Canaco hits high-grade gold at Handeni

Vancouver — Canaco Resources (CAN-V) has pulled intriguing intercepts from its Handeni gold project in eastern Tanzania that confirm a high-grade gold core as well as low-grade near-surface mineralization.

Hole 66 tested the Magambazi main zone of the project where the company has pulled a number of significant intercepts since discovering the prospect in 2009. The hole returned 37 metres grading 12.45 grams gold per tonne from 230 metres depth, with an estimated true width of 30 metres.

“It’s one result that confirms the continuity of a very high-grade core,” says Andrew Lee Smith, president and chief executive of Canaco. “We’ve seen these kinds of results before but now they’re starting to string together, we’re starting to understand the geology a little better.”

Canaco shares jumped 15¢ or 16.1% on the drill results news to close at an all-time high of $1.08 apiece on 5.9 million trades. Shares were trading at a low of 6¢ last September before the company hit a hole which returned 59 metres grading 4.28 grams gold.

The company has now identified three targets on a 1.4-km-long and 170-metre-high ridge that straddles its Magambazi and Kilindi claims. Referred to as Magambazi, Magambazi North and Magambazi Central, Smith says the three could form a single larger target.

“The drilling appears to indicate, I think arguably, that they’re coalescing into one large zone over the entire strike length,” says Smith.

Recent drilling on Magambazi North focused on identifying the near-surface, lower-grade mineralization. Hole 54 cut 15 metres grading 1.29 grams gold from 50 metres, hole 52 hit 10.3 metres carrying 1.99 grams gold from 40 metres and hole 51 hit 10.4 metres grading 1.18 grams gold from 14 metres.

Deeper down on Magambazi North, hole 63 cut 30.2 metres averaging 1.64 grams gold from 119 metres, hole 62 hit 22.4 metres of 0.99 gram gold from 100 metres and hole 59 returned 3 metres of 9.44 grams gold from 129 metres.

In May, Canaco released several step-out drill results from Magambazi North that extended the strike length from 200 metres to over 700 metres in length. Hole 48 intersected 60 metres grading 1.67 grams gold from 109 metres depth, while hole 45 cut 21.7 metres carrying 6.79 grams gold from 246 metres and hole 43 hit 21.2 metres averaging 4.8 grams gold from 247 metres down-hole.

Also in May, the company released the results of preliminary metallurgical work on a 380-kg bulk sample. Testing showed gold recovery of 94.14% using a combination of gravity separation and cyanidation, with 72.59% recovered with gravity separation alone.

Mineralization in the area occurs in quartz-arsenopyrite-pyrrhotite veined silica-garnet alteration zones in high-grade metamorphic rocks.

The 1.4-km target identified, so far, at Magambazi forms part of a longer 11-km trend leading further into the company’s 200-sq.-km Kilindi claims.

The initial discovery was on the adjoining 34-hectare Magambazi claims that the company has an option to acquire from the artisanal miners in the area. Canaco acquired the right to explore the property by agreeing to make payments of US$180,000 over two years and can fully acquire the property for US$1.8 million subject to a 2% net smelter return royalty.

The Tanzanian government also has a 3% royalty that could increase to 4% after the upcoming elections this year.

Smith says his experience in the country has been tremendous over the last five or six years and Canaco is well placed in a region that has seen little mine development.

“We’re in a part of Tanzania that has never seen any history of exploration or mining, which makes us quite unique,” says Smith.

With the rainy season wrapping up, Smith says the plan is to significantly increase both definition and exploration work on the site. The program has yet to be finalized, but he expects to have three diamond drill rigs drilling 25,000 metres of core and two reverse-circulation drills completing a further 15,000 metres.

As to a resource estimate, Smith says the earliest to expect it would be around March 2011, and the latest would be by the end of 2011.

“We’re still trying to wrap our arms around this thing. It’s open in several directions and we have geochemical anomalies and high priority targets all over the place. That’s why we think the next six months is going to be very important for the project and for the company and our shareholders,” says Smith.