In June Mariana Resources (LON:MARL) raised £6.75 million from investors.
The cash call reflected a remarkable change in the company’s fortunes.
The new shares were issued at 28p – a premium to the prevailing price, which underlined the growing interest in its gold project in Argentina.
It also provided a graphic illustration of how Mariana’s prospects have improved immeasurably thanks to a shrewd grass-roots discovery programme, overseen by managing director John Sutcliffe.
At the start of 2009 the stock was changing hands 2p.
Today the price is 37.5p – so even those people who invested at 28p are sitting on a healthy profit.
The catalyst for all of this has been Argentina, and specifically the Las Calandrias gold discovery in Patagonia.
It is located in the Deseado Masif, the up-and-coming area for gold and silver discoveries.
The Mariana project is divided in two – Calandria Sur and Calandria Norte. The licence is 100 per cent owned by Mariana.
Around a year ago Sutcliffe and his team drilled 1,350 metres of holes around Norte and came away with very little.
“We got a few metres with a few grams of gold,” Sutcliffe told Proactive Investors.
However he had better luck when he began a second round of drilling to 70 metres that struck bonanza grades of gold between 338 grams and 443 grams per tonne.
“It is pretty amazing. But both intersections are very narrow - in one case one metre and the other 80 centimetres,” Sutcliffe says.
The first programme, completed in October 2009, did find a very viable target at Sur, which the Mariana MD says is “stacking up to be bulk minable”.
The grades here range between 0.9 grams per tonne and 2.4 grams, but are spread over a much greater area.
However Sutcliffe reckons the drill programme is yet to uncover Sur’s full potential.
“Calandria Sur is a bowl with the gold like a soup at the bottom of the basin,” he explains.
“The gold is spread out over a large area. What we are looking for is where the gold came from, because it didn’t just appear in that rock. It didn’t form that way. It has got to have come from some sort of feeder zone.
“I think the feeder zone is something like Calandria Norte, which is a vein of a high-grade multi-ounce feeder zone.
“Perhaps what we haven’t found at Calandria Sur is what could actually be the future if the project.
“It is going to be hard to find (the feeder zone) and we may not find it in this round of drilling. If we don’t find it then this project is still going to have legs.”
While Mariana continues to look for the source of the gold at Sur, the drilling is also designed to help it compile a resource estimate, which it hopes to publish by the “first part of next year”.
However Mariana isn’t a one project play.
Drilling at Sierra Blanca, in Argentia, will begin by the end of the year with the potential for silver-gold discovery. Mariana owns 70 percent of Sierra Blanca, though it has an option to a buy the remaining 30 per cent from IAMGOLD.
“We have got on the surface some very exciting silver numbers,” says Sutcliffe.
One particular 11 metre intersection contained 386 grams of silver per tonne coupled with a not-to-be-sniffed at 3.4 grams of gold.
“The numbers are really interesting, but we’ve not been able to nail it in the drilling,” Sutcliffe explains. "This is mainly the result of drilling problems – difficult ground and loss of water circulation.”
In Chile the group has joint ventured all its iron oxide copper gold (IOCG) projects there with Cliffs Natural Resources. The earn-in agreement could see the American group take a 70 per cent stake in Mariana’s Northern Chile properties.
But it will only do so if it invests US$3 million developing them. Cliffs has committed to a minimum spend of US$500,000.
Analyst Joe Lunn, of the company’s broker FinnCap, reckons this is a very sensible approach.
“We view the decision ... as an excellent way of unlocking the potential value of this world class exploration ground while maintaining shareholder exposure in the event of a discovery,” he said.
And he points out that while there is the potential for a major copper discovery in Chile, he also notes that a “substantial amount of geophysics” needs to be carried out before drill targets can be determined.
Back in Argentina, and just two kilometres from Calandria Sur, is the El Nido prospect, which barely rates a mention in the Mariana literature and certainly isn’t included in the company’s current valuation.
FinnCap’s Lunn has taken a stab at valuing Las Calandrias and reckons it is worth 41p a share based on a resource of 600,000 ounces of gold. However his matrix gives an upside case of 91p.
“We think that the enlarged mineralised footprint at Calandria Sur, proved up by the recent drilling campaign, has the potential to contain up to 500,000 ounces of low grade, bulk tonnage mineralisation,” Lunn said in a note to clients shortly after the summer fundraiser.
“But our re-rating of the shares is primarily due to the bonanza gold grades encountered at Calandria Norte, located 700 metres away.
“Although only two ore grade holes have been drilled so far, we believe that Calandria Norte has the potential to become the standout discovery at Las Calandrias.”