Minesite ArticleNews
August 18, 2010
With Drill Rigs Poised, Canaco Could Be About To Open Up A New Gold District In Tanzania
By Charles Wyatt
Minesite has never been a tipsheet, never will be in the future, but every now and then we publish a comment on a junior mining company which changes the perception of investors. Thus it was with Canaco back in March, when we outlined the successful lateral thinking from geologist Dr Peter Groves, on which chief executive Andrew Lee Smith had based Canaco’s exploration programme at the Handeni gold project in Tanzania. Back then, drill results were confirming that Dr Groves was on the right track, and Sinotech (Hong Kong) Corporation seemed to agree, as it had not long since become a strategic partner by acquitting a shareholding approaching 30 per cent. At last, the message got around that all the gold in Tanzania is not simply focused on the Lake Victoria Goldfields. The Magambazi gold mining licences in the Handeni district are in fact well to the east of Tanzania’s established mines, including famous names like Bulyanhulu and AngloGold Ashanti’s Geita. And once investors had digested the success of Dr Groves’ unconventional approach the shares started to move. The price started April at C40 cents, but suddenly got the wind behind it and is now at C$2.16, having advanced virtually in a straight line.
Mind you, there has been plenty of good news in the background to keep things on the move. Early in May Andrew announced that extensional drilling 240 metres north of previous holes had hit 21.7 metres at 6.79 grammes per tonne gold in one hole, including 9.5 metres at 12.75 grammes per tonne, and 21.2 metres at 4.8 grammes per tonne in another. Good widths and high grades, and further proof of Magazambi’s worth. As at May the Magambazi Lodes had contained high-grade gold intercepts in every section drilled so far, and had been defined over 440 metres of strike. What’s more, the system remains open down dip, down plunge, and along strike to the north.
In addition, the drilling had identified new lodes to the west of the main Magambazi Upper and Lower Lodes, and Dr Groves was satisfied that the Magambazi, Magambazi Central, and Magambazi North prospects were part of a 1.4 kilometre long trend of gold mineralization defined by bedrock gold occurrences, artisanal mine workings, and soil geochemical anomalies. The important point, which investors picked up on very quickly, was that this 1.4 kilometre trend represented only the southernmost segment of the 11 kilometre Handeni Gold Trend, contained within the Handeni project. No wonder the shares took off.
There comes a point when a gold project starts to be thought of as a gold district, and that point was signalled when Canaco sent some bulk samples for initial metallurgical testwork. The results were excellent, as recoveries as high as 94.14 per cent were achieved using gravity separation and cyanidation, with gravity alone being responsible for 72.59 per cent of the recovery. Moreover there were no refractory issues with the mineralization. What this means is that development of a mine is more than a mere possibility: it becomes a probability, provided there are sufficient resources at a decent grade. No great problem about that, as the drilling that followed has come up with hefty intersections, and as a result the Magambazi gold zone is being steadily extended.
The pace of exploration has been ratcheting up all the time, and in mid July Andrew decided to go for a C$20.02 million private placement, under an arrangement whereby a syndicate of brokers agreed to buy shares at C$1.40 each sufficient. These things take a bit of time as the brokers want to make sure the clients appreciate that they are earning their extortionate fees and commissions, but earlier this month the syndicate announced that it had done even better than expected and raised C$$25.06 million. With this money in the bag, little time was wasted in putting together a C$13.7 million programme to drill 28,000 metres at Magambazi. Its aim is to advance definition of the gold discovery at Magambazi and test targets in the vicinity of Magambazi Hill. At the same time RC and RAB drills will test other, riskier gold targets along the Handeni Gold Trend, and test for productive water wells. In the background airborne magnetic and ground geophysical surveys will be carried out, and further geological mapping and geochemical sampling will take place. Once the drilling is completed, the company will be in a position to announce its first resource estimate, and Andrew reckons that this will materialize between the second and third quarters of 2011.
Back in the spring SinoTech’s shareholding was 28 per cent, but if it had exercised its warrants the interest would have gone up to 33 per cent. This was considered as a potential overhang by North American investors who may not have noticed that Dr Jingbin Wang had accepted the post of chairman of Canaco. Thus the two companies were tied even closer together, and now SinoTech is sitting on a handsome profit on its original investment, and was clearly not concerned that the recent funding diluted its position to 27 per cent, including the warrants. The point for SinoTech is that it has a significant involvement in a new gold district in Tanzania, and Tanzania is one of the best countries in which to operate in Africa, as African Barrick has been keen to point out. SinoTech has also introduced the Harvest copper–gold project in Ethiopia to Canaco, but the financial due diligence is taking time, as the input from Ethiopian and Chinese accounting systems is being translated to Canadian. Andrew and his colleagues will then have to decide how Harvest can be accommodated without diluting the interest of shareholders in Handeni.
Finally, it is worth emphasising that the parent company of SinoTech is SinoTex Mineral Exploration, a major Chinese exploration and mine development company, with operations in mainland China and international operations in more than 10 countries worldwide. Andrew confirms from Canada that the relationship with SinoTech is excellent, and it provides vital technical input to the Handeni project. It would be hard to find a better partner when things move to the development stage. Last, but certainly not least, Dr Groves, the man responsible for the success at Handeni, is being awarded the Logan Medal in October, which is Canada’s top recognition for geological work. Well deserved!
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