Less than a year after picking up the Caballo Blanco project in Mexico for US$17.5 million, Candelaria Mining (TSXV: CAND) has pulled in a $9.77 million strategic investment from Agnico Eagle Mines (TSX: AEM; NYSE: AEM).
Agnico Eagle says the junior’s 100%-owned gold and silver project looks a lot like its own La India project did before it entered commercial production in February 2014.
“For us, it has some similarities with our La India mine, so we see it as the early days of La India with a good half a million ounces, with room to grow, and with apparently some easy metallurgy,” Guy Gosselin, Agnico’s vice-president of exploration, tells The Northern Miner.
“We thought it was a good opportunity for us to get involved and, for them, they’re going to use the proceeds to continue to advance studies and regional exploration. It was a good fit.”
Ramon Perez, Candelaria’s CEO, could not be reached for comment, but described the investment in a press release as a “strong endorsement of the quality and potential” of Caballo Blanco.
Caballo Blanco has 590,000 oz. gold and 2.17 million oz. silver in the indicated category (31.2 million tonnes grading 0.52 gram gold per tonne and 2.16 grams silver per tonne). Inferred resources add 95,000 oz. gold and 590,000 oz. silver (8.63 million tonnes grading 0.34 gram gold and 2.14 grams silver).
The resource is contained within a conceptual open pit, using gold and silver prices of US$1,150 per oz. and US$21 per oz., and a cut-off grade of 0.11 gram gold.
Mineralization remains open to the north and south along trend and at depth.
“It’s shallow and they have identified some good targets, and so this is why we believe that with more exploration it could become a more sizeable deposit, so it was a good early stage opportunity for us,” Gosselin says. “It’s an oxidized system, having a good strip ratio per metre. It just needs to get bigger.”
When Agnico started at La India, Gosselin adds, the deposit was close to around 1 million ounces, but it grew larger with drilling, and he suspects the same thing might happen with Caballo Blanco.
“We continued to drill and continued to add ounces and we even managed to process some of the sulphide or transitional mineralization below the oxides,” he says of La India. “Caballo Blanco is half the size of what La India was, but it’s open to grow, so for us, it appears to be an attractive opportunity.”
Agnico acquired the La India property, 200 km east of Hermosillo in the state of Sonora, in November 2011, and within 22 months had completed its design, permitting, construction and start-up. Mining began in September 2013, with initial leaching the following month, and the first gold pour in November of that year.
The mine is a collection of deposits grouped into three open pits — North, La India (central) and Main — that are being mined over an estimated six-year mine life. Last year it produced 115,162 oz. gold total cash costs of US$395 per oz. gold.
This year Agnico plans to spend $6.9 million on 31,000 metres of exploration drilling and $800,000 on 5,000 metres of conversion drilling. During the first quarter, the company drilled infill holes in La India’s Main pit to evaluate the potential to extend mineral reserves and resources below the current pit design.
At Caballo Blanco, a total of 233 core holes and 36 reverse circulation holes have been drilled since gold was found there. So far, two large areas of epithermal gold mineralization have been discovered called the Northern Zone and the Highway Zone. Both are prominent high-sulphidation and low-sulphidation epithermal gold prospects, respectively, that occur within extensive areas of clay and silica alteration.
The Northern and Highway zones lie along a north-south linear trend over a distance of more than 9 km, and include the La Paila discovery on the north end of the trend in the Northern Zone. The Northern Zone is about 4 km by 5 km in area and the Highway Zone is about 4 km by 2 km in area.
Drilling at La Paila has returned intercepts of 2.19 grams gold over 90 metres in hole 8CDN-4; 0.58 gram gold over 216 metres in hole 7CBN-2; and 1.08 grams gold over 60 metres in hole 11CBN-183.
The deposit is oxidized to a depth of at least 300 metres and gold mineralization is very fine, occurring within a vuggy and brecciated silica alteration of an original andesite host rock in the upper levels of the surrounding epithermal system.
The company believes the elongate and silicified gold-rich mineralization at La Paila likely formed from fluid rising along a north-trending fault structure well above a deeper intrusive heat source.
The property lies at the eastern end of the Trans-Mexican volcanic belt. According to a technical report published in April 2017, the property is “underlain by sub-aerial basalts, andesites and diorite dykes of Miocene age covered by a sequence of felsic quartz tuffs, andesitic ‘dome’ complexes, volcaniclastics and younger intrusive dacitic plugs.”
The technical report recommends a budget of US$6 million for further exploration that would consist of 40,000 metres of core drilling, focused primarily on infill and definition drilling at La Paila and drill testing or investigation of less developed gold targets outside La Paila, such as Bandera, Las Cuevas, La Cruz and Red Valley in the Northern Zone, and La Luz, Highway North and Highway South in the Highway Zone.
Metallurgical work on core and surface samples from La Paila by previous owners in 2009 was favourable, Candelaria says. Initial bottle roll testing indicated the mineralized material is “highly amenable” to leaching.
Caballo Blanco consists of 14 contiguous mining claims over 198 sq. km. The project, on the eastern coast of Mexico, is 65 km northwest of Veracruz, a major port city on the Gulf of Mexico. Access to the property is via the Pan American Highway, which transects the eastern portion of the claim block.
According to the technical report, the first record of gold on the property was when Charlie Warren of Whitehorse, Yukon, “sampled a small quartz vein outcrop in a road cut along the Pan American Highway” and “through his Mexican wife, staked several mineral claims to cover what is known today at the Highway Zone.” Warren retains a net smelter return royalty (NSR) on the project, which is scaled to production rates.
In 1997, Warren optioned the property to Almaden Minerals (TSX: AMM), which retains a 1.5% NSR on the property. Almaden drilled 17 RC holes and in 2001 optioned the property to Noranda, which drilled nine core holes and then returned the property to Almaden later the same year.
In 2002, Almaden signed a joint-venture agreement with Comaplex Minerals, which drilled 10 core holes between 2004 and 2006, during which time it discovered the La Paila zone. Comaplex earned a 60% interest in the property by spending about US$2 million over four years, but in February 2017, Almaden purchased Comaplex’s 60% stake for US$1.25 million and then optioned the property to Canadian Gold Hunter Corp.
Between 2007 and 2009, Canadian Gold Hunter drilled 42 core holes, at least 30 of which targeted La Paila. In September 2009, Canadian Gold Hunter changed its name to NGEx Resources (TSX: NGQ; US-OTC: NGQ) and signed a share purchase agreement with Goldgroup Resources to earn a 70% stake in the project.
Between 2010 and 2012 Goldgroup Resources drilled 193 holes in seven areas in the Northern Zone and in October 2011 acquired the remaining 30% of the project from Almaden. Two resource estimates were completed, one in March 2010 and a second in February 2012.
In December 2014, Goldgroup Resources sold its 100% interest to Timmins Gold for US$10 million in cash and 16 million shares. Timmins Gold, now called Alio Gold (TSX: ALO; NYSE: ALO), sold its 100% stake in the project to Candelaria in July 2016.
Candelaria’s shares on the TSX are trading at around 99¢ within a 52-week range of 36¢ and $1.19. The company has 92 million shares outstanding.