A battle is brewing in Tanzania

While neither Sonora Gold and Silver (SOC-V), nor Canaco Resources (CAN-V), are much inclined to talk about, the two companies are on a collision course over a small plot of land on the Magambazi gold trend in Tanzania.

Canaco, which has been working in the area for the better part of four years, was surprised to learn that another company, Sonora, was laying claim to an option to acquire a mining licence on a 0.075 sq. km piece of land that sits within its much larger 196 sq. km. Kilindi prospecting license.

Sonora made the move on the claim back in late July, but only issued a sparse press release stating it had entered into a “property option agreement” to explore and acquire a 100% interest in a property located in the Handeni Tanga gold district – the same district that Canaco has been proving up with great market success over the last year.

The Sonora press release was brief and made no mention of the terms of the option nor of the fact that the 0.075 sq. km claim lies within in Canaco’s larger project. The release did, however, roughly coincide with a remarkable run on the company’s share price.

On Aug. 10 Sonora shares ended a sideways movement in the 10¢ range, running all the way up to a closing high of 92¢ on Oct 7. Since then its shareprice has come off a bit and closed at 70¢ in Toronto on Oct. 19.

Sonora’s MD&A report for the period ending July 31 and released in September, did shed a bit more light on the transaction. The company said it had acquired the option on the Handeni claim for US$20,150 and it was for 12 months from the signing of the agreement, which was on July 24th. It said it could extend that time period for up to two more 12 month periods and one 6 month period for US$45,000 at the beginning of each period.

On Oct. 1, the company issued another press release in which it revealed that on top of the US$20,150 for the initial option it must also pay US$90,000 over the course of one year. In addition, Sonora said, an addendum to the agreement could see 700,000 common shares of Sonora going to the local claim holder.

At the time of the MD&A report the company had just $200 thousand in its kitty, but on Oct. 6 it reported it had added to its coffers thanks to a loan from insiders of the company for $150,000 at an interest rate of 12%. The lenders also recieved a bonus payment of 58,823 shares.

On Oct. 15 the issue of the who held the claim came back to the fore after Sonora announced that the claim holder it has the option agreement with, received a mining licence on the claim.

The mining licence, Sonora says, grants the rights to prospecting and mining operations on the property.

That last release prompted the TSX Venture exchange to call on Canaco for clarification.

Canaco’s release said it had met with the Commissioner of Mines in Tanzania and that he confirmed the validity and status of Canaco’s existing Prospecting License.

The Commissioner did, however, also confirm that there were competing rights on the disputed clams, which Canaco says, it had not been previously been aware of.

Canaco’s release went on to state that “the Commissioner has advised Canaco that it has suspended the transfer of the mining license to Sonora…”

But Sonora’s chairman, chief executive and president, Ken Churchill disputes that claim.

“There’s nothing to suspend,” he says. “We haven’t even applied for the mining license; we have an option to acquire it. It’s a Tanzanian who owns the property mining licence.”

In an attempt to resolve the issue quickly, the Tanzanian mining commissioner called for representatives from both companies to meet in Dar es Salaam in the next two days.

Expect both companies to put up a decent fight due to the prospectiveness of the area.

The disputed claim is on the Magambazi gold trend whic Canaco has been drilling with great success.

It’s most recent drill results from Sept. 17 assayed 15.6 metres grading 6.6 grams gold and 27 metres grading 4.29 grams gold.

The company recently brought a third rig to the property which will increase its drilling capacity to 5,500 metres per month.

And while Canaco is staying relatively mum on the issue until matters are further resolved, company spokesman Nick Watters did emphasize the company’s experience in the country.

“We’ve been there for eight years and we’ve owned the property for four,” Watters said and he went on to underline the company’s position as a taxpayer, job provider and good social citizen in the region.