Minesite.com – 5th October 2011

Shares In Spanish Mountain Are Trading Strongly, As Pre-Feasibility Work On Its 200,000 Ounce Per Year Gold Project Continues

It’s been a good year so far for Spanish Mountain Gold, the TSX-listed, British Columbia-focussed gold explorer. After the release of a preliminary assessment at the end of 2010, the flow of encouraging news from the company has continued almost unabated. Exploration work, financings, and negotiations with local stakeholders have dominated the newsflow this year, as Spanish Mountain gears up for the release of its pre-feasibility study, due in February next year.

The thinking is that Spanish Mountain will produce over 200,000 ounces of gold per year over a projected 13 year life from its Spanish Mountain gold property in the Cariboo region of British Columbia, scene of the famous gold rush in the late 1800’s. Cash costs are projected at less than US$600 per ounce. In addition to this, Spanish Mountain is also drilling prospective gold and copper targets this year, hoping to add to its gold reserves and identify a copper resource which may be developed of farmed out in the future. And so far, company chief executive Brian Groves appears cautiously optimistic, hinting that if the exploration and permitting process continues to advance favourably Spanish Mountain should move through the pre-feasibility study and proceed into a full feasibility study very rapidly.

The setting has numerous advantages, including all weather road access, low political risk, and access to a skilled workforce. In additiona, Spanish Mountain project is served by C$0.04 per kilowatt hour grid electricity, and that’s a price which compares more than favourably to other Canadian locations – power costs in Ontario, for example, average C$0.10 per kilowatt hour.

Spanish Mountain is a potentially bulk mineable, large tonnage, sediment hosted gold deposit. The latest NI 43-101 report shows 1,924,300 ounces of gold in the measured and indicated categories and an additional 2,191,300 ounces in the inferred category at a cut-off grade of 0.20 grams per tonne gold. This is a project that has been well drilled. This year, a further 18,000 meters of infill drilling added further data to that already accumulated from 135,401 meters of drilling done on the property in the past. Metallurgical test work has already been completed by G&T Metallurgical and SGS LaKefield, and a power supply study is underway.

On 31st August the company announced that work on the pre-feasibility study has begun. Among other things, this study will examine the optimal mill throughput rates for the project, and will also allow for an update on the resource potential. Ahead of that, though, will come a resource update, due to be published in late October. This follow on from interim drill results published in late July, at which time Spanish Mountain stated that “the results of the drilling conducted to date continue to confirm the continuity of potentially economic mineralization in areas presently classified as inferred resources”. Highlights realeased so far include 321.5 meters of grading 0.65 grams per tonne gold including 50 meters grading 1.03 grams per tonne gold.

Spanish Mountain Gold continues to focus the majority of its attention on the flagship gold resource, but exploration works is also continuing on its Cedar Creek copper target. Cedar Creek is located on the western side of the Spanish Mountain property, and has been identified through soil geochemistry as a promising target hosting up to 0.235% copper in soil. Brian Groves maintains that gold is still the main focus of the company, but that the Cedar Creek copper target is a great opportunity which can be developed in a number of ways without compromising the original plan. These might include building a new mill to process the resultant copper ore or farming the project out and retaining a royalty.

So there’s still everything to play for, and a quick look at the company’s share graph shows that the market remains fairly optimistic too. The shares have strengthened by more than 10 per cent since the announcement that work on the pre-feasibility study had commenced, albeit that there’s been some weakness in recent days in the face of wider economic jitters. The impending resouce update should give investors a further steer as to whether or not their faith has been misplaced. And once it comes out, Minesite will check back to give it the once over too.