This follows a recent agreement with A-Cap Resources Limited (ASX:ACB) aimed at developing the Marlborough Cobalt-Nickel Project, also in Queensland.
Castillo’s board decided at a strategy meeting that the optimal way to create value from its two Queensland projects was to align with groups amenable to form joint ventures.
Part one of a two-pronged strategy will see the company leverage experienced third parties for its two Queensland projects.
The second part will see Castillo utilise in-house expertise and resources to re-open the Cangai Copper Mine in northern NSW while also progressing plans for inaugural drilling at the Broken Hill project.
In this regard, Castillo has exploration teams concurrently in the field at Cangai Copper Mine and Area 1 at the Broken Hill project.
A-Cap transaction optimal outcome
For the Queensland projects, the recent A-Cap transaction is an optimal outcome and the company is seeking a similar outcome for Mt Oxide.
Subject to final documentation, A-Cap has agreed to invest $2.25 million over the next two years to develop the Marlborough Nickel-Cobalt Project, northwest of Gladstone and adjacent to Queensland Nickel mining leases.
For Castillo, the benefit is being free-carried for a 40%-stake in the project through to bankable feasibility study with an experienced strategic partner with significant China end-user connections.
Well-known for copper-cobalt systems
Mt Oxide is made up of four prospects in the Mt Isa region of northwest Queensland and is well-known for copper-cobalt systems.
With the right high-calibre strategic partner, Castillo is targeting to develop a viable copper-cobalt mining operation at the project, which has returned grades of up to 2.99% copper and 2,400ppm cobalt.
Resurgence of mining activity
The prospectivity has been boosted by a resurgence of mining activity in the region facilitated by Capricorn Copper reopening the Capricorn Copper Mine in 2017 and delivering its first sale in February 2018.
Mt Oxide was mined from 1927-43 and 1955-60 with higher grade ore worked by underground methods.
The lower-grade envelope and remnants of high-grade ore were mined from an open cut from 1967-71.
Underground mining produced 79,000 tonnes of ore at 15.9% copper and open-cut produced 355,000 tonnes of ore at 2.5%.
Potential exploration upside
More than 5,000 surface samples have been collected and analysed from the Mt Oxide project.
Multiple copper-cobalt samples across the northern part of the project illustrate demonstrable surface mineralisation occurrences.
Reconciling these occurrences against aero-magnetics within Hill of Grace highlights the extent of potential exploration upside.
Castillo’s geology team also believes that there is potential for several satellite deposits to be proven once an inaugural drilling campaign has been conducted.
The project is close to supporting infrastructure, ready access to skilled labour and third-party processors amenable to offtake arrangements.
Providing further encouragement are copper and cobalt markets, which face potential forward supply deficits over the next five to 10 years.
For cobalt specifically, large global tech groups are looking for new supply chains from stable countries which have properly regulated mining practices.