Canaco continues expanding Handeni (June 06, 2011)

Showing little sign of slowing down, Canaco Resources (CAN-V) has in recent weeks accelerated a 28,000-metre drill program in Tanzania, readied the spin-out of its Ethiopian assets, raised almost $140 million, and dramatically increased its property holdings in Tanzania.

Drill results were the one thing that fell behind, owing to heavy rains and supply delays, but the company has since addressed the issues and recently released results from several targets at its Handeni project in Tanzania.  

The latest results include high-grade gold from a steeply plunging shoot in hangingwall gneiss, referred to as the Southern Gneiss Lode, west of the Magambazi Main Lode. Hole MGZD83 cut 17 metres grading 23.96 grams gold per tonne from 91 metres depth, and hole MGZD135 returned 12 metres grading 2.86 grams gold from 140 metres downhole. The Southern Gneiss Lode, so far defined over a 160-metre strike length, is open downdip and along strike to the north.

The company has also extended mineralization at the recently discovered Western Lode, structurally below the Southern Gneiss Lode. Results from the Western Lode include hole MGZD129, which hit 17.5 metres carrying 7.29 grams gold from 283 metres downhole and 80 metres north along strike of that. Hole MGZD134 hit 34.3 metres grading 2.01 grams gold from 196 metres depth.

Mineralization at Magambazi has now been defined over nearly a kilometre, with the company interpreting it as occurring in a doubly plunging, broadly synformal zone which has distinctive hangingwall gneiss. Canaco has outlined five distinct lodes in the hangingwall of the Magambazi North Thrust including the Main Lode, the Cave Lode, Magambazi West Upper and Lower, and the Southern Gneiss Lode.

In late March the company released regional drill results targeting the Kwadijava area, roughly 6 km northwest of Magambazi, outlining near-surface gold mineralization over 240 metres. Results included 37 metres grading 1.02 grams gold from 5 metres, 25 metres averaging 1.21 grams gold from 9 metres, and 11 metres grading 1.96 grams gold from 6 metres.

And looking even bigger-picture, in April Canaco added 1,200 sq. km of land in the Handeni region to its previous holdings of 100 sq. km. The company stated that the new properties are located in areas with “known prospective geology and the presence of artisanal gold workings.”

Canaco wants to stay focused on Tanzania, and is preparing to spin-out its Ethiopian assets into a wholly owned subsidiary named Tigray Resources. The move awaits approval by shareholders at a June 24 meeting. The move would see Canaco’s 70% ownership of the 277 sq. km Harvest copper-gold-silver volcanogenic massive sulphide project transferred to the spin-out.

The company drilled 12 holes into the Harvest project before making the move, with the best hole returning 52.1 metres grading 4.1% copper, 1.55 grams gold and 25.97 grams silver from 46 metres downhole. Canaco shareholders will get one Tigray share for every five Canaco shares. Tigray is expected to follow through with exploration work at the project, including an 11,000-metre drill program. Canaco will transfer roughly $4 million to Tigray to cover the first-phase drill program and working capital.

Back at Handeni, many more drill results can be expected, as Canaco has six drill rigs there capable of drilling 8,000 metres a month. The company plans to complete its current 28,000-metre drill program by September so that a resource calculation can be completed by the end of the year.

Canaco should have no financial constraints on its exploration after completing a $120-million bought-deal financing in March at $5.40 per share, brought to $138 million thanks to an exercised over-allotment option. The company now has 197 million shares outstanding.

Following the financing, a drought of drill results in April, violence at African Barrick Gold‘s (ABG-L) North Mara mine, and a general market downturn, Canaco’s share price went on a decline and traded as low as $3.25 in mid-May. On the day of the latest results, the company’s share price rebounded 30¢ to $4.14.