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Inventing the Jalisco Gold BeltBob Moriarty It’s been a busy month. I’ve been to Mexico twice and seen three incredible projects. In between, I went for a day to see the NY Gold Show. It reminded me most of a show I went to in 2001, two months before we started 321Gold. There were only 16 companies there. No one loved gold. I wrote about it and predicted a bull market. Well, we are still in it. Before I went to see Cayden Resources, I was primed to love it. The company has a tight share structure with a tiny 41 million shares outstanding. Better yet, it has $16 million in the bank or on the way and will end the year with $9 million after a 5000-meter drill program at their latest project, El Barqueno. While the wailing of tears and gnashing of teeth from Vancouver and Toronto can be heard from the moon due to the whining of junior mining companies who don’t know how to manage money, Cayden is almost embarrassing to be around. They just completed a $15.7 million dollar deal with Goldcorp on one of their projects in the Guerrero Gold Belt. They also hold a sliver of land in between Goldcorp’s Los Filos mine and their El Bermejal mine. Goldcorp is in the process of determining a value for that sliver. It could be a $40 million dollar purchase or $200 million dollar purchase but for sure, it’s bigger than Cayden’s current $15 million dollar enterprise value. Goldcorp is producing 336,000 ounces a year from Los Filos. Goldcorp has already shown the sliver in their future mine planning. It’s a done deal with the price being set just yet. Cayden has more money coming to them once they complete the deal. In addition, Cayden is drilling another major target in the Guerrero Gold Belt they call the La Magnetita target. They are just now finishing a 5000-meter program. They are just now finishing the last drill hole and will be releasing all the drill results in 3-4 weeks. If you totally ignore El Barqueno in the Jalisco Gold Belt, Cayden has enough on its plate to make it through this downturn in gold and resource shares in incredible shape compared to its contemporaries. But El Barqueno is going to shock the industry. People are thinking that their Guerrero projects are the cake and El Barqueno the icing but it’s the other way around. El Barqueno is even better than the Guerrero Gold Belt; it’s the first major deposit in the Jalisco Gold Belt. A little history first. The deposit has a mining history. The Mexican government drilled it and produced over 250,000 ounces of gold in the 1980s. There is a historic but highly conservative non-43-101 resource of 290,000 ounces. There was 25,000 meters of core drilling but much of the core wasn’t even sampled, the holes weren’t surveyed and the samples have disappeared. Grupo Mexico acquired the property from the Mexican government and optioned it out to famed miner Chester Millar. Chester is a mining guy, he doesn’t favor exploration. He produced from a tailings dump on the project but turned the project back to Grupo Mexico. Grupo Mexico put it up for bid. Management from Keegan Resources sent over a technical team. The technical team saw exactly what I saw and told management to pick it up. Cayden Resources began operations in mid-2010. The stock has been as high as $5.40. Management is young, experienced and excellent. Their technical team is nothing short of brilliant. Cayden plucked the project from Grupo Mexico for $8 million over a few years. They are only paying $2.1 million in the first two years. If you think of “value at Risk” they only risked $7 an ounce and can buy 100% of the project for $30 an ounce of gold. That’s an exceptional deal. I’m a little shocked that prior operators didn’t get it. It took me maybe 30 minutes to “get” it. They optioned the project about 13 months ago and have only been doing their technical work for about 6 months. But it was mined; there is a lot of visual data you can see with simply your eyes. It’s really really big. The primary structure they are targeting is an east west corridor. In some of their channel samples done oblique to the east west structure, they have 91 meters of 2.9-gram gold. That’s giant and implies something both bigger and richer than a simple vein. The western section of the zone is exposed, the middle is covered with volcanic tuffs and the eastern zone is exposed. All of the samples taken and drill results show intense mineralization. This system has been pulsed, and pulsed and pulsed. Every time it was hit with a new pulse, more gold was deposited. The technical team, headed by Chief Geologist Dan McCoy, believes the east-west trend is straight and will be joined by drilling the area in the middle now under cover of volcanic tuffs. I have to agree. The structure is straight and almost perfectly vertical. It is not a fault; the forces of a massive intrusive created it, literally breaking the earth apart. It’s wide, deep and rich. I don’t think I have ever seen a deposit so easy to drill. The greatest areas of mineralization are located where a 060 bearing structure hits the east-west shear zone. You can see it in the pit area. Some intercepts run 75 grams of gold over 2 meters. I’m going to climb way out on a limb and tell you what I told Ivan Bebek and his technical people. I think they can define 5 million ounces in 18 months with 5,000 meters of drilling. And I think it’s a gold belt both richer and bigger than the Guerrero Gold Belt. Cayden needs to be thinking about how they paint some lipstick on this puppy because some major is going to want to take them out within the next two years at something 50 times their current enterprise value. I think they are going to be adding ounces in the $1 to $2 an ounce range. When the market gets it and that’s not far off, this stock is going to go a lot higher. The slam-dunk at Guerrero is merely icing on a very sweet cake. Cayden is not yet an advertiser, they may be. As I write it's a holiday in Canada so I can’t buy any shares but they won’t be cheap for long. I am biased. Cayden Resources
### Bob Moriarty 321gold Ltd |
