Dow Jones Newswires: US Gold Sees Opening Mexican Mine, May Grow Via Acquisition (November 21, 2008)
VANCOUVER (Dow Jones)--US Gold Corp. (UXG), which had been focusing on gold finds in Nevada, continues to see success at its relatively new operation in Mexico, the Magistral mine and Palmarito project in Sinaloa state.
Earlier this month, it released assay data from a 16-hole drill program showing promising gold intersections.
"The Magistral mine did produce for a few years between 2002 and 2005, producing 30,000 ounces...so it's small but the facilities are in place, there's a fleet of trucks and an assay lab," Chairman and Chief Executive Rob McEwen said.
McEwen - the founder of Goldcorp Inc. (GG) - said the internal assay lab is of particular use because the company has been able to explore various aspects of the property in Mexico and get a 24-hour turnaround on assays.
"And that's guided the exploration program," he said.
Conversely, in Nevada, drilling has been generating core samples but the assay results don't materialize for three to four weeks, he said.
Since July 2005, when McEwen became the company's largest shareholder, US Gold's land position within Nevada's Cortez Trend has grown from 36 to 170 square miles. The trend is part of the Battle Mountain-Eureka Gold Belt. While the Cortez Trend remains under-developed, US Gold says recent discoveries indicate that it could rival the now-famous Carlin Trend, which is about 30 miles to the northeast where reserves and mineralized material are estimated to be about 180 million ounces.
"But the problem in Nevada is that, while we waited for assay results, we'd drill up to 15 more holes; it's a bit like driving a car at night where you can't see the road in front of you - the whole industry is facing this problem of not knowing if you're hitting gold," he said. "So with the Magistral lab, it's made our exploration dollar more efficient."
Cost-efficient Mexico
McEwen also said it's cheaper to drill in Mexico, the permitting is much faster than anywhere else in North America and the deposits being explored are shallower.
"So we're spending less, spending it better and getting far superior results; we'll start putting out press releases once a month beginning in January," he said.
So what happens next?
"We're looking to see if we can put the Magistral mine back into production and if we can expand our resource base so we can run at a higher rate of production," he said. "In addition, we're exploring outlying properties and have an option on about 750,000 acres - a large land package and in a district where there's lots of historic mining but an area that hasn't been explored all that well."
He said the recent drill holes were showing relatively good intersection finds at surface, meaning cheaper mining.
"The grades being found are economical, with sufficient find and that's what we're trying to establish now," he said.
A scoping study is probably still six to nine months out as exploration continues apace, he said.
Given McEwen's propensity for consolidation in the market, it raises the obvious question about a merger with, or acquisition of, a rival. After all, during his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, boosting its market capitalization to about $8 billion from $50 million.
"There are a number of (companies) in Mexico and the market could use a larger player," he said. "Institutional investors are trying to stay away from juniors right now (because) there's no liquidity in the stock and because the market capitalization is so small, meaning it won't make much of an impact on their portfolio."
In other words, consolidation is clearly the route to take when trying to get more attention in the marketplace, he said. "And that means there's better access to capital," he said.
Company Web Site: www.usgold.com
-By Brian Truscott, Dow Jones Newswires; 604-669-1595; brian.truscott@dowjones.com
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Earlier this month, it released assay data from a 16-hole drill program showing promising gold intersections.
"The Magistral mine did produce for a few years between 2002 and 2005, producing 30,000 ounces...so it's small but the facilities are in place, there's a fleet of trucks and an assay lab," Chairman and Chief Executive Rob McEwen said.
McEwen - the founder of Goldcorp Inc. (GG) - said the internal assay lab is of particular use because the company has been able to explore various aspects of the property in Mexico and get a 24-hour turnaround on assays.
"And that's guided the exploration program," he said.
Conversely, in Nevada, drilling has been generating core samples but the assay results don't materialize for three to four weeks, he said.
Since July 2005, when McEwen became the company's largest shareholder, US Gold's land position within Nevada's Cortez Trend has grown from 36 to 170 square miles. The trend is part of the Battle Mountain-Eureka Gold Belt. While the Cortez Trend remains under-developed, US Gold says recent discoveries indicate that it could rival the now-famous Carlin Trend, which is about 30 miles to the northeast where reserves and mineralized material are estimated to be about 180 million ounces.
"But the problem in Nevada is that, while we waited for assay results, we'd drill up to 15 more holes; it's a bit like driving a car at night where you can't see the road in front of you - the whole industry is facing this problem of not knowing if you're hitting gold," he said. "So with the Magistral lab, it's made our exploration dollar more efficient."
Cost-efficient Mexico
McEwen also said it's cheaper to drill in Mexico, the permitting is much faster than anywhere else in North America and the deposits being explored are shallower.
"So we're spending less, spending it better and getting far superior results; we'll start putting out press releases once a month beginning in January," he said.
So what happens next?
"We're looking to see if we can put the Magistral mine back into production and if we can expand our resource base so we can run at a higher rate of production," he said. "In addition, we're exploring outlying properties and have an option on about 750,000 acres - a large land package and in a district where there's lots of historic mining but an area that hasn't been explored all that well."
He said the recent drill holes were showing relatively good intersection finds at surface, meaning cheaper mining.
"The grades being found are economical, with sufficient find and that's what we're trying to establish now," he said.
A scoping study is probably still six to nine months out as exploration continues apace, he said.
Given McEwen's propensity for consolidation in the market, it raises the obvious question about a merger with, or acquisition of, a rival. After all, during his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, boosting its market capitalization to about $8 billion from $50 million.
"There are a number of (companies) in Mexico and the market could use a larger player," he said. "Institutional investors are trying to stay away from juniors right now (because) there's no liquidity in the stock and because the market capitalization is so small, meaning it won't make much of an impact on their portfolio."
In other words, consolidation is clearly the route to take when trying to get more attention in the marketplace, he said. "And that means there's better access to capital," he said.
Company Web Site: www.usgold.com
-By Brian Truscott, Dow Jones Newswires; 604-669-1595; brian.truscott@dowjones.com
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