Spec Value Hunter Comment - February 23, 2012: Geologix confirms new exploration targets near Tepal copper-gold development play
Geologix Explorations Inc released a geophysical magnetic map on February 23, 2012 for the Tepal project that highlights 7 new exploration targets interpreted as possible porphyry style systems. An airborne geophysical survey flown in 2011 was intended to identify targets with signatures similar to the North-South and Tizate deposits currently the focus of a prefeasibility study. Curiously the new targets highlighted in the diagram below do not bear much resemblance to the established zones, which has caused exploration VP Sig Weidner to quip that it is a good thing nobody started with this geophysical survey or North-South and Tizate would never have been found. The 3 km by 3 km target #1 several km north of the North Zone is a dead ringer for a classic porphyry style system: a magnetic high intrusion whose core has turned into a magnetic low coinciding with a potassic high identified by the radiometrics part of the airborne survey. The surface view corresponds with the porphyry model developed by Lowell and Guilbert (see slide below). Geologix is awaiting final results from a 200 m by 100 m soil sampling grid done over Target #1, but already knows from fieldwork that gold, copper, silver and molybdenum mineralization is present. Drilling is expected to begin late in Q2 of 2012.
Target #1 was apparently never the subject of a detailed geophysical survey, and, because much of the target area is covered by farmland, would not have been a priority focus for surface exploration compared to the outcropping North-South zones. Drilling may demonstrate that Target #1 is at best weakly mineralized, but the optimistic view is that if it is strongly mineralized it would represent a resource substantially bigger than what is currently the focus of a prefeasibility study expected in May or June. CEO Dunham Craig prefers to hold is breath for the smaller targets #2 and #3 which are associated with copper-gold soil anomalies not attributable to the nearby Tizate zone. Trenching has already established rocks similar to the known zones, with assays imminent. The target #3 area has seen past drilling which intersected low grade copper-gold mineralization now viewed as peripheral. A 2009 IP survey established a chargeability anomaly in the area. Targets #4-7 are mainly of a geophysical nature which management intends to follow up with soil sampling. Whether or not these exploratory targets deliver new economic mineralization is immaterial in terms of my upside target of $1.00-$1.50 based on the zones that are the focus of the PFS, so at the current stock price this new side story represents a free ride on the possibility of a major exploration discovery that would allow much higher price targets for Geologix. Management now indicates that the updated resource estimate will arrive later in March after PDAC. Final 2011 drill results reported last week showed that the area beneath the North pit limits does not have elevated gold grades comparable to what was found beneath the South pit limits, so scratch that hope off the list of possible new and better things for Tepal. These new exploration targets and the higher grade feeder beneath the South Zone, however, are bonuses for Spec Value Hunters focused on the economics of developing Tepal as a medium sized copper-gold mine.
*JK owns shares in Geologix Explorations Inc