple metallurgy and typically high grade of IOCG deposits produce extremely profitable mines – like Olympic Dam. It is well worth spending 5 minutes studying this map of the area around Olympic Dam in South Australia – it takes a while for it all to sink in.

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Source: Core Exploration

You can see above that CXO’s tenements – red in the map – are circled by BHP’s brown tenements. In fact, in all directions CXO are also surrounded by the likes of RIO, Oz Minerals, Fortescue, and international mining giants Vale and Teck. A few market capitalisations of CXO’s high calibre neighbours to ponder:

  • BHP – $120 billion
  • RIO – $29 billion
  • FMG – $17 billion
  • Oz Minerals – $1.1 billion
  • Teck – $15 billion
  • Vale –$71 billion

CXO is in a league of its own, as the only listed microcap explorer that controls tenements directly in between Olympic Dam and the Woomera Protected Area . The red areas in the map below are CXO, the brown area with the digging tools is Olympic Dam.

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Minotaur Resources (ASX:MEP) was part of that league... until BHP took their tenements out in 2012 for $10 million. $10 million doesn’t sound like a huge sum – but that value is over three times the current market cap of CXO.

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BHP also splashed $8 million to secure tenements from Archer Exploration (AXE).

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Rio Tinto is keen too, dishing out $10 million the same year for just for a joint venture share in one of Tasman Resources’ projects.

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The area is definitely a hive of activity – The Next Small Cap is sure that a few of these mining giants will be watching CXO’s movements very closely.

Our Track Record:

Did you catch the Next Oil Rush report on Rey Resources (ASX:REY )? Following our article release, REY has been up nearly 75% since.

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance

IOCG drill targets released – next to Olympic Dam

CXO’s 400km 2 Roxby Downs South IOCG project is just 10km’s from BHP’s recent Wirrda Well IOCG discovery , and 40km’s from Olympic Dam.

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CXO is the single closest neighbour to BHP’s mammoth new discovery, majors included. We see nearology and takeover potential!

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CXO has just identified IOCG drill targets , based on respected data from a new, government sponsored, $2 million gravity survey.

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This survey comprehensively covered CXO’s entire 400km 2 tenement... and their adjoining tenement, Horse Well, which spans another 122km 2 . Following the recently completed geophysics, CXO identified multiple, substantial, high priority IOCG drill targets:

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Targets so compelling, that CXO has already been approached by a number of Australian and international companies looking for exposure to the potential. CXO will be providing updates to the market as discussions progress – more material, near term news flow to look forward to. At a recent presentation by BHP detailing its Wirrda Well discovery, SA’s Minister for Resources and Energy stated that this new geological information should “ light up the sky ” in the area. And that the ground breaking survey “ will help explorers to better target an estimated $35 billion of potential developments in this region .”

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Also, CXO’s Roxby Downs South is also one of the few independent projects directly in between BHP’s expanding Olympic Dam mine and Oz Minerals’ Carrapateena project. Carrapateena is one of Australia’s largest undeveloped mineral deposits... and Oz is planning a $2.5 billion expansion and upgrade:

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CXO is the “piggy in the middle”, and the “middle” is getting smaller and smaller.

Our Track Record:

Did you catch our ‘tip of the decade’ – TSX:AOI back in February 2012? The Next Oil Rush called it at around CAD$1.8 and has been as high as CAD$11.25 since – that’s over 600%!

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

CXO’s multi-tenement-multi-metal prospects in the Northern Territory

In addition to the tenements held in South Australia, at Albarta in NT, CXO have identified and pulled together a set of disparate tenements, to form an organised mega project ... The mega project comprises 20 tenements covering over 2000km 2 . It’s worth squinting your eyes for a few seconds to see the plethora of high grade early results CXO has delivered at multiple prospects in the image below. The map captures CXO’s ground at their multi-prospect super project Albarta in the Northern Territory. The title of the slide is IOCG Prospectivity – but the silver results are one of the most exciting aspects of CXO’s artillery – and the 2.2kg shown at Blueys has since been upgraded to 4.5kg /tonne . The red/orange areas are those considered to be the most prospective – right where CXO controls ground.

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In case you can’t see the details on the map, surface metal assays to date are summarised below:

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Until the drill starts spinning at Blueys, a steady stream of news flow should keep the market eyes fixed on CXO, with fieldwork results from Virginia, Copper King and Paradise Well to be released in the weeks ahead.

Our Track Record:

Following our report on Pura Vida (ASX:PVD) titled Why has this stock got analysts predicting four thousand percent gains? the PVD share price rose as high as 40%.

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Drill ready at Blueys

Drilling approvals at the Blueys and Inkheart prospects are at an advanced stage. The drill bit is anticipated to hit the ground in about 8 weeks. This comes after extensive IP surveying and geophysical work to refine targets. IP stands for induced polarisation, it’s like a giant X-Ray, except it scans for underground metal, instead of bone. Surveying confirmed chargeable drill targets show strong correlation between the silver mineralisation in surface rocks, and the silver, copper and lead in surface soils. Chargeability is an electrical feature , and it’s not a characteristic of rock, but of metal . You may already have learnt about chargeability when reading about another Next Small Cap company, Promesa (ASX:PRA ). PRA have learnt a lot from their chargeability results in Peru, and will drill based on these results shortly. The bulk of CXO’s chargeable IP targets appear to be at 75 to 150m depth, and are directly below the metallic soil anomalism and mineralised rocks at surface. Drilling has never been conducted to these depths at Blueys . Surface rock chips at Blueys assay up to:

  • 4.5kg per tonne silver
  • 10% copper
  • 25% lead
  • 25,000 ppb silver in soil

At the Inkheart prospect, just to the north:

  • 19,500 ppb silver in soil, and
  • widespread silver rock chips
  • Results to date indicate significant mineralisation at depth.

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Below are photos of silver and lead chips found in rocks that were just rolling around on the surface of Bluey’s tenement – who knows what’s underground!

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Recent rock chip sampling at Blueys defined a widespread zone of veining , with high copper, lead and silver in surface rock. Mineralised veining is a reliable indicator of further mineralisation at depth. Here is a photo of typical veining at Blueys:

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Source: Core Exploration

That is some serious veining that CXO have found. Surface mineralisation, along with widespread veining, also coincides with a big area of silver in soil... over 700m by 400m. With all these indicators in the same location, CXO have a strong chance of hitting something shiny. Now, the silver in soil assays of up to 25,000 parts per billion (25 grams per tonne silver) is not too shabby as a drill result, but that amount of silver, just loitering around in loose soil... that’s very unusual . We know a lot of you might switch off when you hear results in parts per billion... but when it’s you consider its 25g/t silver in loose soil at surface, you should switch on... especially when it’s silver. The level of silver in soil considered an indicator of underlying mineralisation is around 100 parts per billion. CXO have 250 times that at Blueys! In addition, CXO’s first rock chip sampling results at the Inkheart prospect, just north of Blueys, confirmed significant silver levels at surface. Okay... now hold your breath and concentrate: Geological mapping also identified a metal-rich gossan (an exposed part of an ore deposit) within a newly-identified 1,500m by 250m area of silver in soil, averaging 1000 parts per billion, and up to 19,500 parts per billion at its core. The soil anomaly at Inkheart is now over 2 kilometres long, and it remains open, leaving scope to get much, much bigger. And the geology has been identified as being carbonate ... the copper in rock chips came in their carbonate forms of malachite and azurite, and the lead and silver are also hosted in carbonate, as argentiferous galena. Argentiferous is just a fancy way of saying that a rock contains silver. Are you still with us? Good. This is significant, because carbonate hosted silver deposits are known to be both large AND high grade. Also...the majority of soil samples at Bluey’s and Inkheart are residual, which means they should reflect the geochemistry of the underlying geology. Yes we are total mining nerds. Continuing results of this calibre from Blueys and Inkheart have elevated the prospectivity to a level comparable to the early exploration of Investigator Resources (ASX:IVR), at its flagship Paris silver project in S.A. – more on that below.

Our Track Record:

Did you see our coverage of Trafford Resources (ASX:TRF)? TRF has been up as high as 110% since we called it.

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

CXO Management Track Record

The Next Small Cap is very impressed with the exploration track record of the guys that run CXO. Stephen Biggins, CXO’s Managing Director, has over 20 years’ experience as a geologist and geophysicist, specialising in silver, gold, uranium and base metals exploration in Australia and internationally – just the metals CXO are looking for. Most notably, he was the founder of Investigator Resources , and was the early brains behind the Paris discovery that lined the pockets of IVR stake holders .

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Following this discovery, IVR surged more than 8-fold, from 5c to 41c:

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance Shares in IVR have since pulled back, and Mr Biggins is no longer involved with IVR – however the fact remains that he has been there and done it all before in the silver exploration game. Should the drilling success at IVR be replicated, then the market cap of CXO could follow a similar growth trajectory. It is also interesting to note that CXO’s surface exploration results at Blueys and Inkheart have been of a much higher calibre than anything IVR had produced pre-drilling :

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IVR reached a market cap of $70 million based on its Paris silver drilling results. Should drilling results at Bluey’s be of a similar standard, a market re-rating for CXO could be on the cards.

Our Track Record:

Did you see The Next Oil Rush report on Swala Energy (ASX:SWE) titled The last junior oil explorer operating in this exciting region with this same JV partner went up 800% in a matter of months ? SWE has traded as high as 150% since.

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance. E-book Checklist We’ve analysed CXO using our e-book checklist, which outlines key aspects to research prior to making an investment in any speculative resource stock. You can read about the Pre-Investment Check List (and a lot more) in this e-book titled: “How to Make Money Investing in Junior Resource Stocks”

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If you’ve already read our eBook, you’ll know that potential profit is greatest when a small-cap company is in its exploration phase – exactly where CXO is right now. It’s a two sided coin, however. There is always the chance that nothing exciting is found and the shares fall in value. But with research, you can pinpoint the explorers with a higher likelihood of tapping into a game changing mineral deposit. We believe CXO to be one of these “smart picks”. Today we will analyse CXO against three key points from the checklist: Is management experienced? Have they made other significant discoveries? Management is not only experienced, they are experienced in the same type of discovery CXO are targeting at Blueys. CXO’s MD Stephen Biggins has already established a microcap silver explorer that’s gone from obscurity to a $70 million market cap following the Paris silver discovery. CXO is much more than just a silver stock... Can he do it again? Is there takeover potential? Is there ‘nearology’? Who is operating in the surrounding area? As you should now be aware, there is some astounding nearology going on here, with multiple, multi-national, multi-billion dollar mining companies operating next door. We would not be surprised to see BHP, RIO, or any of the other majors swoop on a significant discovery on their stomping ground... Price Catalysts: Are there upcoming catalysts? There are two near term catalysts of note:

  • Bluey’s – Drilling at Blueys and Inkheart, with the unbelievable silver rock chips of 4.5kg per tonne, along with high silver in soil and clear IP targets – is expected to start in around 8 weeks.
  • Roxby Downs – Drill targets have just been announced at Roxby, near BHP’s big new IOCG discovery.

Drilling at Blueys will take centre stage... and it’s going to get us, and the market, very excited.

Our Track Record

Did you see The Next Oil Rush report on Citation Resources (ASX:CTR) titled Junior oiler gearing up to drill a giant Guatemalan oil kitchen... and will puncture the behemoth reservoir in just days... ? This report showed CTR to be cooking up a storm with the share price rising over 40% after we called it.

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The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

The Next Small Cap Conclusion

We are excited about CXO, their prospects, and ongoing exploration at multiple world class metal prospects. Near term drilling for bonanza silver grades, an IOCG project that you’d expect from a billion dollar company, and a tiny market cap to make any discovery VERY worthwhile ... CXO makes up an essential part of our investment portfolio, because it is in a league of its own amongst ASX listed microcap explorers:

  • Multiple large scale, high probability drilling targets;
  • Potential takeover or joint venture approach from the numerous mining giants in the area;
  • The smallest market cap of any company with ground so close to Olympic Dam;
  • Management that has done it all before, know what they are looking for and how to find it.

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