Auracle shares pop 51% before drill results

Shares of new Vancouver-based gold explorer Auracle Resources (AAL-V) spiked 51% last week to 46¢ apiece before the release of assay results from the company’s first round of drilling at its Mexican Hat gold property in Arizona.

Auracle started a 4,200-metre drill program at the property in mid-October and by mid-December had completed 15 holes for a total of 2,600 metres. The program has been designed to redrill historical drill holes completed by a half-dozen operators at the project since the 1980s, including Placer Dome, as well as test new targets derived from recently collected high-grade samples.

Last month, Auracle’s management decided to add a second drill to Mexican Hat. One drill will now concentrate on step-out drilling while the other will continue to conduct infill drilling to confirm historic data and tighten the drill hole spacing. In all, Auracle plans to test roughly 1,000 metres of strike length and 200 metres of width.

Rock chip sampling undertaken prior to the company’s public listing in July 2011 generated several follow-up targets for the program following high-grade assays from the lab. Samples taken along cross-cuts of drill access roads on the property returned assays as high as 48 grams gold per tonne over 10 metres, included within a larger section grading 4.23 grams gold over 160 metres.

Auracle’s management says visual observations of new drill core have identified zones of strongly fractured material containing intense hematite and limonite alteration in the majority of holes. It says such alteration was indicative of gold mineralization in the historic drill programs as well as earlier rock sampling completed by the company.

A historical, non-National Instrument 43-101-compliant resource estimate by Placer Dome and joint venture partner Oneida Resources identified six major gold-bearing zones at Mexican Hat in 1989. Their target was an open-pit, heap-leachable gold deposit. The six zones delineated in over 65,000 feet of drilling combined to 10.3 million tons averaging 0.035 oz. gold per ton for 361,894 oz. contained gold. In metric terms, the resource comprised 9.3 million tonnes averaging 1.08 grams gold.

As a low-sulphidation epithermal lode gold occurrence, mineralization at Mexican Hat is generally structurally controlled and occurs in silicified fault zones, shears and pipe-like breccias. Gold mineralization largely consists of free gold with pyrite, with most of the pyrite having been oxidized, leaving limonite, hematite and goethite.

The property is located in Cochise Country in southeastern Arizona, 115 km east of Tucson. The majority of the mineral claims fall under federal jurisdiction, being administered by the United States Bureau of Land Management. Auracle says access to the property is by all-weather roads and infrastructure in the area is good: water is available from nearby commercial wells and future power could be provided by a major coal-fired generating plant 25 km to the north.

President and CEO Robin Forshaw, a geologist with over 40 years of mineral exploration experience, helped found Auracle in 2009. He also helped recruit the company’s largest shareholder, Elgin Mining (ELG-V), a former coal miner turned gold explorer now run by Bob Buchan. Elgin bought 36% or 11.8 million shares of the company for $2.03 million in 2010 when Auracle was still private. Those shares are worth roughly $5.4 million today.

Should first-round drilling at Mexican Hat prove positive, Auracle will likely need to raise more money, diluting its current 32 million shares outstanding. The company had $890,000 in working capital as at Oct. 31, 2011. Its shares rose 14¢ to close at 46¢ on 104,000 shares traded on Jan. 6.