"We are finally starting to see improved productivity in the diamond drilling pace after changes we implemented over the summer period", said Ari. "The exploration focus for the balance of 2011 is going to be step-out drilling on the CMZ (central mineralised zone).” There will also be follow-up drilling on the ultra high-grade zone encountered three recently reported drill holes, and new targets outlined by extensive radiometrics and geochemical programs will also be drilled. “We will announce further details in the coming weeks once all results are received and interpreted”, continued Ari.
For investors watching the revival of mining in a region that between 1980 and 1986 was host to the largest precious metals rush in Latin American history, that bodes very well indeed. But it can hardly be counted a surprise, as the latest assay results following a whole string of good-looking intersections. Among the most recent results was a continuously mineralized intercept of 74.40 metres at 31.17 grams per tonne gold, 3.02 grams per tonne platinum and 6.78 grams per tonne palladium in the CMZ. These results confirmed the continuity of mineralisation and extended the high-grade zone in an area that will be the subject of bulk sampling in 2012.
Other intersections included 11.65 metres at 57.28 grams per tonne gold, 6.58 grams per tonne platinum and 7.66 grams per tonne palladium from one of the initial 25 metre step-out holes to the southwest. A second hole will be drilled on this section shortly, targeting more of the ultra-high-grade mineralization encountered in a previous drill hole, SPD-099, which showed 7.30 metres at 1494.7 grams per tonne gold, 516.6 grams per tonne platinum, and 558.9 grams per tonne palladium.
The company has already completed 25,000 metres of surface drilling, has constructed an accommodation complex and purchased a ball mill. In a few weeks underground diamond drilling and construction of the first phase tailings dam will commence. Next year bulk sampling will begin, along with dewatering and the construction of a gravity processing plant. Then in the first quarter of 2013 there will be an initial 43-101 report which will outline the first 12 months of probable reserves, and which will allow Colossus to predict its future earnings accurately. Approximately 475 metres of decline development has been completed on the site too. Once the decline gets to around 1,500 metres, production will be able to commence, although the eventual plan is to go to 3,500 metres.
However, equity markets remain in the doldrums, and in spite of the positive drilling news, the high gold price, and the likelihood that the company will enter commercial production in little more than a year, the shares have weakened over the past 12 months. The current price of C$6.61 is slightly up on the year-lows hit at the end of August, but still a long way short of the target prices set by most analysts. Macquarie and Dundee both set a target price of C$13.00 for the shares, although GMP and Canaccord are slightly less ambitions, looking for C$12.50 and C$12.00 respectively.
The development phase is often a low point for company share prices, and in the case of Colossus that dynamic has combined with the current weak equity markets, meaning that the potential size of any re-rating that will come as production nears is that much greater. In the meantime as the market recovers its poise, more of those high grade hits won’t do sentiment any harm at all.