Desert Star cuts deal to acquire Kutcho, BC

Desert Star Resources Ltd. June 15 reported that it has signed a definitive agreement to acquire full ownership of Capstone Mining Corp.'s Kutcho copper-zinc-gold-silver project in northern British Columbia.

To acquire Kutcho Copper Corp., the Capstone subsidiary that owns Kutcho, Desert star has agreed to pay C$28.8 million in cash and issue enough shares to provide Capstone with 9.9 percent of Desert Star's issued and outstanding shares.

A prefeasibility study prepared for Desert Star outlines a mine at Kutcho that would produce 378 million pounds of copper and 473 million lb of zinc, plus by-product gold and silver, over 12 years of production.

The base case estimate of this study generates an after-tax net present value (8 percent discount rate) of C$265 million and an internal rate of return of 27.6 percent using metal prices of US$2.75/lb copper, US$1.10/lb zinc, US$17/oz silver and US$1,250/oz gold.

Desert Star has developed plans to advance Kutcho to a fully permitted project with a feasibility study completed by the end of 2019.

This work includes additional geotechnical work on the deposits; a drill program to collect metallurgical samples and upgrade a portion of the inferred mineral resources to the measured and indicated categories; additional metallurgical test work to optimize metallurgical parameters; and environmental baseline studies.

Significant exploration upside has been identified through historic work including several priority drill ready targets prospective for the discovery of new deposits.

Mineralized drill intersections along strike and down plunge to the west from the Esso deposit - one of three volcanogenic massive sulfide deposits found at the Kutcho project - is one such target.

Highlighted drill intercepts from this area include 7.2 meters averaging 1.96 percent copper, 5.24 percent zinc, and 18 grams per metric ton silver.

The FW zone, a relatively narrow sulfide lens beneath the Kutcho Main zone is another target.

historic estimate, prepared as an internal document for Esso in 1979, outlined 230,000 metric tons averaging 1.47 percent copper, 5.52 percent zinc, 0.4 g/t gold and 43.7 g/t silver.

In addition, there is favorable untested stratigraphy east of the Main zone, and on the southern portion of the property.

"We believe Kutcho is an exceptional opportunity, with significant near-term upside potential in both the project economics and expansion of the existing mineral reserves and resources," said Desert Star President and CEO Vince Sorace.

Upon completion of the Kutcho acquisition, Dessert Star proposes adding Stephen Quin, president and CEO of Midas Gold and former CEO of Sherwood Copper (predecessor to Capstone); former BC Mines Minister Bill Bennett, and former Kaminak Gold Vice President of Sustainability Allison Rippin Armstrong to its board of directors.

"Desert Star is guided by an experienced board, management and technical team with experience in project development, permitting and finance, all committed to working closely with First Nations, local communities and all levels of government," said Sorace.

-SHANE LASLEY