Torex Gold (TSX: TXG) is solely focused on its Morelos Gold Project, located in the Nukay mining district of Central Guerrero State, in Southern Mexico, which is four hours drive to the south of Mexico City. The project area contains approximately 12 kilometers of a 35 kilometer strike line, along the Guerrero gold trend within a gold camp that hosts over 15 million ounces of gold.
The company is currently drilling out a massive semi circular hydrothermal system, stretching for approximately 18 kilometers that is split in the middle by the Balsas River. Torex holds 7 claims over 29,000 hectares, where 25% of the property has been explored to produce a NI 43-101 compliant, Measured and Indicated Resource of 3 million ounces, and an Inferred Resource of 900,000 ounces of gold, that is open pit and very high grade at 3.2 g/t.
The current resource is contained in a relatively small section of the hydrothermal system that is located on the southern side of the Balsas River. The proposed El Limon open pit contains 18,271,000 Measured and Indicated tonnes at 3.31 g/t, and the Los Guajes East and Los Guajes West Prospects host an additional 10,550,000 tonnes at 3.01 g/t gold. El Limon is also being appraised for its underground potential, where a new underground resource is being defined for an Indicated Resource of 7,450,000 tonnes at 6.79 g/t for 1,626,000 ounces and an Inferred Resource of 2,350,000 tonnes at 5.92 g/t for 446,000 ounces. A new mine design has been modeled and relevant potential ore resource blocks are being drilled out by the current drilling program. This underground development will reduce the footprint of the mine and the environmental issues associated with a very large open pit, allowing a local village to stay in place and accelerating the development schedule.
Drilling at El Limon resumed in late August, and 8 holes have already been completed for 2,312 meters. Ongoing drilling and assay results confirm the postulated geologic model is accurate and the resource is expanding. TXG have scheduled 18,300 meters of drilling, with 70% of this being step out drilling for new ounces, and 30% being in fill drilling to upgrade existing resources. Two rigs are on site, with a third contracted to commence at the end of November.
Two rigs have been deployed at Los Gaujes East and West to complete 19,800 meters of drilling. Additional drilling at Los Mangos, located 150 to 600 meters northwest of Los Guajes has encountered significant intervals of up to 200 meters of pervasive gold mineralization typically in the .02 to .05 g/t range with some higher grades appearing throughout the mineralization. This is a new porphyry related center of alteration and mineralization, contained within intrusive rocks that appear to be younger than the local gold bearing skarns. This fresher mineralization is being tracked in a current drill program that has completed 6 holes for 2,493 meters.
A number of prospects have been identified south of the Balsas River known as El Naranjo, El Cristo, La Fe and Media Luna that stretch out over approximately 7 kilometers. Surface sampling has identified targets with a surface expression that are much larger than that north of the river. Drilling has already commenced at El Naranjo, where 3 holes have been completed for 1,826 meters from a planned program of 10,000 meters of exploratory drilling. Roads and drill pads are being prepared for a concerted push across these prospects. The geological model will develop as more holes are drilled, but there is an obvious spatial relationship with the resources at El Limon and Los Gaujes West and East. TXG has deployed 5 rigs on the property but this number will step up to 11 in early 2011 for an annualized budgeted cost of $14 million, and will increase the previously planned 56,500 meters of drilling to a tota1 100,000 meters by June of 2011. This will provide enough drilling infrastructure to hit substantial drill targets as they develop during the current program.
Torex has obvious potential to very substantially increase its current resource base, and appears to be drilling out the ‘rich heart” of the Guerrero Gold Belt. The Morelos Gold Project is located 10 kilometers north of Goldcorp’s (TSX: G, NYSE: GG) Los Filos Nukay and El Bermejal open pit heap leach operation, which holds a massive resource base of 435.33 million tonnes of reserves and resources at grades of 0.56 to 0.63 g/t gold. In 2009 Goldcorp processed 25 million tonnes of ore to produce 239,000 ounces of gold, and plan to increase output to 300,000 ounces per year, making it the largest goldmine in Mexico. This massive resource of low grade gold may be a southern extension of a much larger system that extends across TXG ground.
Other companies with interests in the same gold camp include Newstrike Capital (TSX: NES), holding 88,000 hectares abutting Torex, and will start drilling its Ana Paula Project.
Ceyden Resources (TSX.V: CYD) recently optioned the nearby Morelos Sur Project from a private Mexican company.
Tarsis Resources (TSX-V:TCC) is the smallest player in the camp and holds ground away from the strike line to the north east of Torex known as the Erika Property. At the northern end of the Guerrero Gold Belt, Farallon (TSX-V:FAN) operates the 1,500 tonne per day Campo Morado zinc mine, that also produces silver gold and lead.
The Morelos Project is close to paved roads, surrounded by electrical power lines, adequate water supply and the infrastructure required to operate a substantial mining project. The ramp up in tempo of drilling will see a steady flow of assay data, substantial upgrade of resources and various studies leading to completion of feasibility studies, permitting and mine construction planned for the first quarter of 2012.