Cayden Resources is upbeat on La Magnetita target at flagship Morelos Sur project

Cayden Resources (CVE:CYD) could see some positive news flow coming out of its Morelos Sur project in the coming months, with particular emphasis on the La Magnetita target at the 100 percent-owned Mexican project, said president and CEO Ivan Bebek.

Formed in September 2010, the company has raised over $30 million in the first 15 months of being public.

Cayden is a junior resource company with a special situation in one of two key precious metals projects: its flagship Morelos Sur gold project located in the Nukay mining district of central Guerrero State in southern Mexico and the Quartz Mountain silver-gold project in Nevada.

Morelos Sur lies approximately 230 kilometres south of Mexico City in the Guerrero Gold belt which is located in the Nukay district and has a very strategic land position as it surrounds the Los Filos Gold mine which is an 11.5 million ounce mine that is currently being mined and operated by Goldcorp (TSE:G)(NYSE:GG).

The Guerrero Gold belt currently hosts over 15 million ounces of gold between two separate projects, the Los Filos Gold mine, Torex Gold’s 3.9 million ounces, and provides an excellent platform for exploration and development as other significant ounces are continuing to be discovered in the belt with a third company Newstrike, Cayden said.

The Morelos Sur gold project contains an 80,000 ounce NI 43-101 compliant gold resource, and the company is currently running a drill program on one of three targets that will be tested in the first half of 2012.

Speaking to Proactive Investors, Cayden's Bebek said one of the magnetic anomalies and current drill targets at the site, La Magnetita, represents a significant target that could provide some very positive news in the future.

"We have an excellent shot at defining a large multi-million ounce deposit," Bebek said.

Bebek himself has spent over 12 years financing resource companies and has been instrumental in the raising of considerable risk capital for the exploration companies in which he has been involved. He has extensive experience in financing, foreign negotiations and acquisitions, he said.

A unique attribute of Morelos Sur is that it has a producing mine within its boundaries - Goldcorp's (TSE:G)(NYSE:GG) Los Filos mine, which also happens to be the largest gold mine in Mexico and is forecast to produce 345,000 ounces of gold in 2012 at a very low cost of under $500 an ounce, according to Goldcorp.

Cayden is currently completing a soil and rock sampling program to develop detailed drill targets in the La Magnetita area, and expects to begin drilling by the end of the first quarter of 2012.

Indeed, Cayden's Bebek sees potential for upside in the company's share price based on pending results from La Magnetita.

"What I think the market is doing is valuing us at a discount based on a potential transaction with Goldcorp on the basis that Goldcorp’s operations clearly need to be expanded further into Cayden’s property.

"Goldcorp currently has five drills turning under Cayden’s supervision in an area on Cayden's property that is understood to be needed for the expansion of Golcorp's current leach pad which.

"In addition to Goldcorp needed more of our land we believe that there's room for significant speculation at our La Magnetita target which hasn't quite been realized in the share price."

Thursday, Cayden's shares closed at $2.58 on the TSX Venture Exchange. Over the past six months, the stock is up 22 percent, while the TSX Venture index fell 2.7 percent over the same period.

In early December 2011, Cayden also started drilling at Quartz Mountain in Nevada, following up on 60 square kilometres of historical works on the surface. Bebek said the company has drilled 16 holes and results for eight of them are due for release.

"What we're seeing in Nevada is the potential for multiple high-grade silver lead and zinc depsoits- which is what we're looking for - and we're starting to see gold in some preliminary results."

Rock samples taken from the Quartz Mountain area returned values as high as 1.38 and 2.38 grams per tonne gold.

Historically, the Quartz Mountain district was organized in 1875, after the discovery of rich silver-lead ores on the southeast flank of Lodi Hills. 

Over the next several decades, additional mines and adjoining prospects were active in development and production.  In 1920, gold rich silver-lead ores were found on the northwest flank of Quartz Mountain, and the San Rafael mine commenced operations. 

Despite some breaks in production, San Rafael produced ore from six levels of underground mining until 1957.

Cayden Resources may also be on the hunt for assets that would boost its resources.

"We're always reviewing additional acquisitions. Our goal is to deliver another plus five million ounce deposit to our shareholders as we did with our sister company Keegan Resources (CVE:KGN)(NYSE:KGN). If we see a project with equal or more upside than our existing flagship project, we would go after it."

Bebek wouldn't elaborate on what assets the company is specifically looking at or where they might be located at this time.

By June, the company expects to have unveiled results from 30,000 metres of drilling - 25,000 metres carried out in Mexico, and 5,000 metres in Nevada.

Bebek was "confident on delivering of signficant results" from the drilling, Bebek said “all of our exploration results ahead of the upcoming drilling programs have been very encouraging”.

On completion of the 30,000 metres, Bebek said the company's treasury would be at approximately $2.8 million of unallocated cash, with Cayden planning to raise further cash on the back of the drill results.

In terms of the outlook for gold prices, Bebek reckons gold will continue its uptrend, supported by major near-term factors such as the US presidential election in November, and the threat of further quantitative easing by the Federal Reserve, which would increase gold prices as the US dollar falls.