VANCOUVER - Last year, GoGold Resources (GGD-T) issued millions of shares and worked for months to acquire Absolute Gold Holdings for its Parral project in Mexico, home to a huge heap of tailings left behind after 300 years of operations at the Mina La Prieta mine.
Now a prefeasibility study has shown why GoGold so wanted that tailings dump. For just US$35 million, GoGold should be able to turn the dump into a heap leach operation that produces more than a million ounces of silver a year and generates an 80% pretax internal rate of return (IRR).
The Parral tailings repository actually lies within the city limits of Hidalgo del Parral, in Chihuahua. The town of 100,000 grew up around Mina La Prieta, a historic silver, gold, and base metals mine that operated on and off for 300 years. Metallurgical techniques have improved dramatically since the mine started operating and, as such, the tailings contain more than enough gold and silver to recover economically using modern methods.
Specifically, the Parral tailings now comprises 20.4 million proven and probable tonnes of mineral reserve grading 0.31 gram gold per tonne and 38.43 grams silver per tonne. GoGold's metallurgical testwork indicates that a modern heap leach operation should be able to recover 58% of the silver and 64% of the gold remaining in the rocks.
The pre-mined and milled rocks will be easy to process. The operation planned at Parral would simply involve moving 5,000 tonnes of tailings each day onto an engineered heap leach pad and then processing the leach solution to recover the leached metals. Such a simple operation would be inexpensive to develop – capital costs are estimated at just US$35 million, while sustaining capital over the mine's 12-year lifespan is expected to total just US$27.5 million.
The operation would produce 1.2 million oz. silver and 11,000 oz. gold annually. Using a 5% discount rate and assuming a gold price of US$1,475 per oz. and a silver price of US$29 per oz., the planned Parral operation carries a pretax net present value (NPV) of US$159 million and would generate an 80% pretax IRR. After incorporating taxes Parral's NPV falls to US$107 million and its IRR sits at 54%.
That is still a very healthy rate of return. In fact, the prefeasibility study predicts it would take just 1.7 years after the commencement of production to repay Parral's capital costs, using after-tax revenues. That estimate incorporates two other payments that matter at Parral: a 12% net profits interest and a US$30,000-per-month property payment, both of which are payable to the Municipality of Parral.
GoGold also announced that it secured the property it needs at Parral to build the heap leach facility. The company says it will spend the next three months completing final design, engineering, and permitting work and plans to commence construction immediately thereafter.
GoGold is also advancing its San Diego property, which is a 710-sq. km property in Durango, and recently released results from a set of drill holes that targeted the Chispa De Oro target. Chispa is one of three mineralized zones discovered to date at San Diego, where gold and silver exist within the quartz veins, breccias, and stockworks that stem from an epithermal system that stretches out along 35 km of strike.
Eight holes drilled into Chispa returned mineralized intercepts. Hole 62 produced one of the best results, returning 50.5 metres grading 158.5 grams silver, 0.76 gram gold, and 0.53% copper from 18 metres downhole, followed by 13 metres of 63.75 grams silver and 1.2% copper from 244 metres. Hole 64 also produced promising results, returning 175 metres averaging 59.2 grams silver, 0.25 gram gold, and 0.75% copper from 59 metres depth. That intercept included a 24-metre segment grading 304.7 grams silver, 1.03 grams gold, and 2.08% copper.
GoGold intends to define a resource at Chispa, though for the moment the company has moved its drills to another target, known as Las Europas, while it awaits permission to build a drill road. Drilling to date at Chispa has relied on helicopter support. Now that initial holes have proven the area's merit, GoGold wants to make the target road accessible and thereby reduce exploration spending.
Las Europas is a high-grade silver target located roughly 4 km south of Chispa, where mapping has identified eight structures aligned along 1.2 km of prospective strike. Trenching at the target has returned such results as 10 metres grading 318 grams silver and 0.62 gram gold.
News of the Parral prefeasibility study did little for GoGold's share price, which lost two pennies to close at $1.22. The company has a 52-week trading range of $1.12 to $1.78 and has 128 million shares outstanding.
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