Oro Cruz: The potential of Southern Empire Resources’ Californian gold opportunity (TSX-V:SMP│Frankfurt:5RE)

By Patricia Miller


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One look…

That was all it took for Southern Empire Resources’ (TSX-V:SMPFRANKFURT:5RE) director James Hutton to recognize what an enormous investment opportunity the Oro Cruz gold project is.

And if anyone knows the value of a potential mine, it’s Hutton.

As one of the most prominent figures in Canada’s resource industry, Hutton has completed $1.4 billion in financing deals throughout his career.

But even he could not believe his eyes last year when Dale Wallster, Southern Empire’s CEO and President, handed him the slide below (please click here to see in full size).

This slide might not immediately mean much to the untrained eye, but to gold exploration experts it represents a golden opportunity.

It shows a vertical slice of the earth with the results from historical drilling into the Oro Cruz gold deposit projected onto it. Located in California, Oro Cruz produced gold up until 1996, when it closed due to declining gold prices. Since then, despite huge growth in the price of gold, it has been largely overlooked and forgotten.

The data from Oro Cruz went unnoticed until Wallster recognized its incredible potential.

Each vertical line represents an exploration drill hole and the colour bars reveal gold mineralized intervals from the drill hole (yellow: 0.2-0.5 grams gold/tonne (“g Au/t”); orange: 0.5 – 1.0 g Au/t; and red: greater than 1.0 g Au/t).

As you can clearly see, there is an exciting concentration of red spots, which denote higher-grade gold intercepts. Although it is unknown if these are true widths, highlights of the historical drill results include:

  • 6.9 metres of 23.1 g Au/t (hole OC-428)

  • 19.8 metres of 7.9 g Au/t (hole OC-157)

  • 13.7 metres of 11.1 g Au/t (hole OC-280)

  • 10.7 metres of 12.5 g Au/t (hole OC-382)

  • 4.6 meters of 13.6 g Au/t (hole OC-258)

  • 4.6 meters of 11.7 g Au/t (hole OC-168)

  • 3.0 meters of 12.8 g Au/t (hole OC-159)

  • 6.1 meters of 9.3 g Au/t (hole OC-07)

These gold grades and drill intercepts point toward the exciting exploration potential at Oro Cruz.

Yet they have never been followed up.

And that’s despite being primed for new underground drill exploration, with more than 2.5 kilometres of modern-day mine workings below the surface.

Hutton tells us he made his mind up immediately:

“I took one look at those drill holes and said: ‘You have got to be kidding me’. You are very rarely going to find long dormant projects with open-ended high-grade drill intersections.

This is one of the best opportunities I had ever seen at this stage of development.”

Alongside Wallster and Bryan Slusarchuk (K92 Mining’s co-founder and former President), Hutton’s capital pool company, Owl Capital, optioned a 100% stake in Oro Cruz.

The team then brought this golden opportunity to market in March, 2020 under its new name – Southern Empire Resources. (TSX-V:SMPFrankfurt:5RE).

Oro Cruz – a high-grade gold opportunity

Aside from its considerable underground potential, another factor driving the enthusiasm for Southern Empire (TSX-V:SMPFrankfurt:5RE) is Oro Cruz’s location.

Oro Cruz sits a mere 22.5 kilometers away from the Mesquite Gold Mine – an open-pit, heap-leach project owned and operated by the $2.8 billion firm Equinox Gold (TSE:EQX).

Mesquite is currently firing on all cylinders, with production expected to hit 120,000-130,000 ounces of gold this year.

With Mesquite down the road, Oro Cruz is no doubt in a great neighbourhood.

Oro Cruz already boasts a heap-leach amenable historical inferred resource estimate of 341,800 ounces of gold from 4.4 million tonnes of ore having an average grade of 2.4 grams gold per tonne.

Now, Southern Empire is looking to confirm and expand this historical resource and demonstrate Oro Cruz’s true upside potential.

The firm has set out a clear, initial development strategy as part of a fully-funded US$1.6 million work program.

The Oro Cruz historical open pit (Source: Southern Empire Resources)

First, it will begin drilling and metallurgical testing to add to the existing historical database of more than 400 holes drilled at Oro Cruz.

This will then lead to identifying new drill targets.

Following this, Southern Empire will look to establish a new, industry-compliant measured and indicated resource.

Once this is complete (and assuming it shows good potential for economic gold extraction), Southern Empire will proceed with other studies to create a detailed mine plan of operations based on the new mineral resource estimate.

Passing these milestones is precisely what will strengthen interest in Oro Cruz. It will also put Southern Empire on the radar of institutional investors and potential financing partners.

The opportune time to consider Southern Empire Resources (TSX-V:SMPFrankfurt:5RE)

Now, if this might all sound a little speculative to you, here is one other less-known fact to be aware of.

Jim Currie, one of Southern Empire’s (TSX-V:SMPFrankfurt:5RE) directors, is a professional mining engineer. As former COO of Equinox, Currie also happened to have previously worked at Mesquite and knows the regional setting intimately.

With his influence in the background, a powerful picture starts to emerge as to what is starting to come together here in terms of the potential of Oro Cruz to develop into something special.

Against a backdrop of soaring gold prices, it is no surprise that Southern Empire has started to grab the market’s attention.

As with its peers, Southern Empire’s stock is moving higher, but with so much exploration and development work planned for Oro Cruz in the second half of 2020, there is every chance this momentum will accelerate.


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Author: Patricia Miller

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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