VANCOUVER — When it comes to Mexico’s emerging Guerrero gold belt, there aren’t many geologists with as much experience in the region as David Jones, who first set boots in the area with Teck Resources (TSX: TCK.B; NYSE: TCK) in 1994.
Over the past two decades Jones has worked on wide swaths of Guerrero — first as a geologist for Teck, and then with a number of junior companies — and emerged as a leading specialist on the Tertiary granodiorite porphyries that host much of the region’s gold mineralization.
During an interview with The Northern Miner, Jones recounts his early exploration days at Guerrero, his work with Teck’s team to outline Goldcorp’s (TSX: G; NYSE: GG) prolific Los Filos mine and how a Mexican accountant named Enrique Miranda played a role in the land deals that divided the belt amongst junior explorers.
“I have an interesting tale on this, which is a great story. Back in 1999, Miranda took out a huge amount of loans to develop an orebody they were mining. He was in dire straits because the price of gold had collapsed, the loans were coming due and he wasn’t making any money,” Jones explains. “So he walked up to Teck and said: ‘I will sell you 100% of everything I have for around $15 million.’ Teck declined, and I think that goes to show nobody really knew what we were sitting on down there at the time. Miranda turned around and sold it for around twenty times that amount a few years later.”
Goldcorp would end up with control of Los Filos after striking a US$40-million deal by its predecessor Wheaton River, which included all of Miranda Mining’s holdings. Since Goldcorp was a production story, other promising assets — like Torex Gold Resources’ (TSX: TXG; US-OTC: TORXF) multi-million ounce Morelos deposit, Newstrike Capital’s (TSXV: NES; US-OTC: NWSKF) advanced-stage Ana Paula discovery and Cayden Resources’ (TSXV: CYD; US-OTC: CDKNF) early stage Morelos Sur gold project — ended up in the hands of junior explorers.
Jones notes that since the late eighties, the Guerrero belt has yielded gold discoveries at a rate of around 600,000 oz. per year, and he doesn’t see it slowing down.
The region’s most recent high-profile entrant was Osisko Mining in late 2012. The company staked a 10,000 sq. km play there, with much of it turning out to be claims Miranda had held back. When Yamana Gold (TSX: YRI; NYSE: AUY) and Agnico Eagle Mines (TSX: AEM; NYSE: AEM) took out Osisko for $3.9 billion, the company negotiated a spin-out for its Mexican assets, along with $155-million in cash and a 5% royalty on the Canadian Malartic mine.
“I spoke with someone I know [at Osisko] and they were extremely surprised no one had thought to stake up the rest of this trend. I’m not too sure what they’re doing at the moment, but I was down there a month ago, and I saw a bunch of Osisko geologists,” Jones continues.
“They just got that massive cash payment from the Malartic deal, as well as the royalty. My guess is that they are going to dump a large sum of money into the Guerrero stuff very quickly. There’s little to lose and a lot to gain. I would say half of what they’ve staked was originally Miranda’s ground,” he adds.
Jones headed back to Guerrero a decade after he left Teck in 1999, and scored his own piece of the trend that became the flagship exploration asset for Minaurum Gold (TSXV: MGG; US-OTC: MMRGF). The Vuelcos del Destino project — named after Jones’ fondness for Bob Dylan — occupies 88 sq. km on the northwestern fringes of Osisko’s land package.
Jones says that Vuelcos del Destino has all the “classic earmarks” of a Los Filos-style system, including identical intrusions, quartz and biotite content, and alteration zoning and controls. He says that the best indicator “by far” for finding gold along the Guerrero belt is the nature of the porphyry intrusive rocks, which would hold relatively quartz-rich granodiorite. He notes that many of the regional discoveries have been “blind” with orebodies rarely outcropping, but that vectors can help geologists figure out where to place drill collars.
“There’s no outcropping orebody there yet, but all the indicators are there, and those are the types of intrusions you have to drill,” Jones says. “There’s the main stock that is around 4 by 3 km, and there’s a versatile time domain electromagnetic anomaly that coincides with the magnetic anomaly and the broad geochemical anomaly with arsenic and antimony. It was the great arsenic anomalies at Ana Paula that really defined the target.”
Jones looks for the “centre of the stock” before moving around the margins, which he says provide the best targets for finding ore. He gets more textural hints from the igneous rock by looking at how it correlates with the alteration and anomaly.
Minaurum is itching to get the drills turning at Vuelcos del Destino, but complications during leadership elections in the local ejido community have delayed the company’s application for a permit.
Jones knows where he wants to drill, and has outlined a 7,000-metre maiden program that will run the company around US$1.5 million. And Minaurum has the cash-on-hand to get started, having raised $1.9 million via non-brokered private placements since January.
“There was bit of a nice move in Guerrero two or three years ago during the early Newstrike and Torex days, and now it’s picking up again, especially with Osisko being the big, new kid on the block,” president and CEO Darrell Rader adds. “We’re getting offers of financing that weren’t there a year ago, and there are definitely eyes on the story. We went over to Europe a few weeks ago and had numerous financing offers, but it’s a balance between dilution and the need to drill.”
Minaurum shares have traded within a 52-week window of 3¢ to 15¢, and are up 58% over the first half of 2014, en route to a 9.5¢ close at press time. The company has 84 million shares outstanding for a $7.6-million market capitalization.
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