Newstrike Capital explores Ana Paula (June 06, 2011)

In the sixteen years that Gillian Kearvell has spent working in Mexico, her success stories have included co-discovering Teck Resources‘ (TCK.B-T, TCK-N) San Nicolas massive sulphide deposit in Zacatecas, and leading the exploration team that found the El Limon gold deposit now owned by Torex Gold Resources (TXG-T) in the country’s Guerrero gold belt.

Today the geologist works roughly 12 km northwest of El Limon at Newstrike Capital‘s (NES-V) advanced stage Ana Paula project as vice-president of exploration. Ana Paula is adjacent to the west and north of Torex Gold’s Morelos project (which includes the El Limon deposit, 180 km southwest of Mexico City), and about 26 km northwest of Goldcorp‘s (G-T, GG-N) producing Los Filos mine.

Newstrike Capital picked up the Ana Paula project in June 2010 from Goldcorp for US$2.1 million – US$2 million of which was a break-fee Goldcorp owed Newstrike for terminating an agreement to sell it Morelos. Goldcorp retains a 3% net smelter return royalty but Newstrike has the option to buy-back 1%, and Goldcorp does not have any back-in-clause.

“You could say we paid US$100,000 for Ana Paula,” Kearvell says. “It was a good deal.”

Kearvell also estimates that Goldcorp spent about US$2.5 million on project exploration, including an airborne magnetic survey that delineated a magnetic anomaly with a coincident induced-polarization anomaly underlying a 1 by 2 km surface gold geochemical anomaly, as well as 11 drill holes, 10 of which hit significant gold mineralization.

Last year Newstrike began a 5,000-metre drill program to test the geometry and geology of the deposit, and continues a program of step-out and infill holes this year to expand the boundaries of the known mineralization. Currently there are two drill rigs on the property.

On April 20 Newstrike released its latest drill results including AP-11-35, which intersected 87.22 metres of 0.95 gram gold including 1.11 metres below the 0.2 gram gold per tonne cut-off; and also returned 208.03 metres of 0.93 gram gold where 10% assayed below the 0.2 gram gold cut-off.

Drillhole AP-11-37 intercepted 316.95 metres of 5.80 grams gold including a 230.95 metre interval of 7.51 grams gold, and a 57.64 metre interval of 18.61 grams gold where a 5.7-metre interval assayed below the 0.2 gram gold cut-off grade.

Last year Newstrike discovered breccia in hole AP-10-19 and AP-10-20, which Kearvell says is very new for the Guerrero gold belt and represents “one of the most interesting mineralized systems” she has seen in the region so far. 

“We have the high-grade contact skarns like El Limon and the low-grade, intrusion-hosted mineralization like Los Filos, but we also have this breccia that we think is going to be a game-changer,” Kearvell says, “not just because it allows us to add ounces quickly to Ana Paula, but because it’s also opened up the possibility of finding other breccia in other horizons as well as extending this breccia along strike and at depth.”

Kearvell adds that she does not know how the breccia will translate into ounces in the ground, but still has big expectations, pointing to the Los Filos mine and the El Limon project. 

Los Filos, she notes, was sold on the basis of a 2.5 million oz. gold resource, and now Goldcorp is looking at a deposit of over 15 million oz. As for El Limon, it was sold on the basis of 3 million oz. but they have “easily got up to 4 million ounces now and are well on their way to repeating what Goldcorp has done at Los Filos.”

“I don’t see why we shouldn’t be repeating that kind of history,” Kearvell says. “We’re just at the early stages of understanding the Guerrero gold belt.”

She also points out that both Los Filos and El Limon have had several hundred thousands of metres of drilling while Ana Paula has had only about 17,000 metres. “We’re very much at the early stages,” she says. “We have a long way to go to understand what we’ve got.”

Kearvell describes the Guerrero gold belt as a northwest trend of magnetic anomalies along which a series of associated intrusions outcrop at surface. Each of the intrusions she says share a similar origin and age, ranging from 62 million years in the southeast up to 66 million in the northwest. The entire belt runs about 55 km. 

“Every single deposit on the belt occurs in clusters about or within these intrusions in a skarn-porphyry mineralizing system with a very strong epithermal overprint,” she adds. “Los Filos is primarily an epithermal deposit; El Limon is primarily a skarn, and Ana Paula is turning out to be primarily epithermal although there are elements of skarn and epithermal in all of them. The gold tends to occur associated with the intrusions.”

She also notes that there are two types of mineralization at Ana Paula. The first is a low-grade one that has the potential to host a bulk tonnage operation. “Los Filos is currently being mined at 0.68 gram gold per tonne and is a key generator of cash flow for Goldcorp,” Kearvell says. The other is the recently discovered higher-grade breccia.

“Nobody else that I’m aware of has discovered the kind of breccia we have, so we’re going into new territory,” she explains.

Newstrike controls about 880 sq. km of land in the Guerrero gold belt.

At presstime Newstrike was trading at $2.17 per share. Over the last year the junior has traded between a low of 36¢ (Aug. 23, 2010) and a high of $2.87 (April 4, 2011). 

Lundin Mining (LUN-T) is Newstrike’s largest shareholder, with about 52%.