Sonoro Gold offers investors a unique opportunity with its Cerro Caliche Project
By: Don Hauka, Market One Media
- Location continues to be a major factor in a mining company’s success
- Mexico’s Sonora State is known as prime gold country, specifically within their 632-area code
- Sonoro Gold is a relatively new exploration and development company in the region and is already on the fast-track to production
Mining, like real estate, is all about location, location, location. Some of the world’s prime mining real estate is in Mexico’s Sonora State, the precious metals equivalent of Toronto’s Bridle Path, Vancouver’s toney Shaughnessy Heights or Toronto’s Lawrence Park M4N postal code.
The region around Sonora’s capital city, Hermosillo, has been known as a prime gold country since Jesuit missionaries staked claims to the property that would eventually become the La Colorada gold mine in 1740.
As the precious metals market emerges from the COVID-19 pandemic, Sonora’s 632 golden area code in the northern part of Sonora continues to be one of the best locations for mining companies to find and profitably produce gold.
Take Premier Gold’s Mercedes mine. It had a strong fourth quarter and finished the year producing over 58,000 oz of gold and 170,000 oz of silver in 2020. Magna Gold’s San Francisco mine, which has produced over 820,000 oz of gold since 2010, re-started surface operations in the third quarter of 2020 and is gearing up towards full production in 2021.
“Sonoro Gold offers investors a unique opportunity to get in on the ground floor of something special.
— John Darch, Chairman, Sonoro Gold Corp.
Not far from Highway 15 and the northern city of Magdalena de Kino, Agnico Eagle is funding an ambitious exploration season for its Santa Gertrudis project. The program will see $11 million spent on 30,000 m of drilling with the goal of potentially restarting the past-producing heap leach mine in 2021. Results so far show an inferred resource of 1.6 Moz of gold.
Sonoro Gold is the New Kid on the Old Gold Block
The fortunate producers in the 632 golden area code club have a new neighbour in Sonoro Gold Corp (TSXV: SGO|OTCQB: SMOFF), which plans to begin producing gold early next year. To say they are experienced is an understatement. Sonoro’s dynamic management and technical teams have collectively either discovered, developed and operated twelve gold and copper mines in the region and more if we include their global activities over the past four decades.
The company has two precious metals properties in Sonora: the San Marcial gold and silver project and its flagship Cerro Caliche gold project.
There’s much to like about Cerro Caliche. It’s in the heart of Sonora’s historic gold district and surrounded by producing mines. Just three hours south of Tucson, Arizona and the same distance north of Hermosillo, Cerro Caliche is close to first-class infrastructure in a mining-friendly jurisdiction.
Just as likable are the numbers coming out of the company’s drilling program. Sonoro Gold has produced over 34,000 m of drilling since September 2020, taking the total amount of drilling at Cerro Caliche to about 56,000 m so far. The results have increased drilling density and expanded known gold zones while discovering new high grade gold zones.
The numbers are promising enough that the company has elected to increase the size of its planned heap leach mine operation to 15,000 tpd, with the potential to increase to 20,000 tpd during the first year of operation. As part of the evaluation, Sonoro is working on a new NI 43–101 resource estimate report and a Preliminary Economic Assessment (PEA). Both will include drilling results to the end of March and are scheduled to be completed by this summer. They are expected to show a substantial increase in the existing gold resource and exceptional economics.
“We are confident that there will be a substantial increase in the resource,” says Ken MacLeod, Sonoro’s CEO. “We feel that drilling over the next two years will continue to demonstrate the full potential for the Cerro Caliche property.”
Potential for “Super Pit” captures investors’ imagination
Over a very short time frame, Sonoro Gold has gone from junior explorer to potential mine developer which is on track to begin construction of its proposed mine as early as this summer. That’s almost unprecedented for a junior mining company. The evaluation’s focus is for a leach pad, truck and shovel operation similar to others in the area which process high volumes at very low cost.
“We estimate that we have a property capable of supporting between seventy-five and one hundred million tonnes grading between 0.3 and 0.5 g/t. We’re comfortable we can successfully place a half gram property into production and be profitable because of the significant volume we can process,” says MacLeod.
He also says similar mining operations in the region are working with head grades as low as 0.3 g/t gold and are making record profits. Sonoro anticipates that the mining and processing costs for Cerro Caliche will be essentially the same as the company’s peers.
There is also the promise of a game-changing delineation of a super pit if two parallel gold zones merge into one. As the drilling program continues, two gold bearing areas, Japoneses and Buena Suerte, are getting closer and closer together. Currently, they are only 100 m apart with quartz veins, which often carry the gold, outcropping within the 100 m.
If joined, the two zones will form a single “super pit” three quarters of a kilometer wide by nearly a km long. Then, millions of tonnes of what was once unprofitable waste rock could instead be a major contributor to Cerro Caliche’s gold inventory and the future operation’s size.
“The potential of those two zones merging into one large one has captured the imagination of quite a few investors,” says John Darch, Sonoro’s Chairman. “If it happens, it will make the project even more cost-effective and increase value to the shareholders.”
Potential for a Major Revenue Stream and Fast Capital Payback
Even without the super pit, Cerro Caliche has the potential to produce a high volume of gold at low cost, generating a considerable revenue stream and creating a low-risk opportunity.
Suffice for now to look at similar operations in the area, some of which several of Sonoro’s executives have played a major role in developing.
The Mulatos mine is a good comparable example. Sonoro’s VP of Operations, a mining engineer named Jorge Diaz, oversaw its development in 2004 and over the intervening years, the Mulatos mine has produced more than 2 Moz of gold. The Mulatos mine estimates cash costs of $840-$890 per oz/Au.
Experienced management and technical teams drive Sonoro Gold’s rapid progress
The big reason for Sonoro Gold’s rapid progress from exploration to the verge of production is its exceptional collection of expert managers and technical personnel. MacLeod has been CEO of resource companies with major projects from Asia to America to Africa, including large copper-cobalt deposits in Central Africa.
John Darch, the company’s Chairman, has either discovered, developed or operated everything from Greenland’s first gold mine to privatizing a copper mine in Zambia, to discovering and taking to feasibility one of the richest potash deposits in the world.
As part of these efforts over three-and-a-half decades, Darch secured over USD$300 million in private and public funds from North America, the U.K. and Europe. The management team also includes Curtis Turner, a former senior executive from Argonaut Gold.
The technical team, as mentioned previously, is led by Jorge Diaz, who has also managed mine developments for Argonaut Gold, Morgain Minerals and Alamos Gold. Going back even further, he developed and operated mines for heap leach pioneer Glamis Gold. Glamis started with a single mine in 1980 that was smaller than Cerro Caliche. The company was eventually bought by GoldCorp for $8.6 billion in 2006.
Another notable is Mel Herdrick, Sonoro’s VP of Exploration, who has made multiple gold discoveries in the area over the past 30 years. His last focus was called Pediment Gold which developed two gold deposits: one in Sonora and a second in Baja California, resulting in Argonaut Gold acquiring Pediment in 2011 for $2.56 a share.
Solid financing, a bright future and an undervalued market cap
As the Darch and MacLeod records illustrate, the management team also has a track record of being able to raise money to finance precious metals projects. They also have a global reach when it comes to recruiting ideal partners. Cerro Caliche is no exception.
For example, the project has already been vetted and approved by major Chinese EPC companies resulting in several MOU’s being executed for Cerro Caliche’s debt financing and development.
The COVID-19 crisis has slowed the process with the Chinese companies, but Sonoro Gold still managed to raise $8 million in equity last fall to finance Cerro Caliche’s drilling and technical work. A $2 million financing has just been announced and is considered to be the final equity bridge financing before the actual debt finance is organized for the project’s construction and start-up.
Darch says another thing that attracts investors is the company’s tiny market cap of $17 million (USD$13.5 million). If Sonoro Gold goes into production in the next 12 months and management’s predictions are correct, the company’s shares should react very favourably.
A Preliminary Economic Assessment is to be issued by July and will disclose an estimate of the capital costs and the free cash flow generated from mining, so it is expected to be a major share price catalyst.
“The catalyst for that market cap revaluation will undoubtedly be the publishing of the NI 43101 resource estimate and PEA,” notes Darch. “That’s when you’ll see real excitement.”
Until then, Darch says Sonoro Gold offers investors a unique opportunity to get in on the ground floor.
The report is expected to be published in July. Until then, work will continue on the project, but you can sense that Darch and MacLeod are just bursting to spread good news and get moving, like two kids on Christmas Eve, only the night before lasts for weeks. But they’re coping.
“Patience is a real virtue in the mining business,” says MacLeod. “And from all the results coming in, I expect in Sonoro’s case we are about to be rewarded.”
To learn more about Sonoro Gold, visit their website here.
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