Sonoro Gold Corp: Ideal Balance of Risk and Reward

By Alejandro Ehrenberg | Thu, 10/08/2020 - 11:16

The price of gold has risen steadily over the last year, driven by US dollar weakness and a lingering global economic uncertainty. Although gold stocks have received less attention than the precious metal itself, a clear pattern has emerged and investors are now weighing which companies to invest in. Vancouver-based Sonoro Gold Corp, which owns the Cerro Caliche and San Marcial projects in Mexico, has achieved an ideal balance of risk and reward, making it an attractive option for investors, especially during the early stages of the current metals upswing.

In fact, investors have already placed their trust in Sonoro. The August 2020 closing of a CAD$8 million (US$6.087 million) financing was a major milestone for the company. It was made possible thanks to the support of Palisades Goldcorp, a Canadian resource-focused merchant bank. The financing testifies to the soundness of Sonoro’s two-track approach, designed to mitigate risk and maximize potential benefits. On one hand, the company is exploring near-surface targets in Cerro Caliche to support a heap leach mining operation (HLMO). At the same time, Sonoro has commenced drilling deeper targets on the property, which shows good potential for high-grade mineralization. The apparent risks of high-impact brownfield exploration are then balanced with a less risky HLMO development which, if successful, would generate cash flow and reduce the need to raise equity capital in the future.

Sonoro is making progress with its proposed HLMO under the direction of Vice President of Operations Jorge Diaz, an engineer and mine development expert who has directed the development of numerous mines in Northern Mexico, including La Colorada and El Sauzal. The HLMO is projected to be ready for construction by mid-2021. In May 2020, Sonoro released its Cerro Caliche Project Development Report, which discusses both the project’s resource and shallow bulk mineable potential together with the newly developed high-grade gold potential. Subsequent to this report, the company commenced a two-tiered drilling program, composed of reverse-circulation drilling to expand the near-surface inferred resource and core drilling to test the deeper high-grade potential.

This exploration drilling campaign can be a game-changer for Sonoro. The recently-commenced drill program,  is designed to test Cerro Caliche’s ideal boiling zone for the occurrence of deeper high-grade gold mineralization, the existence of which is strongly suggested by geological analysis. Part of this analysis includes geological data from the Mercedes mine, which is located roughly 9km to the southeast of the Cerro Caliche site. Drilling will consist of 6,000m of core drilling to test an initial 20 potential targets. It is common knowledge that the best place to find a gold mine is near another gold mine.

Sonoro’s investment upside is noteworthy. Results from drilling and field work show that the extent of the exploration potential of mapped shallow oxide gold mineralization is between 75 to 100 million tons with grades likely between 0.3 g/t and 0.5 g/t AuEq. Additionally, there is potential for high-grade gold zones at depth, as indicated by Cerro Caliche's geology and the Mercedes mine, which shares the same epithermal system. Average mine-mill grades at the Mercedes mine have ranged between three and six g/t of gold with up to 100 g/t of silver. Cerro Caliche shares several similarities with Mercedes' geology, indicating possible Mercedes-style zones of high-grade gold mineralization.

Sonoro’s Cerro Caliche has been described as the best of both worlds. The proposed HLMO can generate revenues from an already defined inferred resource of 200,000 oz of gold. This will help fund future exploration and possible development of the known near-surface gold mineralization. Additionally, the exploration drilling, totaling approximately 50,000m and planned for 2020-21, will target both infill exploration in zones that were previously drilled, as well as a large number of holes to test undrilled portions of various mineralized trends along strike and at depth.

Sonoro Gold Corp has developed a relatively rare investment opportunity consisting of two elements. First, the HLMO plan: a solid, lower risk component. Second, the high-grade potential upside. When this dovetails with the fundamentals spurring the current gold bull market, the result is indeed promising. 

Alejandro Ehrenberg Alejandro Ehrenberg Journalist and Industry Analyst