Location

Though it’s been ‘alive’ for a few days now, we’re still getting new clarity on the La Candelaria property that effectively turned Lone Star Gold Inc. (OTC: LSTG) into an overnight sensation late last week.

Just as a quick refresher, the La Candelaria site that LSTG now owns a 70% interest in is about a 2000 acre property in North Central Mexico, where there’s a long and fruitful history of successful gold mining. Though the La Candelaria has not been developed yet, most of the areas all around it have been… and by some significant names in the gold mining industry.

Per this morning’s news release, northwest of Lone Star Gold’s newly-acquired rights you’ll find Goldcorp’s El Sauzal project, which is capable of producing more than 200,000 ounces of gold per year ($300 million at today’s current prices). Just north of El Sauzal is another successful mining operation owned by Silver Standard… Veta Colorada. Over the past three centuries; worth of off-and-on mining, this site has yielded 200 million ounces. North of that is Coeur d’Alene’s Palmerejo, which gives up more than 100,000 ounces of gold and about 9 million ounces of silver every year. And, just north of there is an area that has been fruitfully producing for more than a century, owned by Gammon Gold. It’s one of the largest gold/silver mines in Chihuahua State, Mexico.

Point being, there’s just a lot of proven gold production amazingly close to where Lone Star Gold Inc. is starting to set up shop. It would be surprising if there WASN’T a worthy amount of gold and silver in the area, especially after 2009’s geological survey was completed. Preliminary research suggests the site could offer more than 10 million ounces of gold and more than 200 million ounces of silver… about $16 billion worth of precious metals for LSTG after its 70% cut.

Now the company has to go dig it up.

To that end, drilling has not started, but it should soon. Lone Star Gold has a geological team at the site right now looking at two caldera structures, and doing some more specific geo-chemical work, an electro-magnetic study, a stream sediment study, and making a channel/trenching plan.

While the company has not said it, this reporter will suggest that the initial digging is on the order of weeks away [months is too long of a timeframe, while days is too short]. Fortunately, getting the mining operation shouldn’t be an impediment.

LSTG has been clear about one thing, and reiterated in a press release earlier today… the area around La Candelaria is developed enough to support communications, infrastructure, utilities, transportation, and all the other things that are required “behind the scenes” of a gold mining operation. Ironically, it’s Lone Star Gold’s mining competition that largely made all that support and infrastructure possible.

As far as LSTG goes in the meantime, trading has been quite healthy since it got going on Monday. The most compelling part about the chart isn’t that it bolted out of the gate on Monday and Tuesday (though that was impressive), but rather, that it sold off steeply early in Wednesday’s session and then recovered back to Monday’s close. This is a hint that Lone Star Gold Inc. may have just flushed out all the weak hands and nagging sellers, and left behind only the committed traders…. a healthy action, ultimately. Of course, a little more progress over the remainder of this week would solidify that stance.

Given the strong PR effort from the company against the backdrop of the incredible La Candelaria story, the market’s bias seems to remain on the bullish side of the table. That’s apt to remain in place for at least a while longer.

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