Geologix gets back on its feet (September 29, 2010)

Losing a key asset is never an easy thing for a company to rebound from.

But Geologix Explorations (GIX-T, GXEXF-O), after having just such a thing happen to it early last year, is back at it again, looking to heal itself via the mineral wealth of Mexico.

The company’s big loss came when it was unable to make a final payment to Silver Standard Resources (SSO-T, SSRI-Q) to acquire the San Agustin polymetallic project in Mexico. That after the company spent the better part of two years drilling up and defining the project.

But with credit conditions still tight going into 2009, Geologix couldn’t come up with the US$34.3 million it needed to make a final payment and secure its stake in the San Agustin.
That amounted to a free gift to Silver Standard, which, as per the option agreement signed between the companies in 2006, took back the project along with all of the information Geologix compiled on it free of charge.

It was a bitter pill for Geologix to swallow considering it had left the project – located 85 km north of Durango City in Mexico – with a resource of 122.2 million tonnes grading 0.41 grams gold per tonne, 12.3 grams silver, 0.49% zinc and 0.06% lead in the indicated category. That works out to 1.61 million oz. gold, 48.3 million oz. silver, 161 million lbs. lead and 1.3 billion lbs. zinc.

But rather than cry in its pillow, Geologix got back up, dusted the sand off of its jeans, so to speak, and went looking for other prospective projects in the country.

In November of last year it struck a deal with Arian Silver (AGQ-V, AGQ-L) to take a full interest in the Tepal gold and copper project, 70 km west of Apatzigan in Mexico’s Michoacan State.

The project currently has 24.9 million tonnes grading 0.544 gold and 0.267% copper in the indicated category and 54.9 million tonnes grading 0.405 grams gold and 0.219% copper in the inferred category.

Geologix is pushing to finish a preliminary economic assessment on the project while testing areas for resource expansion.

To get a full interest in the project Geologix has to make payments amounting to $4.05 million in cash and shares next year. The company says that works out to a purchase price of US$2.60 per oz. of gold in the existing resource estimate.

And while Tepal looks promising so too does a discovery made on a property jointly held with Riverside Resources (RRI-V).

The property is known as La Libertad and it sits 250 km north-west of Hermosillo, in Western Mexico.

Geologix managed to bring in some significant results on just its first two holes drilled with highlight assays of 26.05 metres grading 1.02 grams gold and 65.1 grams silver, and 50.80 metres grading 0.51 grams gold and 32.30 grams silver starting.

Mineralization began in the two holes at 46 metres and 49 metres respectively which has the two companies thinking about the projects future open pit potential.

The results came from the northern portion of the structure but the next holes in the 2,000 metre program will look to trace the structure along strike to the south, the company says.

Geologix has met its first year commitment of the first option on Libertad and by spending $3 million and paying Riverside $400,000 over four years it can earn 60% of the project.

After that, Geologix can earn an additional 25% by spending another $2 million on project and paying Riverside $500,000.

As of June 30 the company had $2.9 million in cash and cash equivalents but then completed a private placement in late August which raised it another $2.3 million by issuing 10.45 million units at a price of 22¢ per unit. The units came with a common share and a half warranty with a strike price of 30¢.

In Toronto on Sept. 29 the company’s shares closed at 35¢.