Hawk Resources (ASX:HWK) - December Drilling Targets Five Prospects in Historic Copper District

Key Concepts

• Hawk Resources: An ASX-listed mineral exploration company.
• Cactus Project (Utah, USA): Hawk Resources' primary near-term copper-gold project.
• Olympus Scandium Project (Western Australia): A new acquisition offering optionality for scandium.
• Dual-Track Growth Model: A business strategy involving multiple projects with different timelines and risk profiles.
• Capital Allocation: The strategic distribution of financial resources to maximize investor value.
• Near-Term Catalyst: An event or development expected to drive immediate value for investors.
• Optionality Play: An investment that offers potential future upside without significant upfront commitment.
• Scandium: A high-value, low-volume commodity often produced as a byproduct.
• Copper-Gold Mineralization: The presence of both copper and gold within a geological deposit.
• IP (Induced Polarization): A geophysical surveying technique used to detect subsurface electrical properties, often indicative of sulfide mineralization.
• PXRF (Portable X-ray Fluorescence): A handheld device used for elemental analysis of materials.
• RAB Drilling (Rotary Air Blast): A shallow drilling method used for initial exploration.
• Assay: Laboratory analysis to determine the concentration of valuable minerals in a sample.
• QA/QC (Quality Assurance/Quality Control): Procedures to ensure the accuracy and reliability of data.
• Metallurgical Work: Studies to determine the feasibility of extracting metals from ore.
• Byproduct Production: The extraction of a valuable commodity as a secondary product of mining another primary commodity.

Hawk Resources: Strategic Growth and Project Updates

Scott Caes, Managing Director of Hawk Resources, discusses the company's dual-track growth strategy, focusing on the near-term catalyst of the Cactus copper-gold project in Utah, USA, and the optionality offered by the new Olympus Scandium project in Western Australia. The company recently raised capital, with investors showing interest in both these key assets. While Hawk Resources also has lithium projects in Brazil, these are currently on the back burner due to their early-stage nature.

Cactus Project: Near-Term Value Driver

The Cactus Project in Utah is positioned as Hawk Resources' primary value driver due to its near-term potential. The company has invested significant effort over the past 12-18 months in modeling the historical Cactus mine, which operated between 1905 and 1920. No mining has occurred since then. Hawk Resources has identified five distinct targets within the Cactus project area, with drilling scheduled to commence in December, pending final permitting.

Historical Context and Grades: The Cactus mine itself historically produced approximately 1.3 million tons of ore grading over 2% copper, with a credit of 0.3-0.4 g/ton gold and 67 g/ton silver. Post-mining exploration, primarily in the 1960s, involved 33 drill holes in the Cactus-Comet area. These yielded significant intersections, including 5 meters at 6.7% copper, often within broader zones of 20-40 meters grading 1-1.5% copper. Notably, many of these 1960s drill holes were not assayed for gold, leaving potential upside unquantified.

More recent exploration by Hawk Resources and Rio Tinto (who farmed out the area for a period) targeted large-scale porphyry copper deposits. However, Hawk's focus is on smaller, vein-hosted or intrusive-related mineralization. Rio Tinto's drilling intersected 42 meters at 1.9% copper and 6 g/ton gold within a larger 70-meter intercept grading 1.1% copper and 0.3% gold. Approximately 12-13 drill holes in the historical database have recorded grades exceeding 1.4% copper.

New Data and Targets: Further analysis of historical data revealed that New Zealand had a partnership on the Comet deposit around 2004. Their drilling included intersections of up to 26 meters at 1.5 g/ton gold from surface. This adds another layer to the potential of the Cactus project.

Hawk Resources' strategy involves a two-pronged approach:

1. Modeling Historical Mineralization: Understanding that more mineralization likely remains than was historically mined, despite potentially lower grades in some areas. This is based on piecing together data from various exploration programs spanning the late 1950s to the 2000s.
2. Identifying New Targets: Utilizing geophysical and geochemical data to identify five new targets similar to the historical Cactus mine. These targets have been ranked based on surface geochemistry (soil sampling) and geophysical signatures.

Geophysical Targets and Prioritization: The identified targets include:

• Cactus Target: Comprises extensions of the old mine mineralization and a separate target named "Wasp" approximately 200 meters to the northeast, exhibiting identical geophysical anomalies to the old mine.
• CZ Target: Also shows an identical geophysical signature with soil grades up to 300-350 ppm copper, significantly above the district background of around 60 ppm.
• Copperopolis Target: This target is characterized by a chargeability high anomaly in IP surveys, as opposed to resistivity lows seen in other targets. Hawk interprets this as potential for disseminated sulfide mineralization. Soil samples above Copperopolis have reached up to 1000 ppm copper, and a historical drill hole drilled off the anomaly intersected 30 meters of 2% copper, though it was located just outside the anomaly's edge. The geophysical anomaly itself suggests potential for hundreds of millions of tons.

Drilling Program Design: The drilling program is designed to systematically test these geophysical targets, prioritizing them based on supporting surface geochemistry. Hawk Resources has conducted its own soil sampling, revealing high copper concentrations over known historical mines and prospects. For instance, soils over the old Cactus mine reach up to 0.9% copper, and over the New Year's prospect, up to 0.3% copper. The Copperopolis target, with its 1000 ppm copper in soils and historical high-grade intersection, is considered a high-priority target.

Geophysical Modeling and Drill Hole Planning: Geophysicists create 3D models from survey data to determine anomaly dimensions, depth, and dip, allowing for precise targeting of drill holes. Drill hole depths will vary, with some planned as shallow as 150-200 meters and others reaching up to 1000 meters, influenced by topographic constraints and the cost-effectiveness of ground preparation.

Validation of Historical Assays and Near-Surface Potential: The older, near-surface drilling data from the 1960s (maximum depth of 100 meters) is being re-evaluated. While assay data exists, the original drill logs are missing, and the QA/QC procedures from that era were less stringent. Hawk Resources is modeling this historical data, incorporating recent gold results from the Comet deposit, to assess near-surface copper and gold potential. A shallow drilling program (up to 50 meters) is planned to investigate this.

Continuity and Starter Pit Strategy: For deeper geophysical targets, Hawk Resources plans to drill two holes per target to confirm mineralization. The targets are large enough to potentially host standalone deposits. The near-surface mineralization, if delineated and particularly if oxide, represents a quicker, easier cash flow opportunity. The company aims to identify a "starter pit" or "hub" for future development.

Permitting and Timeline: Permitting in Utah has a statutory period of 30 days. Hawk Resources submitted its application nearly two weeks prior to the interview and expects permits before the end of the month or in early December. Archaeological surveys are required, but any identified historical mining features (like kilns) can be fenced off.

Market Communication and Assay Results: The immediate next step for Hawk Resources is to announce the commencement of the drilling program. Assay results are expected to take 6-8 weeks. With drilling potentially starting in early December and continuing into the first quarter of next year, initial results are anticipated in March, with further results extending into the second quarter.

Metallurgical Assessment: If drilling yields positive results, metallurgical work will commence to assess extraction feasibility. No significant historical metallurgical data exists for the project, as past work was primarily exploration-focused.

Team and Decision-Making: Caes notes that working in the junior sector, compared to large companies like Rio Tinto, allows for quicker decision-making and a more entrepreneurial approach. He highlights the challenge for junior companies in securing sufficient funding to fully test targets, contrasting it with the luxury of larger companies to conduct extensive drilling campaigns. This necessitates a more focused approach on "what has to be done" rather than "what would be nice to do."

Olympus Scandium Project: Optionality Play

The Olympus Scandium Project in Western Australia represents an "optionality play" for Hawk Resources. The project was acquired via an option agreement. Past exploration focused on platinum group elements, nickel, cobalt, and gold, not scandium. However, during this work, PXRF analysis of soil and RAB samples revealed significant scandium anomalies.

Scandium Anomaly Details: A 4 km by 7 km scandium-in-soil anomaly has been identified, with grades exceeding 500 parts per million (ppm) scandium, and zones reaching over 1000 ppm, with a maximum of approximately 1200 ppm.

RAB Drilling Results: Four RAB traverses, totaling about 24 holes, were drilled in the area. Crucially, none of these traverses were within the main 4 km by 7 km soil anomaly. One traverse on the western margin intersected up to 5 meters at approximately 940 ppm scandium. Another traverse on the eastern side, over a spot high scandium anomaly, yielded intersections of up to 11 meters at about 930 ppm scandium.

Scandium Market Context: Scandium is a high-value commodity, currently worth more than silver, at approximately $3-3.5 million per ton on the Shanghai Metals Exchange. It is a small-volume commodity, primarily produced as a byproduct globally, with no primary scandium mines currently in operation.

Comparison with Sunrise Energy Metals: Sunrise Energy Metals, a company with projects in New South Wales, is a benchmark. Their resource at a 600 ppm cutoff grade is about 1.7 million tons at 660 ppm scandium. Their lower-grade resource (400-480 ppm) is around 50 million tons. Hawk Resources' identified 4 km by 7 km anomaly with >500 ppm soils suggests they are in a comparable ballpark. Sunrise Energy Metals has recently signed an offtake agreement with Lockheed Martin, indicating advancing interest and demand for scandium.

Mineralization Interpretation: Based on magnetics, the mineralization is believed to sit above a mafic-ultramafic unit of the Giles Complex. The mineralization appears to be a near-surface blanket, with the 11-meter intersection occurring from surface. All RAB holes drilled on the traverses returned grades above 300 ppm scandium. The RAB holes are spaced 200 meters apart, and the traverses cover 800 meters each. The current interpretation is a near-surface blanket, with RAB traverses suggesting areas of 800m x 800m. These RAB lines are on separate targets, not contiguous.

Next Steps for Olympus Project: The immediate work program involves repeating soil sampling to verify historical results and collecting soils where RAB holes were drilled to confirm scandium presence with laboratory assays. This is a relatively quick program, estimated to take about a week of ground work.

Conclusion

Hawk Resources is strategically advancing its exploration portfolio with a clear focus on near-term value creation at the Cactus copper-gold project and exploring future potential with the Olympus Scandium project. The company's disciplined approach to capital allocation, combined with its ability to leverage historical data and modern exploration techniques, positions it to capitalize on the significant copper and gold potential in Utah and the emerging scandium market in Western Australia. The upcoming drilling program at Cactus is a key catalyst, with results expected to provide significant market updates in the coming months.