Chalice, Zara report Eritrea Gold Results up to 39.25 g/t over 3m
Chalice Gold Mines Ltd TSX:CXN and Zara Mining Share Company announced assays from the Koka South discovery adjacent to their Zara Gold Project in Eritrea. Results include
39.25 g/t gold over 3 metres (including 115.33 g/t over 1 metre) 21.38 g/t over 5 metres 9.73 g/t over 7 metres (including 49.64 g/t over 1 metre) 6.06 g/t over 5 metres
The project is a joint venture under Zara Mining SC, the operating company. Under the agreement, the Eritrean National Mining Corp will pay Chalice US$32 million for a 30% interest. ENAMCO will also pay Chalice approximately $2 million towards exploration costs on the Zara licences outside the Koka licence. Following completion of the agreement, the Zara Project’s ownership structure will be 60% Chalice, 30% ENAMCO and 10% free carried interest. Chalice and ENAMCO will pay development costs for Koka and exploration costs for the Zara licences on a two-thirds/one-third basis.
Managing Director Doug Jones tells ResourceClips.com, “They’re pretty encouraging results. Koka South is immediately adjacent to the Koka open pit, where we’ve got 760,000 ounces mineable at five grams. It looks like Koka South is a continuation of that system, whereas the Koka Main mineralization tends to be over a width of 15 to 20 metres. It seems to extend down into the Koka South area, but you’re getting significantly higher results, as you can see from these results and the previous results in early November. The Chinese are already heavily invested in Eritrea. It’s not a surprise that they’re quite keen on acquiring additional assets there. And there’s quite a strong political link between Eritrea and China —Doug Jones
“We’ve got assays from three more holes to come for this season. Holes 236 and 237 look fairly promising because they have visible mineralization, and that does seem to confirm that mineralization continues to the south, at depth. It seems that close to surface at Koka South we’re not seeing the mineralization in the surface geochemistry. There were a couple of holes that had no significant intersections near surface. But certainly the deeper holes have good-looking visible mineralization.
“We’re continuing to expand; 760,000 ounces, even at five grams, is not a big reserve. We’d like to get that over a million ounces. Given that Koka South is so close to the pit, it could be a significant material addition to the Koka operation. It’ll probably be underground, though. I think the strip ratio there would preclude an open pit.
“About two and a half kilometres further south we’ve got the Debre Konate prospect, where we had some pretty interesting results that we released December 15. That’s a pretty exciting prospect too, with very robust soil anomalies. The Debre Tsaeda prospect looks interesting too. So we’ve got a big drill program planned for next year,” Jones says.
Chalice announced December 12 it had signed a non-binding letter of intent proposing terms to sell its 60% share in Zara. Jones acknowledges widespread speculation that a Chinese company was involved. But he declined to elaborate publicly.
“The Chinese are already heavily invested in Eritrea,” he points out. “It’s not a surprise that they’re quite keen on acquiring additional assets there. And there’s quite a strong political link between Eritrea and China.
“The UN sanctions on Eritrea have had a limited effect on exploration and mining so far,” he reports. “It’s been suggested in some circles that the sale of this project results from the sanctions. But it has nothing to do with the sanctions. The press release from Nevsun TSX:NSU [December 6] pointed out that the wording of the sanctions has virtually no impact on the mining industry. I think that it just reinforces aversion in people who are already risk-averse. But I don’t think people who were prepared to fund projects in Eritrea six months ago are going to change their minds because of renewed or extended sanctions. Certainly in terms of our day-to-day activities, it’s not going to affect us at all.
“If the sale goes through, we’ll be looking for a new project,” Jones says. “I think there’ll be a lot of opportunity next year. The way the market is, I think it’s going to be difficult for a lot of juniors to fund their projects. If we have something in the order of $80 million to $100 million, that gives us the ability to leverage it into new projects. We’d be looking for relatively advanced projects.
“We were planning to take Koka into production. We put everything into place except the funding, then this offer came through. We were already transitioning from a purely exploration company towards development with the addition of a couple of mining engineers, and more additions of that sort were planned.
“We’d like to diversify our political risk. Regardless of whether we think Eritrea is a good country to work in, the market has its own view. Along with Nevsun, we’ve been hammered fairly hard through that perception. We’ll certainly look at opportunities inside Eritrea, but we’ll look at others as well, to diversify our political risk.”
Jones concludes, “We’re in an interesting position at the moment. We have a good project which we could take through to production. We’re in the process of being made an offer. If we go through with that, it should leave us with a significant amount of money which will open up a lot of opportunities going into the new year. With the market the way it is, I think a lot of the juniors are going to be starved for funds. So if we have cash in the kitty, we’ll be able to take on some new projects.”
CHN Price at posting:
30.0¢ Sentiment: Buy Disclosure: Held
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