Sonora, Canaco clash in Tanzania

Sonora Gold & Silver (SOC-V) and Canaco Resources (CAN-V) are butting heads over a small land area on the Magambazi gold trend in Tanzania.

Canaco, which has been working in the area for about four years, was surprised to learn that another company, Sonora, was laying claim to an option to acquire a mining licence on 7.5 hectares that sits within its 196-sq.-km Kilindi prospecting licence.

Sonora jumped on the claim in late July, but only issued a sparse press release, stating it had entered into a “property option agreement” to explore and acquire a 100% interest in a property located in the Handeni Tanga gold district — the same district that Canaco has been proving up with great market success since 2009.

It also made no mention of the option’s terms or of the fact that the claim lies within Canaco’s larger project. The release did, however, roughly coincide with a remarkable run on the company’s share price.

On Aug. 10, Sonora shares ended a sideways movement in the 10¢- range, moving to a closing high of 92¢ on Oct 7. Since then, its share price has begun to slide, closing at 65¢ on Oct. 25.

Sonora’s management discussion and analysis (MD&A) report for the period ending July 31 and released in September, did reveal more on the transaction. The company said it had acquired a one-year option on the Handeni claim for US$20,150, from the signing of the agreement, which was on July 24. It added that, it could extend that time period for up to two more year-periods and one 6-month period for US$45,000 at the start of each period.

On Oct. 1, the company issued another press release, in which it added that on top of the US$20,150 for the initial option, it must also pay US$90,000 over the course of one year. In addition, Sonora said, an addendum to the agreement could see 700,000 Sonora shares going to the local claim holder.

In late July, the company had $200,000 in its kitty, but on Oct. 6, it reported it had added to its coffers thanks to a loan from company insiders for $150,000 at a 12% interest rate. The lenders also received a bonus payment of 58,823 shares.

On Oct. 15, the dilemma of who held the claim came to the fore, after Sonora announced that the claim holder it has the option agreement with, received a mining licence on the claim.

The licence, Sonora says, grants the rights to prospect and mine on the property.

That last news release prompted the TSX Venture Exchange to call on Canaco for clarification.

Canaco said in a press release it had met with the Tanzanian Commissioner of Mines and that he confirmed the validity and status of Canaco’s existing prospecting licence.

The commissioner did, however, state that there were competing rights on the disputed claim, which Canaco says it had not previously known.

The company adds that “the commissioner has advised Canaco that it has suspended the transfer of the mining licence to Sonora. . .”

But Sonora’s chairman, chief ex-e cutive and president, Ken Churchill contests that claim.

“There’s nothing to suspend,” he says. “We haven’t even applied for the mining licence; we have an option to acquire it. It’s a Tanzanian who owns the property mining licence.”

In an attempt to resolve the issue quickly, the Tanzanian mines commissioner called for representatives from both companies to meet in Dar es Salaam.

Expect both companies to put up a decent fight due to the prospectiveness of the area.

Canaco has been drilling in that area with great success. Its most recent drill results from Sept. 17, assayed 15.6 metres grading 6.6 grams gold and 27 metres of 4.29 grams gold.

The company recently brought a third rig to the property which will increase its drilling capacity to 5,500 metres per month.

And while Canaco is staying relatively mum on the issue until matters are further resolved, company spokesman Nick Watters did emphasize the company’s experience in the country.

“We’ve been there for eight years and we’ve owned the property for four,” Watters says, stressing the company’s position as a taxpayer, job provider and good social citizen in the region.

Canaco shares closed as low as $2.95 after the word of the dispute was released, but had recovered somewhat since then, closing at $3.23 on Oct. 28.