Cadan Resources is a Hidden Gem

By James West
MidasLetter.com
Wednesday, August 12th, 2009

Every so often, I come across a company whose share price versus its assets is way out of whack. In the case of Cadan Resources (TSX.V:CNF), the discrepancy is nothing short of opportunity for risk tolerant investors. Trading in the $0.10 to $0.20 range for the last month, the apparent low valuation likely stems from several factors that make Cadan a little bit difficult to wrap one’s conceptual arms around.

The company has 6 major projects, two of which host past-producing deposits of mostly low grade, bulk-tonnage amenable copper gold and/or gold-silver systems on the island of Mindanao in the Philippines.

An excerpt from a technical report filed in 2002 elaborates on the state of the project then:

“Within this exploration permit application are five known mineral deposits which are outlined below. The area of the Sabena EPA was subjected to exploration prior to 1978 when Sabena Mining Corporation (SMC) established a mining operation at the Tagpura deposit. Mining was conducted between 1978 and 1981 at the Tagpura Deposit. Resources (resources do not conform to N.I. 43-101 Standards) were also outlined by SMC at the nearby Ma-angob and Kalamatan deposits as part of advance reserves for the copper mining operations.

SMC also discovered further mineralization at Batoto and Surigaonon. Since the SMC operation closing in the early 1980’s there has been no modern systematic exploration undertaken. Historical reports and field inspection of the project area by the Author suggests that the exploration potential is good and the use of modern exploration technology will prove a useful tool to advance the status of the known resources. The remainder of the Sabena EPA has not been systematically explored using modern techniques and there is good potential for discovery of additional mineralization and new mineralization.”
Cadan is planning to produce 20,000 of gold per annum commencing in Q210 on its 100%-owned T’Boli gold and silver project on the Philippine island of Mindanao, on a non 43-101 compliant inferred resource of 2,400,000 tonnes, grading 5.5 g/t gold and 21 g/t silver, for 420,000 contained ounces of gold and 1,600,000 ounces of silver. They will be publishing an update resource in Q4 2009.

T'Boli is an epithermal vein and stockwork system carrying gold and silver and is thought to be of the carbonate base metal hot spring style as defined by Leach and Corbett. In carbonate base metal hot spring style systems gold is associated with base metal introduction and is silver rich, these systems are regarded as developing at intermediate levels between porphyry and shallow epithermal systems. Carbonate base metal hot spring style systems are known throughout the SW Pacific and this class of mineralization includes Acupan, Porgera, Wau, Kelian, Mt Kare and Gold Ridge, which are all multi-million ounce deposits.

According to Director ,John Anderson, “Cadan’s been a work in progress for the last two years. I became involved when the former CEO resigned. It was obvious that Brett Taylor who has lived and worked in the Philippines for the past dozen years should be running the company and operations. As such, Brett and his team decided to go straight into production on the T’Boli Gold deposit. During the last year we’ve obtained all of the permits required to build a 200 ton per day operation, and we’ve purchased the mill which will be installed and in production early next year. So for a $5 million total investment, we’ll be producing about 20,000 ounces per year. At a cash cost of no more than $300 per ounce, that will be a very profitable operation.

The T’Boli system is 2600 hectares, and is a classic epithermal system . We get good gold grades at the top of the system, and it widens up at depth with gold grades improving and silver grades falling off. Our focus is in an 85 hectare area, representing only 5% of the project area.

We anticipate that we will come out with a measured and indicated resource later this year that will stipulate a million tonnes at over 10 grams per tonne gold. Cadan expects to gradually ramp up production by 50 tonnes per day per year, so that we’ll be producing up to100,000 ounces per year by 2016. And that likely will not exhaust the resource significantly at all. So the Company is going to focus on growing the production profile out of cash flow from the mine, which will provide immense value to shareholders.

The other part of the gold business is based on this Comval property, a classic stockwork system that sits along a belt that is 15 km long and 3 km wide. Bill Goode the Company’s technical Director came out of retirement after visiting Comval after being asked by a group of investors who subsequently invested $5.0 million to drill and explore the Comval property’s copper assets.


Mining in the Philippines

The Philippines Natural Resources sector operates under The Philippine Mining Act of 1995 and the Indigenous Peoples Rights Act ("IPRA") of 1997.

The country is rich in natural resources and has a long history of mineral exploration and development. The country is believed to be one of the most mineralized and prospective nations in the Western Pacific, particularly for gold and copper. Philippine mineral resources include a wide variety of metallic and non-metallic minerals.

• As of 1982, Bureau of Mines and Geosciences (15) data records that the principal metallic ore reserve was:
• COPPER 4.3 billion tons
• Gold 2.1 billion tons
• Nickel 1.2 billion tons

Based on past production and defined resources, the Philippine mineral endowment is second in the world for gold and third for copper.

Exploration and development is continuing throughout the country. There is an increasing focus on the Eastern Mindanao Mineral Belt that extends for some 400kms from Mati in the south to Surigao in the north, primarily because much of this area has been unexplored for some 20 years.
Within this belt lies the recognised world class gold deposit of Diwalwal, which is estimated to contain approximately 7 million ounces of gold.


History of Mining in the Philippines

Prior to the Spanish era in the Philippines (1521 to 1898) the Igorot tribes of the northern Luzon area are known to have crudely mined and produced copper. The Chinese in about the third century AD referred to the island of Luzon in Philippines as the “Isle of Gold” and gold was known to occur around areas now known as Baguio, Paracale, Masbate and on the southern island of Mindanao around Surigao. Spanish gold production was mainly from alluvial sources with recorded production during the 19th century at about 21 tonnes of gold. The Spanish, through the ‘Inspeccion de Minas’ also prospected for copper with the first copper mine, the San Remigio Copper Mine in Carawisan, Antique opening in 1842.

Under the administration of the Americans (1898 to 1946) an emphasis was placed on mineral development which was largely fuelled by American finance. Some significant mines to open included Benguet Consolidated (1908), Balatoc (1929) and Lepanto Consolidated (1937). Significant porphyry copper discoveries during the 1950’s and 1960’s (Lutopan, Sipalay, Santo Thomas, Tapian, Mankayan) expanded the copper mining base of the Philippines and by 1974, 18 copper mines were in production. Copper production reached a peak in 1981 of some 305,300 tons of copper.

A large proportion of gold production in the Philippines has occurred as by-product of the country’s porphyry copper mines. This production level then declined partly due to the copper price crash and also to non-competitive mining legislation.
With the introduction of 'The Philippine Mining Act of 1995' considerable increased interest in the Philippine resources sector occurred by foreign companies. The factors driving this interest included the high mineral endowment, a new workable mining law and a lack of exploration for over twenty years using modern exploration technology.


Follow the company’s progress online at Cadan Resources Corporation is exploring Gold, Silver, and Copper mining projects in the Philippines..