Tuesday 13th November 2018

Resource Clips

Eight-fold Expansion

Goldgroup plans two 2013 Mexico gold mines

By Greg Klein

The metal has hit the pedal. Gold smashes record after record as it continues its 11-year run. Some analysts predict gold will surpass its 1980 historic high of an inflation-adjusted $2,300 per ounce. But are such prices enough to guarantee prosperity in the mining sector? David Fry, Corporate Development for Goldgroup Mining, doesn’t think so.

Goldgroup is in a really unique position because unlike other companies who are more senior to us, who are really taking advantage of the leverage through the price of gold, we are also creating leverage by expanding our resources—through consolidation, as well as the drill bit—and by increasing production,” he says. “Our projected increase within the next two to two-and-a half years is from 25,000 ounces per year currently to around 200,000 ounces per year.”

Goldgroup plans two 2013 Mexico gold mines

Goldgroup plans that eight-fold expansion by increasing its interest in two joint ventures and bringing them into production by late 2013. That will give the company three operating gold mines, all in Mexico.

Last week the company announced completion of a 70% earn-in on its flagship Caballo Blanco Project near the southeastern port of Veracruz. The remaining 30% is held by Almaden Minerals.

Caballo Blanco’s 2009 resource estimate shows 6.7 million tonnes grading 0.65 grams per tonne for 139,000 gold ounces indicated and 27.6 million tonnes grading 0.58 g/t for 517,000 gold ounces inferred. The resource also estimates 410,000 silver ounces grading 1.92 g/t indicated and 1.63 million silver ounces grading 1.84 g/t inferred. This resource is limited to the project’s La Paila Zone, which is open in all directions.

August 11 assays from La Paila include 0.71 g/t gold over 84.8 metres, 0.53 g/t over 94.8 metres, 0.51 g/t over 71.5 metres, 0.62 g/t over 42 metres and 0.52 g/t over 22 metres.

These assays, Fry comments, are “more of the same. They’re all around or at cut-off, which is 0.2 grams per tonne. That’s a high-sulphidation, almost totally oxidized low-grade bulk-tonnage deposit. We continue to extend the known mineralization to the south and southwest based on our recent drill results. We’re essentially just extending the ore body. The purpose of that is to revise the current 43-101 and add to the existing ounces.”

Along with the update, Goldgroup plans to begin a PEA later this year with the intention of shipping ore by the end of 2012.

It’s a fast-paced but simple project, Fry explains. “It’s run-of-mine; it’s no strip; it’s no crushing; and it’s highly oxidized ore that leaches extremely fast. It’s not expensive, and because it’s not expensive it won’t take long to get into production. We already possess open-pit heap-leach technology and experience because we have a producing mine in northern Mexico.” The new mine, he says, will add a low-cost 100,000 gold ounces a year to the company’s annual output.

It’s run-of-mine, it’s no strip, it’s no crushing, and it’s highly oxidized ore that leaches extremely fast. It’s not expensive, and because it’s not expensive it won’t take long to get into production —David Fry

Further north and close to the west coast, Goldgroup holds a 50% interest with DynaUSA in another advanced-stage gold project, San Jose de Gracia. A 2009 estimate shows an inferred resource of 3.44 million tonnes with 618,000 gold ounces grading 5.59 g/t and 1.11 million silver ounces grading 10.02 g/t.

Since then the company has drilled another 135 holes, providing data for an updated resource due 3Q 2011 with a PEA following and underground mining slated for late 2013. Goldgroup projects another 100,000 ounces a year from San Jose.

Farther north in Sonora State, Goldgroup’s 100%-owned Cerro Colorado open-pit heap-leach mine is expected to produce 25,000 gold ounces this year. The 2009 resource estimate shows 107,000 tonnes grading 0.63 g/t for 2,157 gold ounces measured, 9.6 million tonnes grading 0.54 g/t for 167,986 gold ounces indicated and 5.6 million tonnes grading 0.41 g/t for 74,177 gold ounces inferred. Cerro Colorado has been in production for seven years, with five additional years estimated. Exploration drilling continues.

The company’s only early-stage project is El Candelero, which it’s exploring under an option from its near-namesake Goldcorp. Goldgroup may earn up to 70% of this gold prospect.

Goldgroup’s team, Fry emphasizes, knows mining and knows the landscape. “[President/CEO] Keith Piggott has 14 years of experience in Mexico. He’s built two mines there already. They weren’t part of public companies, so most people don’t know about that. He has extensive experience identifying deposits and putting them into production in Australia. One of our directors, Paco [Francisco] Escandon, worked for [Vicente] Fox when he was President of Mexico. He worked for him six years; he’s an extremely well-connected guy. We have several hundred employees who work for us down there, both in the mine and at various projects. We, unlike some other companies, find operating in Mexico very good because we’ve got the track record and the history to do that.”

At press time Goldgroup had 120.3 million shares trading at $1.28, for a market cap of $156.4 million. Management owns approximately 17% of the shares, and the company has no debt and $40 million in working capital.

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