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GoGold Resources, Inc. (OTC: GLGDF) (TSX: GGD) Hammering Out a Highly Profitable Silver & Gold Footprint in Northern Mexico
Despite a history of mineral recovery stretching back over five centuries to before the colonization of the country by Spain, Mexico’s massive mineral belts – which are some of the most prolific precious metal producers on earth – have barely been scratched up until more recently. The vast majority of production activity in Mexico was historically concentrated on exploiting the rich surface deposits, meaning that a more concerted application of modern mining techniques and hardware since the early 2000's has been able to really unleash the true potential of the country’s abundant mineralization, resulting in a quadrupling of gold output that has skyrocketed the country up the list to where it currently holds the number nine slot globally, with around 92 metric tons (roughly 3.25 million ounces) of production last year.
When it comes to silver, Mexico is top dog and has taken the number one producer slot globally for many years now, and produced around 5.2k metric tons last year (over 184M oz), off slightly (2M oz) from the country’s all-time record high posted in 2013. Traditionally, Mexico has been an extremely attractive, relatively low-risk jurisdiction for precious metals production, with Sonora in particular (the country’s top mining state by production and permit volume), benefiting alongside other northern Mexico states in large part due to the logistical benefits of being located just south of the U.S. border. The overall nationwide mining sector has a solid outlook according to the latest analysis by BMI View, with a projected 2.7% annual growth rate through 2018, when it is estimated that the mining sector as a whole will hit upwards of $16.9 billion on the back of a stable business environment and continued strength in silver production, allowing the country to maintain its position as world leader in output of the white metal.
However, despite the relatively lax environmental regulations compared to other countries, the cheap labor and the numerous financing, promotional and other benefits offered to established, as well as prospective mining companies, by both the semi-autonomous government trust FIFOMI (Fideicomismo de Fomento Minero) and the central government’s Mining Coordination Office, the recent imposition of a 7.5% royalty on profits and 0.5% tax on precious metals means that only the best-of-breed companies are doubling down these days. Mexico’s environment ministry (SEMARNAT) is even moving to impose tighter restrictions on operators now, ever since the Sonora River disaster last year in August, when millions of gallons of sulphuric acid, heavy metals and copper sulphate were accidently spilled by the world’s third largest copper producer, Grupo Mexico, which was formed during the privatization of the state mining company under the Salinas government back around 1990.
One of the companies that has proven its ability to survive and actually thrive in this new environment, even with gold and silver prices trending towards 2010 levels, at around $1,200/oz and $16/oz respectively (as of April 14), has been well-financed, Canadian-based GoGold Resources, Inc. (TSE: GGD) (CVE: GGD) (OTC: GLGDF). GoGold’s primary operation in southern Chihuahua state, consisting of the Parral Tailings site and nearby $2.5 million heap leach facility, possesses premium metrics and the company has proven itself able to not only rapidly develop the project in an orderly and efficient manner, but to do so under-budget. Acquired in August of 2012, GoGold subsequently completed a PFS (pre-feasibility study) on Parral defining a 35 million silver equivalent ounces reserve, or some 20.3 metric tons grading 38.4 grams per tonne Ag and 0.31 g/t Au. This one tailings pile represents nearly three and a half centuries of dumped material, making it a low-risk and extremely stable cash generator for GoGold.
Since pouring their first bar of dore at Parral back in June of 2014, GoGold has been able to successfully tune their operations and post successively declining cash costs per silver equivalent ounce, with their best performance to date reported April 9, 2015, as the company saw a 14.8% drop in such costs compared with the previous quarter. Mind you, this is only about a month since the official start of commercial production at Parral (defined as 60% of designed tonnage maintained on the heap leach pad and subsequent recovery for 30 consecutive days) that was announced March 1. To make the case for a robust operation even more obviously, the company also saw a 37% quarter-over-quarter jump in production output to 315.804k silver equivalent ounces. With stacked tonnage grades on the heap leach pad roughly 20% higher than in the PFS, recovery rates currently at 92% on the first cell of the pad, and the company stating that they are on track to hit 100% rates this quarter, the recovery rate is also higher than initially stated in the PFS.
The addition in February to this project’s already compelling economics, of an NI 43-101 validated 12.6M silver equivalent measured and indicated ounces (49 g/t Ag and 0.26 g/t Au), via execution of a definitive agreement ensuring the company an exclusive option to process the Esmeralda (Promotora) tailings from a nearby site, adds substantially to the overall project profile’s allure. With extensive due diligence performed by GoGold, via contracting Boart Longyear for their Sonic Drill System and the punching of 158 holes, consisting of some 10.9k feet of drilling, leading to the release of the NI-43-101 in February, this additional acquisition means GoGold has a superbly localized strategy on their hands here and can take full advantage of their heap leach facility’s lifespan.
In addition to their core project, GoGold Resources has a handful of other exciting projects underway, including their recently environmentally permitted Santa Gertrudis project, a past-producing gold mine in Sonora, where considerable infrastructure is already in place (including pre-stripped pits, haul roads, water facilities and personnel housing), improving the project’s economics handsomely. With the final mine design and engineering currently in progress and a six-month window estimated for construction, as well as a PEA (pre-economic assessment) from September last year indicating an 810k oz Au resource (255k oz Au inferred) recoverable at an estimated $699 all in sustaining cost per ounce over the mine’s life, Santa Gertrudis is rapidly emerging as a significant potential source of future profit generation for the company’s shareholders. Santa Gertrudis’ initial projected CAPEX is roughly $32 million, including a 20% contingency. With a mine life of approximately 12 years, doing 7.5k tonnes per day (56k oz Au per year) using a conventional heap leach approach to process the primarily oxide resources (easily heap leachable), which is estimated as costing only $16M over the life of the mine, the overall upside here could be extremely significant to investors.
Down in Durango, GoGold is developing a 176.7k-acre epithermal gold and silver exploration project in the heart of the Sierra Madre Occidental Gold-Silver Belt known as the San Diego Project, which contains three interesting targets tested by 87 drill holes to date. Breccia Hill is an open pit target on which the company has done some 918 surface and underground sampling hits, with returns from the open pit target area yielding arithmetic average assay grades in the neighborhood of 1.23 g/t Au, with 13.15 g/t Ag. Some nice drill results have come back already from tapping into the core mineralized zone, including one 348 foot interval from 160 feet to 505 feet down that showed 1.98 g/t Au and 20.5 g/t Ag over 275 feet (true width), as well as a surface to depth 423 foot hole, with an interval showing 1.18 g/t Au and 13.5 g/t Ag over 230 feet (true width).
Similar results at the second target Chispa De Oro, which consists of high sulfidation epithermal breccia zones, including a 244 foot interval starting just ten feet below the surface, which showed 0.24 g/t Au and 76.36 g/t Ag with a strong 1.25% copper secondary, could grant this project solid backdrop profitability due to the abundant copper mineralization. The third target at the San Diego Project, Las Europas, has shown some impressive high-grade silver, including a nearly 26 foot interval over 23 feet (true width), showing a whopping 938 g/t Ag.
Take a closer look at GoGold Resources by visiting www.GoGoldResources.com
