In late April 2011, Cangold Ltd. TSX.V – CLD, signed a letter of intent with Brigus Gold Corp. (formerly Linear Gold). By paying one million dollars and issuing six million shares to Brigus, CLD entered into an option agreement to acquire a 75% interest in the Ixhuatan advanced stage gold project.
The Deal
To earn its 75% interest Cangold will be required to pay to Brigus a total of CDN$10 million and issue twenty million shares over a three year period. CLD also has to complete an independent third party feasibility study on the Campamento Deposit located on the Ixhuatan property.
Brigus will receive a payment of CDN$5.00 per ounce of gold in the Proven and Probable category included in the feasibility study and has a two percent net smelter royalty (NSR) on production.
Location
The Ixhuatan property is in the north-western part of Chiapas State, southern Mexico, 100 kilometers (km) south of the city of Villahermosa. Chiapas State lies in the 450km long gap between the Trans Mexican Volcanic Belt to the northwest and the Central American Volcanic Arch to the southeast. The area is both volcanically and tectonically active and covers the triple junction of three crustal plates – the North American, Caribbean and the Central American. This tectonic setting has generated a highly favorable environment for the development of structures and the associated fluid flow required for major world class gold and base metal deposits.
Ixhuatan
The Ixhuatan property comprises 4,176 hectares and there are several distinct styles of mineralization around the southern and western flanks of a highly eroded volcano.
The property is host to the Campamento Au-Ag deposit (carbonate base metal Au mineralization) and the Cerro La Mina Porphyry Cu-Au-Mo prospect.
Several other Au and Au-Ag mineralized zones and exploration targets have been identified. The San Isidro, Laguna Chica, Central, Caracol and Cacate prospects, are all located in a one to two kilometer wide, four km long corridor between the Campamento and Cerro la Mina deposits.
Both the porphyry and carbonate base metal mineralization on the property are prone to supergene gold enrichment and produce strong gold in soil geochemical anomalies.
The only other significant mineralization discovered to date, close to the Ixhuatan property, is the Santa Fe Mine area (The Santa Fe mine claims have belonged to Minera Frisco since the 1960’s, Minera Frisco is controlled by telecom tycoon and mining magnate billionaire Carlos Slim), which is contiguous to the Ixhuatan property, to the northeast. The Ixhuatan property was acquired by Liniar, in 2000, due to its proximity to the Santa Fe mine.
Investigation of numerous gold and copper zones at the former polymetallic (gold, silver and copper) Santa Fe mine indicated that the geological setting was a high sulphidation environment with the potential for a copper/gold porphyry system at depth.
A stream sediment geochemical study was carried out in the northern portion of Chiapas. The survey indicated strong gold in stream sediment anomalies on the Ixhuatan property and the properties geochemical anomalies were located during follow-up work.
Three areas of Au-Cu-Mo (molybdenum/moly) geochemistry - the San Isidro, Central and El Campamento zones - were found to be highly altered in a similar fashion to the Santa Fe area.
More than 89,000 meters of drilling in 342 holes have been completed on the Ixhuatan Project.
Campamento
Gold and silver mineralization occurs with base metals in veinlets and as wall rock disseminations with native gold and electrum being the dominant gold bearing minerals.
The first drill campaign was conducted on the property between May 2004 and October 2007. There was 69,679 m of drilling done in 282 drill holes. This drilling was completed on six separate targets but most of the drilling occured on the Campamento Zone.
Resource
The Campamento deposit contains a NI43-101 compliant resource estimate, using a using a 0.50 gram per tonne (g/t) gold cut-off, of:
Measured and Indicated - 1.041 million oz of gold and 4.4m oz of silver within 17.6 million tonnes (Mt) at an average gold grade of 1.84 grams per tonne and average silver grade of 7.79 g/t.
1.84g/t gold = $97.85 tonne @ $1654.10 gold per oz.
7.79g/t = $7.58 a tonne silver at $30.25 an oz of silver.
Inferred - 0.703m oz of gold and 2.26m oz of silver within 21.8 Mt at average grades of 1.01 g/t gold ($53.71) and 3.23 g/t ($3.14) silver.
Since the Campamento resource is already so well defined Cangold will concentrate on the engineering studies needed to move the deposit as fast as possible down the development path towards a full feasibility study. Metallurgical sampling has been initiated to facilitate initial flow sheet development and ascertain potential gold and silver recoveries. This work provides the critical information necessary for the completion of a scoping study. The next step would be starting a prefeasibility study in the second half of 2012
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Cerro La Mina
A second drilling campaign consisting of 20,027 meters of drilling in 60 holes was completed from October 2007 through December 2009. The emphasis was on defining the emerging gold-copper-molybdenum resource of the Cerro la Mina deposit 1.5 km ENE of the Campamento deposit, plus evaluation of the showings between Campamento and Cerro la Mina.
Infrastructure
Chiapas has good communications and highway systems. The Pan American Highway links the state capital, Tuxtla Gutiérrez, to the state of Oaxaca and the country of Guatemala. Highway 195 passes adjacent to the Ixhuatan property and joins Tuxtla Gutiérrez to Tabasco State’s capital, Villahermosa. Both cities can provide services, supplies and personnel.
The railway system and air transportation are also good with international airports located in Villahermosa and at Tuxtla Gutiérrez.
Access to the Pacific Ocean is from Puerto Madero, a port city near the Guatemala border.
Chiapas has four major hydroelectric power plants so electricity is plentiful and inexpensive.
Enviromental
Environmental regulations in Mexico are governed by the Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT). All necessary environmental permits for the Ixhuatan project are in hand.
Land Tenure
The ejido, a communal land system, is a distinctive part of Mexican history. Ejido lands are the lands surrounding villages and settlements. The ejidos own the surface rights to the lands near their villages. Land tenure for mineral rights are acquired through the national government.
Agreements have to be negotiated with each ejido to allow work to be carried out. Agreements with the proper ejido’s are in place for Campamento.
The projection of the Cerro La Mina magnetic (intrusive) and geochemical trends clearly continues northeast onto the San Francisco Jacona ejido area. Unfortunately the ejido, who control surface rights to Cerro la Mina, voted unanimously to deny access to their properties - Kinross withdrew from the option agreement with Liniar (Brigus Gold) after expending US$11,612,610.34 on the Ixhuatan project (on the Cerro la Mina showing) between October 2007 and December 2009.
Social Due Diligence
Cangold intends to work with the local communities in advancing the Ixhuatan project and will use a collaborative approach to project development after identifying all local stakeholders.
Potential
Linear and Kinross Gold Corporation agreed on September 6, 2007 for Kinross to earn up to a 70% interest in the Ixhuatan project by:
“Undertaking US$15,000,000 of exploration expenditure and making payments to Linear of US$101 million plus a production decision fee of up to US$15 million.”
When the San Francisco Jacona ejido refused permission for Kinross to work on their lands Kinross walked away from the deal with Linear. There was simply no way for them to potentially negotiate a deal, and then get the necessary results back from their work, within the time frame of their massive cash earn in commitment. The Campamento resource, while a very big deal for a junior was not, at the time, something a major mining company would option a property for, certainly not on those agreement terms. Kinross was hunting for something much bigger and they drilled plus 20,000 meters and spent $11m looking for it before they were forced to drop the deal.
"The setting of the area shows similarities to that of the majority of giant porphyry deposits worldwide: it occurs above shallowly-dipping subduction, where an aseismic ridge is being subducted. The composition of the associated igneous rocks is alkalic, of the shoshonite suite, similar to those hosting such deposits as Grasberg (Indonesia) and Bingham Canyon (USA). The main prospects under exploration in the Ixhuatan area show abundant evidence for porphyry affinities, including very widespread biotite and feldspar alteration, and the appearance along the eastern margin of the area of a very thick advanced argillic lithocap similar to those found over porphyry deposits in other parts of the world.” Noel White, world renowned geologist
Conclusion
The Ixhuatan Gold Project already has, in the Campamento Deposit, a NI 43-101 compliant measured and indicated resource of 1,041,000 ounces of gold and 4,400,000 million ounces of silver, and another 700,000 ounces of gold and 2,250,000 ounces of silver in the inferred category – a total of 1,741,000 ozs of gold and 6,650,000 ozs of silver.
Cangold can earn 75% of the existing resource for taking what is already a scoping level project through feasibility.
“Sometimes it isn’t just about the resource, sometimes it’s also about the resourcefulness.” anon
Bob Archer, Cangolds president and CEO, and his management team are old Mexico hands, they are well established in the country having numerous good contacts. They know how to work there, that’s beside the fact they have proven they can secure projects and put them into production - Bob is also president and CEO of Great Panther Silver TSX with its two operating mines. It was Bob Archer who did the deal and bought GPR’s Guanajuato mine from a co-op of miners – and who also put the Guanajuato and Topia mines into production and secured the San Ignacio project, GPR’s next mine.
Cangold management has been in the country for a number of years and they know how to work in Mexico.
Cangold is currently trading at .31 a share. For this you get:
- 75% of the resource of 1,741,000 ozs of gold and 6,650,000 ozs of silver on the Campamento Deposit
- Maybe the potential of Cerro La Mina
- The showings between Campamento and Cerro la Mina
- A commanding position controlling a highly prospective district the main potential of which is for world-class epithermal and porphyry copper-gold deposits
- Excellent management, very experienced in Mexico and in dealing with the Ejido’s
- Tight share structure with high insider ownership
- Stocked treasury
- Minera Frisco – good neighbors to have
So is there more to the Cangold story than meets the eye? Perhaps, truly only time will tell, but it is an intriguing story, considerably de-risked, well supported by possible production from the current Campamento gold/silver resource and, in this authors opinion, currently undervalued based on its 43-101 compliant resource.
A company that is both on the path to production and profits, and has such enormous blue sky potential should be on every investors radar screen. Is Cangold on yours?
If not maybe it should be.
Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com
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Richard is host of Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 300 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.
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Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.
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