Gold companies consolidate in Mexico; source exploration drill program aims to join 3 gold zones
Takeover targets in the Mexican gold space are becoming thin on the ground after Timmins Gold (TSX: TMM) announced that it is acquiring Newstrike Capital (TSX-V: NES) in a transaction valued at $140 million. This follows Agnico Eagle Mines’ (NYSE: AEM, TSX: AEM) acquisition of Cayden Resources and its portfolio of Mexican properties.
Source Exploration’s (TSX.V: SOP) Mexican Las Minas Project hosts near-surface gold-silver and copper mineralization. The 1,600 hectare project contains six mineral concessions and is dotted with past-producing mines and untested targets.
“We are drilling for a resource, rather than for exploration at this time,” stated SOP Executive Chairman and Director David Baker in an exclusive interview. “We know where the precious metals are located, so we are focussed on proving a resource to NI 43-101 standards.”
An analog to Las Minas is Torex Gold’s Media Luna deposit which has an inferred resource of 5.8 million gold equivalent ounces at a grade of 4.55 g/t.
“Some Cu-Au skarns such as Media Luna are highly contiguous deposits,” explains Source Senior Geologist Matt Liard. “Our drilling results so far lead us to believe that we are sitting on that type of mineralization. We are successfully executing pattern-drilling on a grid with the objective of fairly quickly calculating an NI 43-101 compliant resource.”
Source’s deposit is in a political and geographical oasis. The local village of Las Minas (pop. 600) has no cartel-related activity, sitting in isolation at the end of a dead end road. Due to the steepness of the terrain, there is limited agriculture and therefore little competition for land or labour or water. Land ownership is 90%+ private, allowing for easy access. Las Minas has a hydroelectric plant, which could be used to power a future mine.
“The town of Las Minas is very happy to have us here,” confirms Baker, “With the drills turning we provide employment for about 35 people, most of them from the local community. We are treated with respect and that respect is reciprocated.”
To date, Source has drilled approximately 14,500 meters. “With global money-printing and currency wars, gold’s day will come,” stated Baker. “We want to make sure when that happens we have a high grade economic deposit in a safe, mature, mining-friendly jurisdiction.”
Source is currently mobilizing a drill rig to the Las Minas site to begin a 6-8 week 2,000 meter program. The company is 100% funded to complete the current drill program. Baker anticipates a resource calculation by Q4, 2015.
“We initially drilled a 40 metre grid hitting 17 holes in a row at Eldorado,” stated Liard. “After reviewing the results, I was confident that this zone was dipping to the south and extended under the canyon. So we drilled across the river and hit on our three holes on the Juan Bran site to confirm this.”
While the river flows to the north, the canyon drifts upward to the south. Liard believes that the river valley represents a minor fault in the marble which has been channeling mineralization.
“We are getting better results close to the canyon walls,” confirms Liard, “and I am becoming convinced this is the result of fluid-channeling based on structure, which is common in skarn deposits. One of the objectives of our current drill program is to confirm that we have a contiguous deposit that stretches for over a kilometer.”
Mineralized intercepts at the Juan Bran zone included 42 metres grading 1.55 grams per tonne of gold equivalent and 20 metres grading at 2.34 grams per tonne of gold. Step-out drilling to the north intersected skarn mineralization and the zone is open in three directions for expansion. Liard estimates that it will take five more drill holes to connect the three zones and from there it is a straight forward drill campaign to prove tonnage.
The Santa Cruz zone, located 300 metres to the south, returned multiple high-grade results, including 10 meters of 19 grams per tonne gold equivalent, and 9. 6 meters grading at 24 grams per tonne of gold equivalent.
“We are drilling Santa Cruz first because the grades and the thicknesses are superior,” states Liard, “We expect to expand the zone between 50 and 75 meters. If the rig continues to hit rich intersections, the drills will keep turning.”
Baker and Liard are convinced that there is enormous potential outside the area they are currently working on, but in these challenging markets, a disciplined program of resource expansion is required to bring maximum value to shareholders.