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Canplats Resources Corp. (CPQ.V, $3.05)

by Brent Cook

Canplats released three additional holes from their Camino Rojo project in Mexico this week, bringing the total number of holes into this developing discovery to six, five of which are on the Represa target and one into the Don Julio target. The results provide added confidence that Canplats is onto a reasonably sized, near surface gold discovery that could be amenable to low cost mining and processing.

Drill-hole 6 intersected an impressive 183 meters grading 1.61 grams per tonne gold beginning at surface that includes 72 meters grading 2.59 grams per tonne gold starting at 68 meters depth. DH-4 was located 70 meters south of DH-6 and intersected 180 meters grading 0.66 grams per tonne gold. DH-5, which tested the blind geophysical anomaly (IP chargeability high) at Don Julio, located about 1.2 kilometers to the southwest, intersected 8 meters grading 2.27 grams per tonne gold.

The market seems very pleased with the drilling to date and is assigning a value of about $150 million to the Camino Rojo project based on Canplats’ fully diluted market capitalization. Not too shabby, especially considering the overall performance of the junior market this month and, more importantly, the limited amount of hard data speculators have to work with.

Here is what I can see at Camino Rojo so far:

Drill-holes 1,2 and 3 were drilled from the same location in different directions (go to www.canplats.com for maps) and DH-6 and DH-4 were drilled 45 meters and 75 meters south of DH-1 respectively. I calculated an area-weighted average grade from the five Represa holes of 1.07 grams per tonne gold. Assuming a north-south extent of 300 meters (based on surface sampling and geophysics), east-west limits of 100 meters and an average depth of oxide mineralization of about 150 meters results in roughly 384,000 ounces gold in approximately 11 million tonnes of rock. I believe this is a reasonable extrapolation of the results so far.

If we assume the surface sampling and geophysics continue to reflect the drill indicated mineralization encountered so far then another 300 meters of mineralization in an east-west direction seems likely. This equates to a potential of 1.45 million ounces of gold at the Represa zone at a 1.07 grams per tonne average gold grade. I have excluded silver and base metals from this calculation on the assumption that they will not be recovered in a heap leach operation.

The mineralization is still open beyond the parameters I used and I have not considered the sulfide mineralization that was intersected at depth in DH-4 and that undoubtedly occurs below the oxide deposit. Additionally, although DH-5 only hit an 8 meter zone of mineralization at Don Julio, this is the first hole into a chargeability anomaly covering a 400 meter by 500 meter area with no rock outcrops. I view this as very encouraging and certainly worth more drilling.

The real upside, and home run potential, for Camino Rojo is that all we have seen so far is only part of a much larger system. The obvious analogy, and one I used in the November 26th letter, is Goldcorp’s nearby Penesquito deposit that has oxide reserves of 110 million tonnes grading 0.18 grams per tonne gold, 18 grams per tonne silver plus sulfide reserves of 907 million tonnes grading 0.48 grams per tonne gold, 30 grams per tonne silver, 0.33 percent lead and 0.72 percent zinc. It is a very long stretch from a few holes along a 300 meter section to a billion tonne ore body but this is the Holiday Season and we can all have wishes, not so?

Looking forward, Canplats has completed at least ten more holes and drilling will continue into late December. The company says further results will be released as they are received.