Cangold Pushes Ixhuatan Gold Project toward Prefeasibility
By Greg Klein
Now this is a testament to the lure of gold—and of Mexico. Two producing silver mines, a silver development project and a silver exploration project, all south of the Rio Grande, didn’t quite satisfy the management of Great Panther Silver TSX:GPR. Hence the existence of Cangold TSXV:CLD, a company whose management and board are almost identical to Great Panther’s. Having picked up a 75% option on the Ixhuatan Project in the same country, Cangold has a gold project moving toward prefeasibility.
“The beauty of this is that it’s an advanced-stage project with a compliant resource of 1.7 million gold ounces,” says President/CEO Bob Archer. “And because it’s the same management team as Great Panther, we can move it into production, if that’s the case.”
Cangold’s Ixhuatan Project came with a 1.7-million-ounce gold resource
Located in the southern state of Chiapas, the 4,176-hectare property had already seen 89,000 metres of drilling in 342 holes. “That’s a huge amount, and the deposit itself is fairly well defined,” says Archer. “So there’s really no need to update the resource. We’ve made it current from a regulatory standpoint, and any additional drilling will come at the prefeasibility stage, mostly a few fill-in holes, if there are any gaps in the model, or a couple of additional holes for a more detailed metallurgical study.”
Included in the project’s May 2011 43-101 technical report is a 2006 resource estimate for the Campamento Deposit, one of nine mineralized zones. The measured category shows 1.95 million tonnes grading 3.49 grams per tonne gold and 15.84 g/t silver for 219,000 gold ounces and 990,000 silver ounces. The indicated category shows 15.62 million tonnes grading 1.64 g/t gold and 6.79 g/t silver for 823,000 gold ounces and 3.41 million silver ounces. Inferred resources come to 21.75 million tonnes grading 1.01 g/t gold and 3.23 g/t silver for 703,000 gold ounces and 2.26 million silver ounces. These numbers use a 0.5 g/t gold cutoff.
Under last September’s option agreement—labelled a reverse takeover by the TSXV—Cangold may acquire 75% of Linear Gold, the project’s owner and a subsidiary of Brigus Gold Corp TSX:BRD, by paying Brigus a total of $10 million and 20 million Cangold shares over two years and completing feasibility within three years. Following production, Brigus would get $5 per gold ounce in the proven and probable reserves shown in the feasibility study as well as a 2% net smelter royalty.
“Brigus did the deal with us because of our management team,” Archer declares. “They were focused on their Black Fox Gold Mine near Timmins, so Ixhuatan was a bit of an orphan for them. They had no team in Mexico, and they weren’t getting any value for it in their share price. So they decided to do the deal with a group that was already well established in Mexico, knew how to operate there and was ready to move the project forward.”
Metallurgical testing is already underway, part of an internal scoping study that will likely lead to an independent prefeasibility for an open pit mine by late summer or early fall. The metallurgy gets a bit fussy because southern Mexico’s rainfall rules out heap-leach processing. “We’d like to use a contained process that would avoid any requirement for cyanide or anything like that. That would lead to a more environmentally friendly operation,” Archer says.
The beauty of this is that it’s an advanced-stage project with a compliant resource of 1.7 million gold ounces. And because it’s the same management team as Great Panther, we can move it into production —Bob Archer
As for infrastructure, “It’s great,” Archer says. “There’s a relatively short gravel road that leads right onto the property and paved roads leading to a number of nearby towns.”
While the scoping study takes place, the company works on community relations. “Again, one of the beauties of this project is that we don’t have to go in with a big drill program. We have the luxury of time, which allows us to engage the local communities and find out what their concerns might be. There are far too many projects that have been stopped in their tracks because companies didn’t communicate properly.”
At the opposite end of the country, in Sonora State, Cangold has the early-stage Plomo Project. “It’s very close to a major regional structure that comes through northwestern Mexico,” Archer reports. “Most of the deposits in that region are related to the structure, both spatially and geologically. It’s only about 25 kilometres from La Herradura [44% owned by Newmont TSX:NMC], one of Mexico’s largest gold mines. We’ve defined an area that’s about five kilometres long and three kilometres wide with a number of gold-bearing zones. We’ll be going back to start mapping and sampling and ultimately resume drilling later this year.”
Cangold is earning 100% of Plomo subject to a 2% NSR with a private owner. Cangold also owns the Argosy Project, a past-producing gold mine in Ontario’s Red Lake District. But that one’s up for grabs, according to Archer. He wants to stay focused on Mexico.
“I love working there,” he says. “I had worked there back in the late 1990s, when I started Great Panther with a friend who’s a Mexican mining engineer. We wanted to build a Mexican mining company. The governments at all levels are very supportive of mining in general, and there’s a good mining act. The geology is fantastic, and there are still lots of discoveries to be made.”
At press time Cangold, had 33.9 million shares trading at $0.20 for a market cap of $6.8 million. “Yet we’re earning 75% of a 1.7-million-ounce gold deposit,” Archer concludes. “The share price doesn’t reflect the potential of the project whatsoever. I think there’s a huge upside there.”