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Animas Resources: Exploring in Mexico and Nevada for the next "Carlin Trend"

The Carlin trend, a 40 by 5 mile belt of gold deposits in Nevada, has already produced more than 72M ounces of gold, equivalent to 1.4% of all the gold ever mined worldwide. More than 100M ounces of resources remain in the ground. The trend, which is characterised by modest-grade near-surface gold oxide deposits and massive, high-grade gold sulphide structures underground, is thus one of the most productive gold-mining districts in the world.

No surprise then that Animas Resources was attracted to the Carlin-type characteristics of the Santa Gertrudis (SG) property in Mexico.  Indeed an evaluation of the SG property for Carlin potential prepared by mining consultants Behre Dolbear in 1997, (ten years before Animas acquired the property), makes compelling reading:

“The (SG) property contains potential for a deep, Carlin-type target. The geology, structure, geochemistry, geophysics and mineralization are indicative of this type of system and the similarities to the Betze-Post deposit are very striking. [Betze Post is the largest gold mine in Nevada producing 1.28M ounces in 2008.  It is part of Barrick's Goldstrike complex which comprises the Betze Post open pit and two underground mines].  Santa Gertrudis is at the same position the Carlin Trend was at the point in time Barrick bought the Goldstrike property and started their deep exploration program..... The deep exploration potential at SG is very positive and the chance for deep mineralization is very good. The surface potential is without question.” [Source:  Behre Dolbear report, October 1997]

Since Animas was formed in 2007 it has been consolidating the land around the original Santa Gertrudis property; it now controls 562 square kilometres which is almost all the Santa Teresa Mining District. The company has put together a top-notch team with expertise in the local geology, Carlin-type deposits and all aspects of the mining industry, and has embarked on a systematic plan to advance the exploration at SG. More recently it has raised CDN$1.4M in private financing and widened its net by acquiring the Ariel copper property in Mexico and a 51% JV interest in the Golden Arrow and Kinsley Mountain projects in Nevada.  The Nevada projects, like Santa Gertrudis, were mined historically and include known ounces in the ground either in the form of NI43-101 compliant or historic resources.

 So Animas is now well placed for near-term near-surface production but also has considerable upside potential for expansion at depth through the application of new technology and knowledge to its projects.  Its market capitalisation meanwhile is just CDN$11 million.

Santa Gertrudis

The Santa Gertrudis (SG) property is located in the state of Sonora, north-west Mexico some 180km north of Hermosillo, 170km south of Tuscon, Arizona and 40km from the town of Magdalena de Kino.  It is accessed by gravel road, while a network of ranch, ore haulage and exploration roads provide excellent access across the property.

The first major discovery of gold mineralisation was made at the original SG project by Phelps Dodge in 1986 who subsequently developed several deposits on the property into open pit heap leach operations. The area was mined from 1991 – 2000, firstly by Phelps Dodge, then by Campbell, who acquired it for $10M in 1994 and later acquired the neighbouring Amelia mine.  In total 22 deposits on the property produced 564,000 ounces of gold at an average grade of 2.13 grams per tonne before the mine was closed due to the gold price and difficulties in gold recovery.  It was fragmented, sold to several owners and used to repay debt. Some, though not all, of the infrastructure was removed.

Animas reconsolidated the property in 2007 and has since added to it by staking ground around the historic workings, and acquiring options on a further 17 square kilometres. The landholding now totals 562 square kilometres – almost the whole of the Santa Teresa Mining District - and is either 100% owned by Animas or it has options to own 100%. The property includes many known deposits and a number of historic (though non NI43-101 compliant) resources totalling about 700,000 ounces.  In May 2009 Animas published the first NI43-101 resources on the project; an inferred resource of 152,000 ounces of gold grading 0.66g Au/t (with a cut-off of 0.3g Au/t) at the La Cristina deposit.  This represented a 23% increase on the previous historic resource for the deposit.

A considerable amount of exploration work had been done on the property prior to the Animas acquisition. Campbell invested $13.8m during the 1990s drilling 1242 holes for a total of 120km, procuring and analysing 34,000 rock samples and 21,000 soil samples and conducting geophysical, Aster and geochemical surveys. However although the near-surface exploration program on at least part of the property has been extensive there had only been very cursory exploration below 300 metres.

Animas therefore embarked on a systematic program to pull together, re-evaluate and reinterpret existing data, to better map the project and to explore new ground, seeking in particular to discover large deep deposits through drilling and other surveys.  Twenty five holes were duly drilled in 2008 and a further 13 in 2009.

Animas' conclusions to date, summarised in the MDA report for the quarter ending March 2010, indicate that gold is indeed hosted in most sedimentary rock types on the project and that it persists over a large area not easily explained by one source or event. There is evidence pointing to the existence of several major thermal centres (hornfels) with high grade mineralisation and there is much about the project which suggests Carlin-type mineralisation. Gold recovery was considered an issue in the past because as it was made difficult by the close interlayering of the oxide and sulphide layers.  Recent improvements in metallurgy now make this less of an issue however and the Company has recently signed confidentially agreements with two companies permitting each to review the mine for leach potential of the district.


While Animas' big goal is clearly to find Carlin-type large deep high-grade deposits it could be in a position to start production and generate cash flow relatively quickly from the near-surface oxide deposits, where much is known already.  There is already some infrastructure on site including lined leach pads, it is a brownfield site, and Animas has the water licences for the area.

Nevada Properties

In April 2010 Animas signed an agreement with Nevada Sunrise (TSX.V:NEV) to option two gold properties in Nevada.  Under the terms of the agreement Animas can earn 51% of the 23 square kilometre Golden Arrow Gold Project by spending $3.5 million in exploration expenditures over the next three years; $1m must be spent in 2010. There is a possibility to earn an extra 9% by spending a further $4m, or up to 75% on completion of a pre-feasibility study. The arrangement for the 11.6 square kilometre Kinsley Mountain project is similar; Animas can earn 51% for $1.5m expenditure ($200,000 must be spent in 2010) with the option to earn an extra 14% for $3m and 75% for a pre-feasibility study.  Animas will be the operator of both projects.

Both properties are brownfield sites with previous production and exploration.  Golden Arrow, which is located in the Nevada high desert some 40 miles east of Tonopah, was mined for high grade gold and silver from quartz vein deposits from 1905 to the 1930s when the shafts reached a depth of 120 metres at which point the mine watered out.  The project was later explored by 7 different companies who drilled 291 holes identifying two gold-silver deposits with hot springs mineralisation.  An updated measured and indicated resource of 296,000 ounces of gold at 0.024opt and 4 million ounces of silver at 0.33opt was published on 14th June with an additional 50,000 inferred ounces of gold and 1.25 million ounces of silver.

Kinsley Mountain, located in Elko County in Eastern Nevada between Ely and Wendover, was discovered in the 1980s and produced 135,000 ounces of gold between 1994 and 1998.   Many shallow holes (1156 of them) were previously drilled on this property, which exhibits Carlin-type characteristics but there has been virtually no exploration at depth.

Animas' hope is that it can apply its knowledge, expertise and new technology to both areas to exploit their considerable size potential.

Analysis

If you look at Animas' presentation on its website you will see the emphasis it places on five key 'P's: its properties, position, people, potential and plans.

Its properties, as discussed, are brownfield with known gold deposits which offer the possibility for modest-scale near-term near-surface production but also upside exploration potential; the Santa Gertrudis property is essentially an entire mining district.

Position-wise, Mexico and Nevada both offer a number of advantages including political stability, a favourable mining framework, a skilled labour force, easy availability of equipment, and good year-round weather for exploration and mining. The Santa Gertrudis project lies in a free-zone in Mexico which reduces the impact of import tax.

Both Mexico and Nevada are highly prospective regions; Nevada accounts for around 76% of US gold production and is a world leader, along with Gauteng in South Africa, in gold production per unit area.

Source:  The Nevada Mineral Industry 2008, Nevada Bureau of Mining and Geology

People - the third P - are a key part of the company's story.  Animas has an impressive and well-respected roll-call of directors, managers and advisors with highly relevant experience in all aspects of mining industry and considerable technical expertise in both the local geology and in Carlin-type deposits.  Two of the directors oversaw operations at Santa Gertrudis when it first operated in the 1990s, the team have notched up a number of discoveries and awards between them while the lead Geologist for the Nevada properties, Dr Odin Christensen, was the Head Geologist of the Newmont Mining Team which discovered the deeper larger high grade deposits on the Carlin Trend in the 1980s. The company also has a tight and committed shareholder base with a high proportion of shares owned either by Management (thus aligning their interests with the shareholders) or by Pacific Opportunity Capital, who provide support to selected emerging companies.

The upside potential of the projects – the fourth P – has already been discussed.  And Animas has clearly laid our plans (the fifth P) for a road-map to set about optimising this potential.  The company's immediate plans are to continue with an aggressive drilling program at Santa Gertrudis and to conduct geophysical and geochemical surveys at both the Nevada projects where it will integrate data from other sources and prepare a new geological map and Geographic Information System for exploration targeting.  It will begin drill testing late in 2010 at Golden Arrow and in 2011 at Kinsley Mountain. Animas hopes to have defined 1 million ounces on its properties by the end of 2010 or early 2011. Long term the company aims to expand all its existing projects and possibly acquire new ones.  It is leaving its options open as to whether it aims to continue to build resources then go into production, either alone or in a JV, or whether it will look for an exit strategy.  The biggest risk for now, according to director Mark Brown, is geological risk; drilling is always a risk. The biggest upside would be the discovery of a Carlin-like district in Mexico and/or Nevada.

Animas' market capitalisation currently stands at C$11m.  The company holds C$3m in cash and has sufficient funds for at least a year.