VANCOUVER — In the first drill program ever to test the 7,000 sq. km Block 14 property in Sudan, Orca Gold (TSXV: ORG; US-OTC: CANWF) pulled intercepts like 2.39 grams gold per tonne over 63 metres, 3.7 grams gold over 31 metres and 13.6 grams gold over 19 metres.
Within a year the company grew that discovery into a deposit hosting 1.7 million oz. near-surface gold. But the market failed to respond. So Orca stepped 60 km east to see if it could make a second discovery. The answer: a definite yes.
The first four holes into the EG3.2 target on the eastern side of Block 14 all returned gold. The best result came in hole 339, which cut a 14-metre intercept averaging 65.79 grams gold from just 9 metres downhole. The next 60 metres of core included four other mineralized intercepts: 6 metres of 1.22 grams gold, 8 metres of 1.61 grams gold, 9 metres of 6.76 grams gold and 4 metres of 1.37 grams gold.
The other three holes also returned interesting intercepts, including 21 metres grading 19.35 grams gold in hole 341, 31 metres grading 1.25 grams gold in hole 342 and 29 metres of 1.26 grams gold in hole 340.
“We drilled EG3.2 alongside a bunch of other targets at the property,” said Simon Jackson, Orca’s president and CEO, in an interview. “Obviously the results from 3.2 were of such a quality that we put them out immediately — we have a second discovery.”
The market responded to the EG3.2 discovery, lifting Orca’s share price 8¢, or 17% in two days to 55¢.
Finding a second gold zone at Block 14 sets a rapid discovery rate for Orca, a company that came into existence only a year ago. The discovery holes at Galat Sufar South — the deposit 60 km west — were drilled only a year and a half ago.
The people behind Orca are perhaps the main reason this junior is advancing so quickly. Orca is the new exploration vehicle for the team that founded, advanced and sold Red Back Mining and its Tasiast gold deposit to Kinross Gold (TSX: K; NYSE: KGC) for $7.1 billion in 2010. Jackson said after Red Back the team wanted to continue working together, so they sat down to consider where to work.
“Hugh, our exploration geologist, said he thought one of the most prospective places in the world was the Arabian–Nubian Shield, specifically in Sudan, because over the previous decade during the boom times Sudan had received little to no exploration at all,” Jackson said. “That was partly due to the troubles in that country in the past, but those troubles being gone, we decided it seemed a reasonable place to go.”
Jackson’s group signed a deal to earn a 70% stake in Block 14, a massive land package in the northern end of Sudan. There is extensive artisanal mining activity all over Block 14, but the project’s 7,000 sq. km had never seen a drill hole.
“We hit significant mineralization in the first drill hole,” Jackson said. “At that point we decided we had better take this company public.”
Jackson’s group arranged a reverse takeover of Canaco Resources, a long-established junior explorer with a large treasury that had lost its momentum. When the dust settled Canaco had become Orca, Jackson and his Red Back team were in charge and the treasury contained $60 million.
“We continued to drill Galat Sufar South and the natural culmination of that was our first resource,” Jackson said. “It was a very solid resource — just under 2 million ounces at just under 2 grams gold, and close to surface — but the market gave us little value for that discovery.
“So we decided rather than keep drilling the existing resource — we could make it bigger and we would still get little value for it — we thought we would go and drill another few targets, and see if we could make another discovery.”
The company had a long list of targets from which to choose. At Block 14 Orca’s first step in finding gold is to follow the artisanal miners.
“The artisanals are doing anything from metal detecting for nuggets to following veins with shafts in a few places, digging pits with rudimentary equipment,” Jackson said. “They are literally picking up nuggets on the surface. That’s how unexplored this property is. It’s true gold-rush stuff here, and we have lots of places to look.”
EG3.2 became a priority target when Orca geologists realized the artisanals working there were not just mining a vein — they were mining host rock.
“Our target here is a multi-million ounce bulk-tonnage gold mine that can be exploited on a large scale, so we aren’t really interested in skinny veins,” Jackson said.
The team started by chip sampling at EG3.2, where the best of three areas tested returned 3.15 grams gold over 13 metres and 1.24 grams gold over 20 metres. Two other areas of artisanal workings, located on parallel structures 100 metres east, returned 30 metres of 1.38 grams gold, 25 metres of 0.48 gram gold and 25 metres of 2.62 grams gold.
Now that four of four drill holes have also returned prospective results, Jackson and his team have to figure out what to do next.
“We’ll discuss the results and design the next program,” Jackson said. “Obviously that will include more holes at 3.2, but we have a lot of places to look. This whole property is covered in gold.”
The initial resource at Galat Sufar South supports that contention. With just a year’s worth of drilling totalling 36,000 metres, Orca defined 22.2 million indicated tonnes grading 1.84 grams gold and 6.5 million inferred tonnes averaging 1.9 grams gold. In total the resource contains 1.7 million oz. gold, and 90% of those ounces sit within 100 metres of surface.
Orca is buying a 70% stake in Block 14 via staged payments totalling US$9.5 million. The final US$3 million payment is due in September. The Sudanese government owns 20% of the project and the private Sudanese vendor is retaining a 10% stake.
Block 14 is located more than 900 km north of the capital city of Khartoum. Jackson describes Khartoum as a modern city with good infrastructure, and in Orca’s three years working in Sudan, the company has encountered zero barriers to doing business.
“One of our great challenges is to educate the market on Sudan,” Jackson said. “Sudan is nothing like what the average person in North America would think it is.”
Jackson acknowledges that part of the problem is general misconceptions about how and why Sudan broke apart into two countries two years ago, and what that means for each nation today. After decades of terrible ethnic violence, South Sudan separated from Sudan in 2011. The new nation has since struggled with continued strife. There are half a dozen different armed groups fighting each other over power and ethnic rights, and the violence has displaced more than a million of the country’s 12 million inhabitants.
Sudan is not at war. That being said, the nation has many challenges: it is stricken with poverty; it regularly earns some of the lowest rankings in the world in terms of hunger, corruption and human development; human rights are not well protected, including the right to freedom of religion; and the country’s president, Omar al-Bashir, has been indicted by the International Criminal Court (ICC) for bearing individual criminal responsibility for genocide, crimes against humanity and war crimes committed during the Darfur conflict.
However, Jackson says Sudan is far more functional than most people realize.
“Today South Sudan is crippled by conflict. Sudan is not, but a lot of people will lump them into the same basket,” Jackson said. “The U.S. government does have sanctions against Sudan, but those are not so much about the country as they are about the president and his ICC indictments. It’s our macro view that those sanctions will be relaxed. And none of that has any impact on us operating there. Most importantly, there is not a war going on in Sudan.”
Jackson and his team have faced market apprehension over a project’s location before: Red Back’s Tasiast project was in Mauritania, a country rife with poverty, corruption and human-rights abuses. Red Back nevertheless worked in the country and convinced the market — and Kinross Gold — that Mauritania was a functional place to develop a gold project.
Now the team is working to repeat that feat.
“We went to Sudan with a hypothesis that this would be a good place to find bulk-tonnage, good-grade gold deposits,” Jackson said. “We’ve already proven that hypothesis because we already have one deposit, and now we have a second discovery in a new area. We still have a lot of money in the treasury, so we still have the ability to keep exploring this property for years without having to raise money. What we do have to do is educate the market about Sudan, and we accept that isn’t going to happen overnight.”
Orca’s share price has ranged between 34¢ and 79¢ over the last 52 weeks. As of the end of 2013, the company had $48 million in its treasury.
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