Most Exciting Week in Esperanza Resources’ History
The Cerro Jumil geologic map with drill hole locations. The red dots indicate the holes on which results were announced this week. (Also see high resolution map below)
Furthermore, Esperanza appointed Mr. Greg Smith as the new President and Chief Executive Officer and Mr. Laurence Morris as the new Chief Operating Officer of the Company. Both were previously engaged at Minefinders Corporation, which was recently acquired by Pan American Silver (TSX: PAA) in a deal valued at approximately $1.5 billion.
And finally, the Company announced a new private placement of 24 million units at a price of $1.25 per unit for gross proceeds of $30 million. Each unit consists of one common share and half a warrant. A full warrant entitles the holder to acquire an additional common share at a price of $1.80 for a period of five years. The money will be used to further advance Cerro Jumil.
On May 2nd, Esperanza announced that it wanted to do a financing of up to 8 million units. Two days later, the Company says it will triple the financing. Although the placement hasn’t been completed yet, this indicates to us that demand is very high and that they’ve actually received offers to participate for $30 million, which shows strong investor confidence in the Company and Cerro Jumil.
Cerro Jumil Drill Results
The results announced this week are mainly from infill holes drilled between the Southeast Zone and the Las Calabazas Zone (see red dots on map below). The intention is to upgrade that area from an inferred resource to the measured and indicated category.
Remember that in April of 2011, the Company began a new drill program to both upgrade areas currently classified as inferred resource with infill drilling and to expand the resource with step-out drilling. Results from 94 holes, totaling approximately 20,000 metres, have been announced since the start of this drill campaign, with overall very good grades.
First, analytic results from step-out drill holes on the Las Calabazas Zone, one of the three gold zones that comprise the current resource estimate, indicated an extension of the gold mineralization with gold values between 0.90 and 3.86 grams per tonne. Later, expansion holes in southwestern direction all intersected gold mineralized veins grading between 0.37 and 2.25 grams per tonne, indicating an extension of the gold mineralized Southwest Extension Zone.
Also successful infill drilling was completed at the West Zone and the Las Calabazas Zone. At the same time, several holes drilled all the way to the north came up with no significant intervals, indicating the end of the mineralized area.
Esperanza still has two drill rigs turning at Cerro Jumil, which are being employed for expansion drilling, metallurgical sampling and geotechnical sampling for pit-slope and foundation design. The Company anticipates to update the Cerro Jumil resource estimate in the second half of this year.
New Management
As Cerro Jumil moves closer to production, this may be an ideal time for Mr. Smith and Mr. Morris to join Esperanza as their Minefinders past shows they have the knowledge and the necessary skills to move a project towards that goal.
At Minefinders, Mr. Smith served as Vice President, Finance and Chief Financial Officer. In this position he developed key financial and business strategies to help lead the company from an exploration stage to a respected gold producer.
And Mr. Morris is a geologist and mining engineer with more than 30 years of hands-on experience. He most recently held the position of Vice President of Operations for Minefinders where he oversaw all aspects of development, mining operations, exploration activities and resource management. His operational leadership at the Dolores gold mine in Mexico led to significant improvements in operating efficiencies and production. Dolores’ minable reserves are 2 million ounces of gold and 114 million ounces of silver.
Mr. William Pincus, the former President and Chief Executive Officer, was appointed Chairman of the Board of Directors of Esperanza. He will remain the Chief Executive Officer of Global Minerals Ltd.
Conclusion
We believe there’s very little that would block Esperanza Resources from becoming a gold and silver producer in the foreseeable future.
The positive analytic results from both step-out holes and infill holes should lead to a significant expansion of Cerro Jumil’s current resource estimate of 1.168 million gold equivalent ounces. More drilling in high prospective zones is ahead, so it wouldn’t be a surprise when the next resource estimate moves the property to 2 million gold equivalent ounces.
The new management members have experience with moving projects towards production and with actually building mines.
And finally, Esperanza Resources is extremely well funded. It currently has approximately $15 million in the bank, it’s bound to receive $30 million from its financing and it has about $12.3 million in marketable Global Minerals securities.
To put this in perspective, the Company will have $57.3 million in cash and cash equivalents, while its current market capitalization is around $64.3 million. That gives the entire Cerro Jumil project a valuation of only $5.4 million! Buy recommendation.
By the way, we will soon publish an updated Company Report on Esperanza Resources.
| Hole Number | From (meters) | To (meters) | Interval (meters) | Gold Grade (g/t) |
| RHE-12-75 | 85.5 | 109.5 | 24.0 | 0.99 |
| 123.0 | 165.0 | 42.0 | 1.05 | |
| RHE-12-76 | 126.0 | 130.5 | 4.5 | 0.72 |
| RHE-12-77 | 33.0 | 64.5 | 31.5 | 2.83 |
| 73.5 | 115.5 | 39.0 | 0.72 | |
| RHE-12-78 | 43.5 | 61.5 | 18.0 | 2.18 |
| 73.5 | 94.5 | 21.0 | 1.01 | |
| RHE-12-79 | 165.0 | 184.5 | 19.5 | 0.59 |
| 279.0 | 289.5 | 10.5 | 1.44 | |
| 327.0 | 339.6 | 12.6 | 0.70 | |
| RHE-12-80 | 19.5 | 45.0 | 25.5 | 0.86 |
| RHE-12-81 | 93.0 | 138.0 | 45.0 | 1.94 |
| includes | 97.5 | 111.0 | 13.5 | 3.34 |
| RHE-12-82 | 12.0 | 69.0 | 57.0 | 0.43 |
| 79.5 | 94.5 | 15.0 | 0.55 | |
| RHE-12-83 | 75.0 | 94.5 | 19.5 | 0.90 |
| includes | 85.5 | 94.5 | 9.0 | 1.59 |
| RHE-12-84 | 174.0 | 183.0 | 9.0 | 1.05 |
| 217.5 | 223.5 | 6.0 | 1.64 | |
| RHE-12-85 | Results Pending | |||
| RHE-12-86 | Results Pending | |||
| RHE-12-87 | 54.0 | 60.0 | 6.0 | 0.64 |
| RHE-12-88 | 15.0 | 91.5 | 76.5 | 0.53 |
| RHE-12-89 | 111.0 | 144.0 | 33.0 | 0.82 |
| RHE-12-90 | 18.0 | 45.0 | 27.00 | 1.09 |
| includes | 19.5 | 31.5 | 12.0 | 1.93 |
| 99.0 | 220.5 | 121.5 | 1.05 | |
| RHE-12-91 | 130.5 | 162.0 | 31.5 | 0.30 |
| RHE-12-92 | 10.5 | 81.0 | 70.5 | 0.62 |
| 102.0 | 126.0 | 24.0 | 0.62 | |
| RHE-12-93 | No Significant Intervals | |||
| RHE-12-94 | 43.5 | 61.5 | 18.0 | 0.33 |
| 69.0 | 91.5 | 22.5 | 0.87 | |
| RHE-12-95 | 111.0 | 133.5 | 22.5 | 0.65 |
| RCHE-11-238 | 141.0 | 156.0 | 15.0 | 0.36 |
| RCHE-11-239 | No Significant Intervals | Analytic results from infill drill holes between the Las Calabazas Zone and Southeast Zone at Cerro Jumil. Source: Company Press Release | ||
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| Smallcaps.us Advice: Buy | Price Target: $2.40 | Latest Company Report (pdf) |
| For important disclosures, please read our disclaimer. |