Continental pushes ahead at Buritica despite share price slide

VANCOUVER — The nine drills turning at Continental Gold’s (TSX: CNL) Buritica project in Colombia are returning high-grade gold-silver intercepts from within and outside the defined resource, positioning the project for a resource expansion ahead of the prefeasibility study due out early next year.

Buritica is a busy place these days, with $40-million worth of work on the go. Not only is Continental working through a 95,000-metre drill program, the company is developing two tunnels that will enable underground drilling.

If all goes according to plan, the tunnels will later become access portals to a future underground mine.

The tunnels are aimed at Buri­tica’s two defined deposits: Yaragua and Veta Sur. Each contains gold, silver and zinc in the form of a carbonate base metal deposit overprinted by gold-silver veins.

In the Yaragua area Continental has delineated 33 veins to date, while Veta Sur is home to 25 veins. An estimate from late 2012 pegged resources within the two zones at 3.7 million measured and indicated tonnes grading 13.6 grams gold per tonne, 38 grams silver per tonne and 0.7% zinc, plus 13.3 million inferred tonnes averaging 8.8 grams gold, 33 grams silver and 0.5% zinc.

Those numbers look set to grow, as drills probing around and beneath each deposit find additional mineralization, while infill holes return better-than-expected grades. The company is also drilling the new San Agustin and La Estera areas, and plans to test two other target zones — Pinguro and Obispo — in the second half of the year.

Most of the results are from Yaragua, where veins run east–west along 900 metres of strike, and the known system covers 1,300 vertical metres. Infill holes across the system are hitting good grades. For example, near the east end of the system drill hole 114 returned 10.5 metres grading 108 grams gold and 96 grams silver. The intercept adds confidence that Yaragua has a high-grade subzone across its eastern end.

Other infill results from the eastern half of the system include 3.8 metres grading 8.2 grams gold and 33 grams silver, and 4 metres of 30.2 grams gold and 100 grams silver. Drills cutting infill holes in western Yaragua returned such results as 11.5 metres grading 9.5 grams gold and 49 grams silver, 0.5 metre of 190 grams gold and 119 grams silver, and 6 metres of 6 grams gold and 20 grams silver.

Stepout holes are also hitting good gold and silver grades. Hole 340 produced two intercepts from 200 metres east of the current Yaragua resource envelope: 15.4 metres grading 6.7 grams gold and 10 grams silver, followed by 9.8 metres of 10.4 grams gold and 22 grams silver. Continental says the mineralization could be from a westward extension of Yaragua, or may come from a separate vein system.

Other intercepts that expanded the Yaragua mineral envelope to depth or laterally include 2.4 metres grading 8.9 grams gold and 5 grams silver, 0.8 metre of 15.6 grams gold and 31 grams silver, and 1.2 metres of 11.4 grams gold and 12 grams silver.

The latest holes include a few results from San Agustin — a new zone 500 metres north of Yaragua. A hole on the western end of this new zone returned four high-grade intercepts, including 0.7 metre of 31 grams gold and 3 grams silver and 0.5 metre of 12 grams gold and 31 grams silver.

These intercepts align vertically with mineralized surface samples.

A previous set of results, released in early April, include several intercepts from the new La Estera area. La Estera covers three vein families, known as Laurel, La Mano and La Estrella. Drills targeting the Laurel family have already traced the zone along 500 metres of strike and as much as 1,000 metres of vertical extent. Results include 9.8 metres of 16.1 grams gold and 50 grams silver, 1.8 metres of 36.7 grams gold and 182 grams silver, and 1.2 metres of 10.8 grams gold and 97 grams silver.

The La Estrella vein family, meanwhile, has produced such intercepts as 1.5 metres of 13.9 grams gold and 5 grams silver, 13 metres of 3.8 grams gold and 10 grams silver, and 1 metre of 7.9 grams gold, 12 grams silver and 8.5% zinc. The third vein family in the La Estera area — the La Mano family — has not yet been drilled, but samples from two historic workings carried high grades, such as 15.7 grams gold, 254 grams silver and 17.3% zinc.

In other news, Continental recently settled on a preferred recovery process for a Buritica mine: gravity concentration followed by cyanidation of the gravity tails, which could recover 95.4% gold and 48.6% silver from Buritica’s rocks. The company also assessed gravity concentration followed by flotation and leaching of the concentrate, as well as gravity concentration followed by carbon-in-leach.

All three methods worked well, but Continental chose the gravity concentration-cyanidation process because it is the simplest process and involves lower reagent costs than the other processes. This method also allows Continental to dry stack its tailings, which reduces the land needed for tailings storage.

Buritica sits 75 km north of Medellin and is accessible by paved road. In fact, a paved road traverses the project, accompanied by a high-voltage power line.

Continental is working on a prefeasibility study, which it expects to release in early 2014. However, the company is not waiting until then to start some aspects of mine development. With permits in hand, the company is building a 6 km switchback road from the deposit area down into the Higabra Valley, where it plans to build the mill.

As mentioned, Continental is also driving two tunnels. The Higabra Valley tunnel will be 1 km long and run from the mill site to the base of the Yaragua deposit. This tunnel is one-quarter complete. The other tunnel will access the Veta Sur deposit, and work is underway on that project as well.

Continental has a promising project, a bank account that contains more than $150 million and a goal of being in production by 2016. Its share price, however, continues to struggle, likely because investors remain wary of the risks of northern Colombia.

In January a self-imposed ceasefire by Colombia’s main guerilla group the Revolutionary Armed Forces of Colombia came to an end, and instability, in the form of kidnappings and infrastructure attacks, surged. The fighting continues even though FARC and the government are advancing their fifth round of peace talks.

Continental’s share price has fallen by more than 50% since the ceasefire ended, dropping from more than $9 in January to just $3.39 at press time.

The company has 126 million shares outstanding.