Aruma Resources (ASX:AAJ) Falls 10% on High-Grade Copper Deal- Buy the Dip or Stay Away?

Aruma Resources targets high-grade copper in Canada

Aruma Resources (ASX: AAJ) surged nearly 40% on January 22 after announcing a binding agreement to acquire 85% of the Tillex Copper-Silver Project in Canada’s Timmins mining district. However, shares have since pulled back 10% to A$0.026 as investors digest the details. The project comes with strong drill results, including thick copper zones starting just 30 metres below the surface. For investors watching the copper space, the question is simple: do the high grades make up for the risks of a micro-cap explorer?

What are the Best ASX Copper Stocks to invest in right now?

Check our buy/sell tips

Why Tillex Caught Aruma’s Attention

The Tillex project ticks several boxes that copper explorers look for. Previous owners drilled over 10,000 metres and consistently hit wide zones of copper. The best results include 110 metres at 1.69% copper from 34 metres depth and 92 metres at 2.12% copper from 37 metres depth. Anything above 1% copper is generally considered high-grade for this deposit type. The project also offers silver upside, with drilling returning up to 5 metres at 355 grams per tonne of silver.

What makes Tillex stand out is how close the copper sits to the surface. Mineralisation starts just 25 to 30 metres down and reaches at least 150 metres deep. The 450-metre strike length stays open in all directions, meaning there could be more copper waiting to be found. The project sits on patented claims, so Aruma Resources gets full ownership of land and mineral rights without extra approvals. A First Nations agreement is already in place.

A Cheap Deal With Copper Tailwinds

The deal terms look attractive on paper. Aruma Resources is paying C$1.8 million total, but only C$225,000 is due upfront in cash and shares. The rest comes in stages tied to milestones like proving up a resource. This structure limits Aruma’s risk while giving it control of a project with real exploration upside.

The timing also works in Aruma’s favour. Copper supply is expected to stay tight through the decade as demand grows from electric vehicles and renewable energy. The project sits about 60 kilometres from Glencore’s Kidd Creek mine, meaning good infrastructure nearby. Aruma Resources has hired a Canadian geologist to manage the project and plans to start fieldwork immediately after the deal closes.

The Investor’s Dilemma – High Grades vs. Funding Risk

The bull case is simple. Tillex has genuine copper and silver grades in a mining-friendly country, the purchase price is low, and copper demand looks strong for years to come.

However, we believe investors need to weigh the funding risk carefully. Aruma’s market cap is just A$10.7 million. The company bolstered its cash position with an A$3.5 million placement late last year, but drilling and resource studies cost money, so further capital raises remain likely. That means potential dilution for shareholders. There is also no metallurgical test work completed, so recovery rates remain unknown.

Our view is that Tillex is a speculative opportunity for investors who can handle volatility. The grades are real, and the deal terms are fair, but the gap between where Aruma Resources is today and where it needs to be is wide. If you prefer lower risk, wait for drilling results before buying. If those results confirm historical grades, today’s price could look cheap. Until then, this one is only for those comfortable with micro-cap uncertainty.