Today, Equitas Resources Corp. released assay results from trenching activities at its 100% owned Cajueiro Gold Project in the Brazilian states Para and Mato Grosso. The results revealed high-grade mineralization at surface: 24 g/t, 19 g/t and 5.5 g/t over 2 m each in 3 separate trenches. Most of the assays from 9 trenches have been received, ranging from 1.16 g/t to 24.26 g/t, including a broader near-surface interval of 1.42 g/t over 12 m.
This is significant when considering that most gold open pits worldwide operate with average grades between 0.7 g/t and 2 g/t. The significance of today’s results are perfectly summed up by VP Exploration, Everett Makela: “All eight of the intersections achieved to date are worthy of follow-up, as the saprolite can be directly excavated on surface and trucked to a processing plant, without the need for drilling and blasting.”
The Baldo Zone is already in moderate sluice-box production, set to expand significantly with plans for a new gravity and CIL processing plant. The current exploration program has been designed to increase resources and provide further information to support open pit development. If today’s results are any indication, the best could be yet to come: 31 HQ holes have been recently drilled with assays pending. As a result of today’s assays, management has announced that they intend to expand the current drilling program.
Figure 1: Baldo Target at the Cajueiro Project
Today’s initial results from Equitas’ exploration program on its newly acquired Cajueiro Property are surprisingly high-grade, or as Equitas put it: “The program has significantly changed the interpretation of prospective altered and mineralized structures in the target area, as shown in Figure 2 below.”
To date, 1,680 m of trenching in 9 trenches and 31 HQ diamond drill holes totaling 1,585 m (51 m per hole on average) have been completed in the Baldo target area. Assays from 24 trench samples are still pending. Assays from all 31 drill holes are pending. More work, including diamond drilling, auger drilling and trenching, is set to commence. Thus, an increased flow of updates from the activities, including assays, is expected over the short-term, potentially hand in hand with a further appreciation of gold prices.
Prospecting for alluvials at the Baldo Zone in June 2016
Chris Harris, President and CEO of Equitas, said today: “We are very encouraged by the strong trenching results from the Baldo area, with results ranging from 1.16 g/t Au up to 24.26 g/t Au. This provides good support for the Company’s focus on fast track gold production and potential for further upgrading of the resource. The team has completed the initial exploration programme on time, and on budget, and with these exciting results we have decided to extend our drilling programme. We are well positioned for further news with all of our drilling results yet to come in.”
Everett Makela, VP Exploration, added: “Results so far have confirmed our expectation that the oxidized saprolite component of the bedrock mineralization at Baldo is host to significant gold concentrations. All eight of the intersections achieved to date are worthy of follow-up, as the saprolite can be directly excavated on surface and trucked to a processing plant, without the need for drilling and blasting. The high grade intervals in trenches TCBL_0003 and TCBL_0004 appear to represent a corresponding increase in structural complexity that adds an exciting new element to the Baldo environment. I would also emphasize that a majority of the assay results have yet to be received, so there is considerable new information still to come from this exploration program.”
Interestingly, the goal of the initial exploration program was to prove the oxide potential of the Baldo deposit as, until now, only the alluvium has been mined sporadically. Previous mapping and surface sampling has revealed the Baldo area as host to widespread gold mineralization in the saprolite.
To date, 3 additional target signatures similar to the current focus area have been identified. Targets will be reviewed in detail and ranked in preparation for upcoming exploration programs.
The trenching program targeted gold mineralization in the near-surface saprolite (the oxidized equivalent of hydrothermally altered bedrock structures hosting gold mineralization with associated pyrite and quartz veining). Assays received to date, for trenches #1 to #5 inclusive a portion of #6 and #7, have identified 8 discrete intervals of interest, as listed in the table below.
Figure 2: Plan view of Baldo target area with new geological interpretation, trenches, drill hole traces and current intersections of interest
Observations of the high grade areas in trenches #3 and #4 indicate that this mineralization and associated alteration may have been focused by a combination of NE and EW deformation events. Further delineation of the high-grade intervals is in progress with diamond drilling, auger drilling and trench sampling. Final results and an updated structural interpretation will be announced when completed. It is anticipated that a follow-up program of resource definition and further exploration will commence once all results have been received and incorporated into the model.
Fast Track to Gold Production
Last month, Equitas signed a long term funding term sheet for $6million USD, $5million a revolving gold prepay and a $1million equity financing from the well reputed private equity fund Cartesian Capital Group (founders of AIG Capital). Cartesian showed great long term support as their equity portion is locked up for 18 months. Hence, this funding partnership gives Equitas the ability to grow their gold production as rapidly as they choose to. With the revolving factor in place this could give Equitas the opportunity of possibly acquiring other near-term gold projects nearby.
This year they plan on constructing a gravity and CIL plant, and sometime next year they plan to mutiply these plants on other zones of the Cajueiro project. The processing plants should increase gold output significantly and could lift the company to a strong/positive cash-flow position. In Equitas’ corporate presentation they state that the first gravity plant will put the company at a self-sustaining position. The production from the CIL plant is projected to put the company into a cash-flow position where they can then grow organically.
With assays from 31 drill holes pending, metallurgical results from a 100kg sample of gold-mineralized saprolite; additional drilling and trenching, the exciting times are just getting started for Equitas and its shareholders.
Core from sulphide-oxide transition zone, Baldo June 2016
Richard Crew and VP Exploration Everett Makela at Layne drill rig, Baldo June 2016
Everett Makela reviews Baldo core, June 2016
As noted in “Ready to make money as an incrementally growing gold miner” (April 27, 2016):
The gravity plant is expected to cost $300,000 USD and has a general production capacity of roughly 3,000 ounces (“oz”) of gold annually. Hence with gold selling for $1,200 USD, Equitas could generate $300,000 USD monthly. The annual production capacity of a CIL plant (~$2 million USD) is roughly between 10,000 and 12,000 oz of gold. Potentially, 1 CIL plant and 1-2 gravity plants could be added each year for the next 4 years, resulting in an annual output of >60,000 oz. This significant production growth potential over the next few years is providing shareholders with an exciting opportunity.
According to an interview between Chris Parry and Equitas’ CEO Chris Harris, Brazil now offers tremendous opportunities, especially for such low-cost, close to surface, open pit gold deposits amenable for rapid development and expansion.For example, Equitas’ drilling costs currently stand at less than $100 USD per meter (a fraction of the costs a few years ago or when compared to North America), whereas the capital costs for the gravity plant are said to have fallen by more than 50% over the last year. Such cost compressions in Brazil will result in much faster payback periods and higher profitability.
Water is readily available from a nearby river, whereas a new hydro dam will supply the area with cheap electricity within the next 2 years, which may drive down the mine’s operating costs significantly and potentially make this area a world-class mining district, in which Equitas now controls major land holdings.The recently secured funding could partly be used for new acquisition opportunities in Brazil.Equitas’ team in Brazil is highly experienced in gold exploration, development and mining, with a strong track-record in South America including Brazil.
Trench reclamation at the Baldo Zone in June 2016
Major milestones ahead
First, Equitas will acquire and install a gravity plant to process the saprolite mineralization from the Baldo Zone. Once permits and the necessary supply agreements are in hand, the second phase of the plan envisions the construction of a CIL plant between the Baldo and Crente Zones. These 2 zones are less than 1 km apart. Initial metallurgical test work indicates that in excess of 85% gold recovery can be achieved through gravity separation and cyanide leaching.
The 3rd phase would be to increase production Cajueiro under a full production licence. Rockstone expects that this could be funded through operating cash-flows. This could mean that no further equity dilution is targeted. To achieve this, the plan is to put the Baldo and Crente Zones into dual production through CIL and gravity plants.While Baldo already produces gold with a “modest” rate, Crente is set to be tied into the Baldo production.
Other target areas on Cajueiro are also highly prospective, with previous artisanal mining activity across the property.
The Juruena gold belt has historic artisanal regional gold production of 7-10 million oz and its considered a recognized mining friendly jurisdiction.Several major miners have an active presence (e.g. Vale, Anglo, BHP Billiton, Anglogold, Kinross). Brazil owns the 7th largest gold reserves globally. The country produced >$6.5 billion worth of gold in 2012, yet a large proportion of the country is under-explored and as such is offering a distinguished opportunity through the use of modern exploration and mining technologies. Brazil is ranked 3/12 of its regional countries for doing good business. Brazil is the world’s 6th largest economy and 5th largest by population. It is rated investment grade by both S&P and Moody’s. Net inflows of foreign investment have increased by a factor of >5 (from $12 billion in 2003 to $67 billion in 2011). Brazilian mining law includes a 1% royalty fee on gold, transparent title and highly competitive tax rates. Brazil’s economy has been on a downtrend for a handful of years.
Rockstone believes this all makes for a very rare and exceptional opportunity to rapidly develop, grow and acquire additional projects within Central Brazil.
Everett Makela examining trench excavation in June 2016
Trenching at the Baldo Zone in June 2016
Trench sampling at the Baldo Zone in June 2016
Coverage
Research #12 “Equitas secures innovative funding for an unique opportunity“ (June 7, 2016)
Research #11 “Equitas starts drilling to prove up more gold for production“ (May 26, 2016)
Research #10 “Ready to make money as an incrementally growing gold miner“ (April 27, 2016)
Research #9 “Equitas Acquires Turnkey Gold Mine For Near-Term Cash Flow Growth While Getting Ready For Garland Nickel Exploration“ (January 15, 2016)
Research #8 “The Pathway To Discovery“ (December 16, 2015)
Research #7 “Voisey‘s Bay 2.0“ (October 21, 2015)
Research #6 “Equitas Starts Drilling and Triggers Buying Rush“ (September 24, 2015)
Research #5 “Kingsley Arrives at Equitas‘ Garland Base Camp“ (September 10, 2015)
Research #4 “Early Warning Report on Equitas Resources“ (September 2, 2015)
Research #3 “Beyond Our Wildest Dreams (Revisited)“ (June 26, 2015)
Research #2 “King & Makela Identify 9 Knock-Your-Socks-Off-Targets near Voisey`s Bay Nickel Mine“ (May 13, 2015)
Research #1 “Vale Vale! Ex-Vale‘s Principal Geologist and Chief Geophysicist on the Case to Answer the Multi-Billion-Dollar-Question“ (April 20, 2015)
Disclaimer: Please read the full disclaimer within the full research report (here) as fundamental risks and conflicts of interest exist.
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