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Beyond Eldorado

August 2nd, 2011

Oro Uses Sound to Find Mexico Gold

By Greg Klein

Whether it was supposed to be a land, a lake, the mother of all motherlodes, a city or even a person covered in glittering raiment, the El Dorado myth has fascinated us since the time of the Conquistadors. Now, in the Mexican state of Sinaloa, junior explorer Oro Mining plans to go into production where giant Eldorado Gold Corp pulled out.

“We’re on to a discovery at the Trinidad Property,” says Oro President Darren Bahrey. “We’re drilling the Taunus Deposit, which was previously mined by Eldorado in the late 1990s. After they left, the ground became available, and we staked this abandoned open-pit mine. Essentially, Eldorado was just scratching the surface. They mined around 90,000 ounces, something like that. It was based on just vertical RC drilling, relatively shallow. We came in around 2006 or 2007 and staked it. We realized that there’s more there, especially when we made a major discovery below the zone they called the Eldorado Zone, the zone that they mined.”

Oro Uses Sound to Find Mexico Gold

Oro’s discovery didn’t come easily. It was, as Bahrey states, “one of the more complicated deposits I’ve come across. And this one’s not just complicated geologically, but technically as well—try to drill this thing.” A few years of reverse-circulation and diamond drilling brought up broken, clay-rich material. “The gold is free and fine, so it’s washing away,” he recalls.

So Oro turned to a new technique—sonic drilling. (For a demo video, click here and scroll to the bottom of the page.) “We’re one of the first companies to use this as an exploration tool,” Bahrey says. “It’s just based on vibration; you’re not using any fluids. You’re vibrating the tube down and pulling up the material. This is the tool to use on this deposit because you’re not losing any of the gold.”

For example, one set of assay results released May 5 show that sonic drilling in the Eldorado Zone found an average grade of 2.6 grams per tonne gold over 12.7 metres, compared to nearby, previously drilled RC holes averaging 1.1 g/t over 13.5 metres.

July 21 assays included 4.07 g/t over 32 metres, 8.07 g/t over 12.7 metres, 3.37 g/t over 25.6 metres and 0.83 g/t over 72.4 metres. May 18 results included 2.24 g/t over 54.3 metres (including 5.04 over 20.9 metres), while May 5 highlights included 2 g/t over 166.6 metres (including 7.7 g/t over 24.6 metres), 4.6 g/t over 29 metres, 3.7 g/t over 20 metres and 2.5 g/t over 28 metres.

“Our most recent results are good news—32 metres of 4.07 g/t,” Bahrey comments. “That’s pretty good grade. It will definitely add to the model. It just confirms that there’s more down there at depth, and that will just keep adding to what we’ve found already.”

The property’s resource estimate shows 3.87 million tonnes grading 1.51 g/t at a 0.3 g/t cut-off for 187,000 gold ounces indicated and 2.54 million tonnes grading 1.45 g/t at a 0.3 g/t cut-off for 118,000 gold ounces inferred. The estimate was released January 6, prior to this year’s 5,000-metre sonic-drilling campaign.

I still think we’re one of the best-kept secrets in the market. The market doesn’t know us yet. That will soon change —Darren Bahrey

According to Bahrey, Oro’s plan is firm: “Let’s go mining.” For that purpose, the company brought in new blood. John Brownlie, former CEO of Capital Gold Corp and a mine builder with “a track record to make things happen pretty fast and at low cost” became Oro CEO and COO in October. In April, Capital Gold’s General Manager of Mexico Operations Marco Antonio Galindo became Oro’s VP of Operations. They joined a team that includes Oro Executive VP Frank Powell, formerly Africa exploration manager for Placer Dome, and Bahrey, Oro’s founder and a geologist with 20 years’ experience in Mexico and Central America.

“This is a group that’s been involved in major discoveries, like over 10-million-ounce discoveries during the Placer Dome days in the 1990s,” Bahrey says. “They’ve taken projects from discovery stage all the way to prefeasibility. Now that we’ve attracted John and Marco, we’re a complete package. We’ve scheduled 2012 for a PEA and 2013 for breaking ground.” The company currently projects a mine producing 40,000 to 60,000 gold ounces a year.

Trinidad is one of several Oro projects. “We have an extensive portfolio in Mexico, close to 3,000 square kilometres. So I guess we can be considered a land baron out there,” Bahrey quips.

In Zacatecas State, Oro’s 2,750-hectare El Compas Project has a January 2011 resource estimate of 524,000 tonnes grading 4.38 g/t gold and 65.5 g/t silver containing 74,000 gold ounces and 1.1 million silver ounces indicated, and 419,000 tonnes grading 3.98 g/t gold and 47.5 g/t silver containing 54,000 gold ounces and 641,000 silver ounces inferred. Back in Sinaloa State, the 8,100-hectare Cimarron Project has an inferred estimate of 3.7 million tonnes grading 0.65 g/t gold for 77,000 gold ounces.

At press time Oro had 120.6 million shares outstanding at $0.315 per share for a market cap of $38 million. As of June, the company had $7 million cash on hand. Institutions hold about 50% of shares and insiders 8%.

Despite Oro’s modest share price, Bahrey remains confident. “I still think we’re one of the best-kept secrets in the market,” he says. “The market doesn’t know us yet. That will soon change.”