LARA EXPLORATION's Lara copper project, Peru, currently under option to Toronto-listed Redzone Resources.

LARA EXPLORATION's Lara copper project, Peru, currently under option to Toronto-listed Redzone Resources.

Lara Exploration Deepens Ties to Antofagasta

Issue 37, April 2013

Miles Thompson, chairman of Toronto-listed Lara Exploration, is not in the business of talking up stocks. He envisages an “ugly tax selling season” in Canada this year and talks of “capitulation” amongst many juniors miners. Auditing rounds he believes will pull the trigger on those already against the wall. “Most people who don’t deserve to be in business are ceasing to be.”

The backdrop is ideal for prospect generators, of which Lara is a pure example. Rather than stuff money down drill holes, the company stakes targets and options them on to partners, who earn a majority share in exchange for a combination of drilling commitments, cash and shares. The approach has proved consistently accretive, as Lara has expanded its project base across Brazil, Peru, Colombia and Chile. In glaring contrast to the broader sector, shares have risen over one, three and five years, as well as year to date.

At its Liberdade project in Brazil’s Carajas district, copper giant Codelco has opted to earn up to a 75 per cent project share, in exchange for delineating a 500,000 tonne copper deposit. Last month, it hit 197m at 0.72 per cent copper, with drilling due to continue at the end of the wet season.

Antofagasta has meanwhile opted to earn into Lara’s Sami project, Peru, investing $6m in exploration for an initial 51 per cent share. The agreement deepens Lara’s ties to Antofagasta after the two companies entered a strategic alliance to generate targets in Brazil in September last year. Importantly, such deals lighten the cost of Lara’s model further, by avoiding even the expense of prospect generation.

Originally based on Newfoundland and Labrador focused Altius Minerals, Lara’s structure is precisely designed to accommodate the risks of exploration, without capping the upside. Thompson says the approach mirrors that of the oil and pharma industries, where high risk but high margin businesses are managed by joint-ventures.

According to money manager Adrian Day, Lara’s market cap of C$37m ($37m) ensures that it is overlooked by most investors. The company however is proving its resilience in weak mining markets. Thompson says he can currently buy two prospects for the cost of identifying one. “In terms of building the business, these are great markets for us.”

“These are great markets for us.”

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