JUNIOR MINING

Canaco shares jump on news of mystery Chinese JV partner

Canaco got a boost of confidence from investors after it announced signing on a Chinese gold producer as a potential partner on to its Magambazi gold project.

HALIFAX, NS (MINEWEB) - 

Though many investors did not think much of Canaco Resources' (TSX-V: CAN) first resource estimate on the Handeni gold project in Tanzania, the Chinese are apparently of a different mind.

After an already long shareprice decline that began in September last year, Canaco was pilloried on the markets in May when it outlined 721,000 ounces gold @ 1.48 g/t gold in indicated resources and 292,000 ounces gold @ 1.36 g/t Au in inferred resources in modelled open pits at Handeni.

Canaco's shareprice fell from near a dollar to around 30 cents on news of the resources that some analysts and investors reckoned would be quite a bit bigger. Canaco, it seemed, had joined the crowded ranks of juniors with a million ounces gold in the ground with few prospects of generating interest.

But Canaco revived hopes for Magambazi on Thursday, announcing it signed a non-binding memorandum of understanding (MOU) with a Chinese gold producer to strike a joint venture to develop and explore Magambazi. There was no word on the identity of the Chinese company, but Canaco said it will get the right to earn up to 55 percent in Magambazi by assuming all project costs until it meets terms of the earn-in.

Exactly what the earn-in will entail is not clear, but it will presumably involve a certain level of expenditures by the Chinese gold producer.

Before the deal becomes reality, Canaco said that, among other things, it must get a mining license for the project and the partners sign a definitive agreement, which would set out detailed terms of the partnership and give a much better sense of how far the Chinese gold producer sees taking the Handeni project.

News of the MOU gave Canaco a hefty shareprice boost. Within a couple hours of market open on Friday it was trading up 13 percent to C$0.39 on strong volume.