It’s been flying below the radar.
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Southern Empire Resources (SMP.V; SMPEF.OTC; 5RE.FSE) has a great project, in a great location, and the funding to find the major gold deposit they’re confident it holds.
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That confidence is well supported by the evidence. The project, dubbed Oro Cruz, is home to no less than three past-producing mines that were closed in the mid-1990s, when gold prices were at small fractions of today’s levels.
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In the ensuing years, Oro Cruz has passed from a JV of operators called the American Girl Mining Joint Venture, back to private owners and then to Lincoln Mining, which did some work on the project back in the early 2010s.
Southern Empire has an option to acquire a 100% interest in Oro Cruz and plans to take full advantage, both of in-place infrastructure and past exploration data.
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The company looks primed to start earning the market’s attention this year, beginning with results from a recently completed sonic drilling program on the project’s historical heap leach pads.
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But that’s getting ahead of its story a bit. First, we need to visit why Oro Cruz has such an ideal address.
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Located in southeast California’s Imperial County, this project lies on the northwest end of the Mojave-Sonora Gold Trend.
It’s a prolific orogenic gold belt that runs from Sonora, Mexico northwest into southeast California. The belt hosts many multi-million-ounce gold mines.
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Not least of these is the Mesquite mine that has been in operation for decades and lies just 14 miles away from Oro Cruz.
The high voltage line that supplies power to Mesquite transects Southern Empire’s property, which is accessible by paved highway and sits just 15.5 miles from Yuma, Arizona.
With the area’s history of mining, having Yuma nearby provides the company with a ready source of supplies and workers.
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…With A Historical Resource To Build On
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And that infrastructure advantage doesn’t stop with roads, power and labor.
The project contains three kilometers of near-pristine underground development that Southern Empire can use to build on Oro Cruz’s existing historical resource at depth.
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That historical inferred resource, outlined in 2011 by Lincoln, contains 341,800 ounces of gold (4.39 million tonnes at 2.2 g/t gold).
While it shepherds Oro Cruz through the drill permitting process, management plans to apply property-scale exploration to identify new targets on the 5,400-acre property.
That work will include mapping of the project’s open pit and underground workings and, once it receives those permits, drilling twin holes to confirm the grades of past drill holes and drilling other new holes targeting additional gold mineralization.
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Targeting A Million Ounces Of Oxide-Hosted Gold
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That historical work includes a number of extremely high-grade intercepts. Here are some of the highlights:
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● 10.7 meters of 20.9 g/t gold
● 11.4 meters of 10.1 g/t gold
● 12.2 meters of 13.4 g/t gold
● 6.9 meters of 23.1 g/t gold
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The long-section below shows just how much past drilling the company has to work with.
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Simply put, if the follow-on RC and core drilling Southern Empire has planned confirms this past work, the company could be on its way to a substantial oxide-hosted gold resource right off the bat.
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That’s especially true when you consider the impressive grades and widths of those historical holes.
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With all that past mining development giving Southern Empire easy access for new underground drilling, management’s goal of a million-ounce-plus resource could be well within reach.
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A Potential Near-Term Head Start
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So why buy this company now?
For starters, it has just wrapped up a sonic drilling program on two of Oro Cruz’s historical leach pads.
The results of that work are still pending, but if Southern Empire can prove up even a modest recoverable resource of, say 60,000 ounces, re-processing this waste material could provide the company with a short-term source of cash flow.
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Operating from a $9.65-million working capital position that includes a C$6.65-million equity stake in Augusta Gold, Southern Empire’s current market cap is still only around C$11 million.
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Given the infrastructure advantages Oro Cruz possesses, along with its historical resource and strong evidence of high-grade gold, assigning a C$2 million valuation to this asset seems grossly out of whack.
As the drill results come in from those leach pads and as permits come in for further exploration at Oro Cruz, Southern Empire could make big headlines in the months ahead.
At current levels, it seems a rare and fleeting bargain.
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