As investors seek a way to capitalize on rising gold prices; they are looking at Gold Equities, and also at the bigger picture in junior explorers – Jurisdiction + Infrastructure + District Context. As much as we want to say that exploration stories are binary, the market continues to reward companies operating in regions with known mining history and operating near well-known, large-scale mines operated by well-established mining companies, in districts with repeated discoveries.
This is the environment surrounding Sonora, Mexico, one of the most active mining states in the country, and is home to Colibri Resource’s (TSXV: CBI) 100% owned EP Gold Project, in the Caborca Gold Belt.
The Market Environment: Why District Location Matters
Most exploration companies do not get “re-rated” simply because gold goes up in a cycle; they get “re-rated” when their project has the three elements of:
- A proven belt: there is existing gold at scale in the region.
- access and infrastructure: roads, power, skilled labor, permitting pathways.
- comparable neighbors: large operators are investing in adjacent areas to your project.
In Sonora, Mexico; having comparable neighbors is key to the success of an explorer in the Caborca Gold Belt. The Caborca belt is home to and surrounds several large projects and mines including those operated by Fresnillo (LSE:FRES) (including La Herradura and the former Noche Buena area), and others that operate throughout the region. Explorers want to be able to take advantage of the fact that “being near a mine” does not automatically guarantee success, however it significantly increases the chances of encountering favorable geology, and increases the likelihood that a discovery will be financially viable.
Colibri’s EP Gold Project: Big Picture
Colibri Resource’s (TSXV:CBI) EP Gold Project (Evelyn/Plomo) is a total of 4,766 hectares in size, and is situated in the Caborca Gold Belt. The Company emphasizes the location of the project, which is about 25 kilometers away from significant gold operations in the district.
Colibri’s near term goal is to execute on drilling and develop sufficient geological evidence supporting mineralization at priority targets so that subsequent drilling programs can be justified.
The Present Catalyst: Drill Program Progress at San Perfecto (Data)
In the most recent news release, Colibri Resource (TSXV:CBI) reported on the progress of its reverse circulation drill program at the San Perfecto target:
- Completed 11 RC drill holes
- Drilled approximately 906 meters
- Includes drilling at San Perfecto and Banco de Oro targets
- Samples are being prepared for laboratory submission
- First assay results anticipated in January (dependent upon laboratory turnaround).
For the market, the practical sequence is: drill hole execution → assaying → interpretation → subsequent drill hole decision making. The only real “news” at present is that the drilling program is proceeding according to plan, and the next real turning point for the Company will be the receipt of assay results.
Market Overview: What the Market is Valuing
Colibri Resource (TSXV:CBI) is currently a junior micro-cap explorer, which is significant since micro-cap stocks can rapidly increase/decrease based upon results.
- Share Price: ~C$0.29-0.30
- Market Capitalization: ~C$9-10 million
Key Items to Monitor
If you are following Colibri Resource (TSXV:CBI), the immediate future will include:
- Timing of Assays: First results due in January
- Validation of Targets: Do the results confirm the geological model at San Perfecto/Banco de Oro?
- Follow-Up Plan: Will Colibri Resource expand the drilling program, target new areas, or reduce the spacing of drill holes?
- Capital Strategy: How will Colibri Resource fund additional exploration without diluting shareholders.
Conclusion
Colibri Resource (TSXV:CBI) represents a district-based exploration story: a small market value, a project in a proven gold belt, and an ongoing drill program with assays pending.
While the upside scenario is apparent (a discovery-style intercept could re-value the micro-cap rapidly), the downside risk is equally apparent (without positive assays, the story will reset to early stage optionality).
At present, the market will receive its next meaningful data point in the form of January assay results.
Marc has been involved in the Stock Market Media Industry for the last +5 years. After obtaining a college degree in engineering in France, he moved to Canada, where he created Money,eh?, a personal finance website.
