Canaco eyes Ethiopian assets

Canaco Resources (CAN-V) has closed in escrow its acquisition from Beijing Donia Resources of 70% of the outstanding shares of Harvest Mining, a private Ethiopian exploration company. Harvest owns a 100% interest in exploration concessions that have several gold-enriched, polymetallic volcanogenic massive sulphide (VMS) prospects in Ethiopia’s Tigray state.

The remaining 30% of Harvest is owned by a private Ethiopian company called Ezana Mining Development.

Canaco has issued 3.5 million shares to Donia, subject to a four-month hold period, and paid $4 million in cash, which is being held in escrow until the remaining documents have been delivered and the TSX Venture Exchange has given its final acceptance.

Donia is a sister company of SinoTech (Hong Kong), whose parent company is SinoTex Mineral Exploration, a major Chinese exploration and mine development company with operations in China and in more than 10 countries worldwide.

Following the transaction, Sino- Tech and Donia will together own about 51.5 million shares, or about 31.6%, of Canaco.

“SinoTech has been a partner with us for the last two years,” says Nicholas Watters, Canaco’s Vancouver- based head of investor relations. SinoTech financed Canaco in June 2009 when the company started drilling at its Handeni gold project in eastern Tanzania.

Canaco’s chief executive, Andrew Lee Smith, described the geological potential for the discovery of gold-enriched polymetallic VMS deposits on Harvest’s 468-sq.-km land package as “exceptional.” (Smith, a geologist, co-founded True North Gems [TGX-V], a company that is exploring and developing the first significant emerald and sapphire deposits in the Yukon.)

Once the acquisition of Harvest is completed, Canaco says it will consider a spin-out of the Ethiopian assets into a new public company. This strategy would enable Canaco to focus on its gold exploration properties in Tanzania while the new spinoff company could concentrate on mixed mineral resources in Ethiopia.

Harvest’s exploration assets are made up of six exploration concessions called Nefasit, Hamlo, Terakimti, Adi Nebrid, Igub and Medri Felasi. The concessions are all within the Neoproterozoic Asmara VMS type copper-zinc-gold-silver metallogenic belt.

Several deposits have been discovered in the northeast extension of this belt in central Eritrea, including the Bisha deposit (27 million tonnes grading 2.08 grams gold per tonne and 1.8% copper) and the Emba Derho deposit (38 million tonnes grading 1.08% copper, 0.18 gram gold and 9.31 grams silver per tonne).

Since 2007, several exploration activities have been completed at Harvest’s properties, including remote sensing and geological mapping among others.

The recent news sent Canaco’s shares up 13¢ or 6% to $2.25. Over the last year the company has traded in a range of 6¢-$2.37.