Newstrike Capital explores Ana Paula

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2011-05-19

In the sixteen years 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 Limon gold deposit now owned by Torex Gold Resources' (TXG-T) in the country's Guerrero Gold Belt.

Today the geologist is working about 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 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 -- of which US$2 million was a break-fee Goldcorp owed Newstrike for terminating an agreement to sell it Morelos. Goldcorp retains a 3% net smelter return but Newstrike has the option to buy back 1% of it and Goldcorp does not have any back-in-clause.

"You could say we paid roughly 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 exploration on the project, including an airborne magnetic survey that delineated a magnetic anomaly with coincident IP underlying a 1 x 2 km surface gold geochemistry anomaly, as well as eleven drill holes, ten 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 is continuing 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 Apr. 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 cutoff; and also returned 208.03 metres of 0.93 gram gold where 10% assayed below the 0.2 gram gold cutoff.

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 cutoff 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's 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," she 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 doesn't know how the breccia will translate into ounces in the ground but says she has big expectations and points to the Los Filos mine and the Limon project.

Los Filos, she notes, was sold on the basis of a 2.5 million ounce resource and now Goldcorp is looking at a deposit of over 15 million ounces. As for El Limon, it was sold on the basis of 3 million ounces but they've "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.

"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 ore 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," she 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 88,000 hectares of land in the Guerrero Gold Belt, which stretches about 55 km from southeast to northwest.

At presstime in Toronto 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 (Apr. 4 2011).

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

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