A gold producer acquires the remaining part of a gold exploration company, and drilling at its flagship mine indicates high-grade mineralization below the existing resource.
Red Eagle Mining Corp. (R:TSX; RDEMF:OTCQX; R:BVL) recently announced it has acquired the remaining outstanding shares of Red Eagle Exploration Ltd. (formerly known as CB Gold Inc.). Prior to the completion of the most recent transaction, Red Eagle Mining had owned 76.43% of the exploration company.
The company stressed that the "combination of Red Eagle Mining and XR will create a strong exploration, development and operating company with four 100% owned high grade gold and silver projects in Colombia."
Red Eagle Mining is producing gold at the Santa Rosa Gold Mine, while Red Eagle Exploration held three exploration properties: Vetas Gold, California Gold and Santa Ana Silver, all located in Colombia.
The agreement was initially announced last month. Thibaut Lepouttre, writing in Caesars Report, argues that the acquisition is good news for the company: "We expect Red Eagle Mining to be able to continue to ramp up the production rate from here on, and the incoming cash flow could then easily be used to fund the exploration activities on the very exciting properties of Red Eagle Exploration."
Three Major Exploration Projects Post Merger
CB Gold's original project, the Vetas Gold project, has played a big role in Red Eagle Exploration's adventures in Colombia. In a 162-hole, 71,000-meter drill program, the company encountered "177 intersections with an average gold grade of in excess of 5 g/t, and no less than 33 intervals with an average grade of in excess of 30 g/t."
Red Eagle Exploration acquired the California Gold project in February 2017. The project includes at least 250 hectares of surface area with eight mining areas for exploitation.
Finally, there's the Santa Ana Silver project, which consists of almost 700 hectares of land. The project was acquired in August 2016 from Condor Precious Metals for CA$250,000 in cash, 8.1 million shares and a 2% NSR. Reports from mining logs 430 years ago indicate silver grades equivalent to almost 20,000 g/t silver. More recent samples from the previous owner's drilling showed 3 meters at 3.68 g/t gold and 1,495 g/t silver. The particular plan included just eight holes, but the findings were attention-getting.
A Long-Term Catalyst
Red Eagle Mining's news release in March revealed results from ongoing underground delineation drilling at the producing San Ramon Gold Mine, Santa Rosa Gold Project, Antioquia, Colombia, have indicated mineralization below the current resource.
The testing showed promising results for the Colombia mine:
"Results from 35 additional underground diamond drill holes have been received (SRDU-0196 to SRDU-0231). Most of this drilling is located below the mine workings along 300 metres of strike between sections 856,970 E and 857,200 E extending the vertical extent of known gold mineralization."
The company goes more in depth about its results about the great mineralization it found: "Mineralization is open to depth in an area with no previous drilling and outside of the mineral resource and mineral reserve. Results continue to return intercepts with grades significantly higher than the reserve grade of 5.2 g/t Au with highlights including intersections."
Red Eagle Mining CEO Ian Slater says the company expects to start mining the area in 2019. Slater also went on to say that the significance of the findings is that "the ore body continues at depth."
"We had issues in 2016 and 2017 with mine development at San Ramon, but everything has been resolved in 2018. We're excited to ramp up to 1,000 tonnes per day by July."
At the time of publication, the shares sit at CA$0.23.