Torex has since outlined a NI-43-101 compliant resource of three million ounces of gold, raising speculation that Morelos will soon be in production.

While exploration is still at an early stage, hopes for a potential third gold mine in the region are being fueled by drilling results on Newstrike Capital’s Ana Paula project, which is located about 15 kilometres northwest of the Morelos mine.

“What we have going in Guerrero is this pattern of discovery,’’ said Whittall.

Recent drilling in a high grade breccia zone, which coughed up a 230.9-metre intersection averaging 7.51 grams per tonne gold, sent Newstrike’s stock price soaring to $2.87 giving the company a market value of $238 million, based on 83 million shares outstanding.

“These results are significant in terms of their grade and thickness,’’ said Jim Mustard, vice-president, investment banking at PI Financial in Vancouver. Mustard said Ana Paula is going to see a lot more drilling in the near future. “So it will get a lot more attention if Newstrike can reproduce the drill results that were released a couple of weeks ago.’’

So far, Newstrike has completed about 16,000 meters of drilling at Ana Paula and will likely need to complete another 30,000 meters to determine the extent of its latest find, Whittall said.

If events unfold as everyone hopes, Whittall said a lot of the credit should go to Gillian Kearvell, Newstrike’s Vice President, Exploration. Kearvell has a long history in the Guerrero Gold Belt. Formerly a geologist with Teck Resources, she was part of the team sent to Mexico to advance the discovery made at Los Filos by Newstrike Director and another former senior Teck geologist Ken Thorsen. Kearvell subsequently led the team and was credited with the discovery of the Morelos project, the primary asset of Torex Gold.

In July 2008, the global financial crisis and a shortage of capital saw Aurea Mining merged with Newstrike Capital, a shell company controlled by Lukas Lundin, one of Canada’s best known mining financiers.

Newstrike, which raised $17.7 million in February 2011 from the private placement of 16.1 million common shares, priced at $1.10 per share is currently 40% owned by the Lundin family.

Newstrike plans to spend about $6.5 million on Ana Paula this year, where it is currently deploying two drill rigs, one of which is drilling step out holes to determine the boundaries of its discovery.

Whittall said the discovery is growing quickly. But Newstrike is still engaged in early stage exploration and has yet to outline a 43-101 compliant resource at Ana Paula.

Meanwhile, the only dark cloud on the horizon has been vandalism in Guerrero State. Two months ago, Torex suspended drilling at Morelos when the company’s drilling equipment trucks were targeted by armed robbers. “The drug cartels have been there forever, so it is an issue,’’ Whittall replied, when asked to comment on the situation in Guerrero.

However, he said Newstrike has yet to experience any problems with local drug cartels. “This is largely because there is an understanding that we are there to drill and to look at rocks,” he said. “We are not really interested in what they do. We stay out of their way and we ask them to stay out of our way.’’

Whittall said Newstrike has not felt the need to hire security to protect the roughly 30 employees and contractors who work at Ana Paula.

Meanwhile, PI’s Jim Mustard said the more immediate challenge for Newstrike is getting to grips with targets on a very large property. “They have been working with two drills,” he said. “But they should have at least four.’’

The Ana Paula project covers only a small portion of Newstrike’s total land package of 88,952 hectares making it the largest landholder in the Guerrero Gold Belt. The discoveries to date at Goldcorp’s Los Filos and Torex’s Morelos and the highly promising early results at Ana Paula have all been associated with a trending series of intrusions of common origin. The Newstrike management team is cautiously optimistic, based on a recent geophysical survey which highlighted additional GGB-type intrusions, that further discoveries could be made.

With a strong cash position, Newstrike is well positioned to aggressively explore the Ana Paula project and beyond.