Resource grows at Continental’s Buritic in Colombia

Continental Gold (TSX: CNL; US-OTC: CGOOF) has updated the resource estimate for the two major vein systems at its Buritica gold project in Colombia. Both systems are characterized by multiple, steeply dipping veins and broader, more disseminated mineralization, and remain open in all directions.

Measured and indicated resources for the Yaragua and Veta Sur veins add up to 8.4 million tonnes grading 10.4 grams gold per tonne, 31 grams silver per tonne and 0.5% zinc, with inferred resources of 16.7 million tonnes grading 7.8 grams gold, 24 grams silver and 0.3% zinc. The resource was calculated using a cut-off grade of 3 grams gold per tonne.

The resource estimate is based on 203,000 metres of drilling and 3,700 metres of underground sampling, and increases the measured and indicated resource by 70% and the inferred resource by 12%, compared with the previous estimate completed in 2012.

Sixty-five percent of the gold resources at Yaragua and 78% at Veta Sur are found above a 1,200-metre elevation — roughly the main access level for proposed development.

Continental Gold says it expects to grow the resource — the latest estimate excludes a number of veins in these systems due to limited drilling — and has just begun underground drilling from the Higabra Valley tunnel at a 1,170-metre elevation, which is below the elevation of much of the latest resource estimate.

In a press release Continental Gold’s CEO Ari Sussman said it is of “particular importance” to add measured and indicated resources around the 1,200-metre elevation level, because it “potentially opens the door to mine-plan scenarios, with even greater throughput rates than being contemplated.”

Through its drill program, Continental Gold has outlined the Yaragua system along 1,100 metres of strike and 1,300 vertical metres, and partly sampled underground developments. At Veta Sur, the system has been outlined along 1,100 metres of strike and 1,400 vertical metres.

At the end of December 2013, Continental Gold submitted its environmental-impact assessment, representing the final modification to the environmental licence for surface infrastructure needed to build a mine in the Higabra valley, including processing, tailings and maintenance facilities.

Continental Gold’s Buritica project covers 591 sq. km in Colombia’s Antioquia department, in the Middle Cauca Belt, a two-hour drive via paved highway from Medellin.

The company expects to complete a prefeasibility study in 2015.

Continental Gold’s shares closed 8.5¢, or 2.2% higher, at $3.97 apiece. Over the last year the junior’s shares have traded in a range of $2.39 to $5.93.

Joseph Fazzini, Laurence Curtis and Kent Neale of Dundee Capital Markets have a “buy” rating on the stock and a $6-per-share price target.

The analysts note that the resource estimate exceeded their expectations and was “worth the wait.” They expect development will “accelerate, with underground drilling now underway.”

Continental Gold “is worthy of a premium enterprise value-per-ounce multiple due to the [8.7-gram-gold-per-tonne total magnetic intensity] high-grade nature of the resource, excellent exploration potential, palatable [US$450-million] capex and gravity assisted mining, which, together, should generate robust project economics,” they write in a research note. “Furthermore, we note that Continental Gold maintains a robust balance sheet, which stands at just over $100 million, and should fund the company’s exploration and development program into 2015.”