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Goldcorp-0, Oroco-1

Bob Moriarty
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Posted Sep 12, 2012

I went to Mexico last week to visit a company I have been following since the spring of this year. They have a project they call Cerro Prieto in Sonora State, Mexico. I like the company because they have already announced financing for a mine to be put into production in 18-24 months. With gold at today’s prices, juniors have to be planning on production even if they would rather explore until the cows come home.

I like production stories and when I saw what they were doing, I bought some shares. And waited. And waited. I let them know I wanted to go see the project. I waited some more.

Adam Smith, VP Corporate Development of Oroco Resource (OCO-V), got in touch with me a couple of weeks back and asked if I was ready to visit them in Mexico. Indeed I was. So I flew down to Mexico City and Adam picked me up at the gate. We jumped into his rental vehicle and headed south towards Acapulco, four hours away.

Right away I started thinking something funny was going on. Sonora State is in Northern Mexico right on the border with Arizona. We were headed to the Southwest. I asked Adam why we were headed to Acapulco if their production story was in Sonora. He smiled and told me that they had an even better story. It was the classic “Bait and Switch.”

I may have mumbled under my breath. What could possibly beat a gold production story? Well, there is the Guerrero Gold Belt. That might beat a production story. Now I must admit, while I had heard of the Guerrero Gold Belt, I had never visited any of the mines there.

The Guerrero Gold Belt extends for some 55 km from the southeast to the northwest. So far, mining companies have outlined over 16 million ounces of gold.

Goldcorp has one of their most important assets in the GGB in the Los Filos Gold Mine. The mine produces about 345,000 ounces of gold a year at a cash cost of $463. They mine just short of 75,000 tons of material a day. Wouldn’t it be nice to have one of those?

Oroco thinks they have one of those. They have two properties they call the Xochipala concessions. Located a mere 4 km from Los Filos on the same trend the projects are a total of 193 HA.

Oroco picked up the projects in 2008 and filed for registration. That is the last legal stage in proving the property is yours. The initial registration was declined and after a series of legal submissions and two court challenges, Oroco had their legal ownership registered as of August 14th, 2012. The land is theirs.

During the process, Goldcorp was attempting to register two properties just 4 km to the SE of their Los Filos project. Their properties also were 193 HA. As a matter of fact, Goldcorp was under the impression the projects Oroco owned were already theirs. They were so sure they were theirs that they conducted a 24-hole 1 million dollar exploration program. They even built a wonderful concrete building to contain the core from the exploration program.

Oroco thinks it’s wonderful that Goldcorp conducted a big drill program on Oroco’s land. Now they want to see the results. Previous surface sampling that took place before Oroco bought the projects indicates various samples such as 1 meter of 11.75 g/t, .9 meter of 54.50 g/t and 1.1 meter of 6.1 g/t.

The mineralization consists of intrusive related skarns where the hot and acidic hydrothermal fluids mineralized the contact between the intrusive and the marble sediments. Every other intrusive in the district has turned into a mine and Oroco believes they have a major project on their hands that investors had forgotten all about. Now I was beginning to understand why Adam was taking me to Xochipala instead of to Sonora. It was a “Switch and Bait” instead of a “Bait and Switch.”

Goldcorp has put themselves into an interesting position. Oroco’s lawyers told Goldcorp that Goldcorp’s claim was not necessarily valid and they should be careful before action lest they find themselves trespassing. Goldcorp ignored the warnings.

In general, if you have a valid mineral claim and someone does exploration on it, you own it. Goldcorp has acknowledged that Oroco does now indeed own the project but wasn’t exactly eager to turn over the drill data and drill core. In the end they will and the fact that Goldcorp claims to have not found anything but won’t turn over the data tells you everything you need to know. If they didn’t find anything, they wouldn’t hesitate to turn it over.

At some point Goldcorp is going to want to approach Oroco with some sort of deal and without seeing the data, the management of Oroco would be legally remiss to even talk to Goldcorp.

Goldcorp has missed a lot of opportunity in the district. A junior called Newstrike bought the project they call Ana Paula from Goldcorp for $2.1 million and then discovered a 2.5 million ounce gold core surrounded by a low-grade bulk tonnage target. Goldcorp sold El Limon in the district only to see Torex come up with a 2.5 million ounce resource.

I bought into the Oroco story many months ago based on their Cerro Prieto project in Sonora that as of now I haven’t even seen. Their stock was $.28 and I was quite content to pay that for that project. That would have given them a $19 million dollar market cap. Much water has passed under the bridge and as of August 14th, they have a far more exciting project in the Guerrero Gold Belt. So the market now values the company at $17.5 million. Go figure.

I don’t know what those 193 HAs are worth but I suspect Goldcorp has a real good idea. When dealing with majors, in general they move at the speed of molasses on a cold day but given that Goldcorp has already done an exploration program on the project, every day that goes by increases the value of the project. That could well end up being a $100 or $200 million or higher buyout. Right now the market isn’t giving it any value and that isn’t going to last long. Adam Smith will be out beating the drums and the price of the shares will go higher.

I’m biased. I bought shares on the open market and I think they are going much higher. They may advertise. Do your own due diligence.

Oroco Resource Corp
OCO-V $.255 (Sep 11, 2012)
ORRCF OTCBB 69.3 million shares
Oroco Resource website

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Bob Moriarty
President: 321gold
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