Robust economics in GoGold’s PEA for Santa Gertrudis

GoGold Resources' geological team in 2014 at the Santa Gertrudis project in Mexico. Credit: GoGold Resources.GoGold Resources' geological team in 2014 at the Santa Gertrudis project in Mexico. Credit: GoGold Resources.

After clinching a deal earlier this year to secure Animas Resources and its past-producing Santa Gertrudis gold mine in Mexico’s Sonora state, GoGold Resources (TSX: GGD) has released a preliminary economic assessment (PEA) outlining the project’s potential as a low-cost, heap-leach, open-pit mine.

For an initial capital investment of US$32 million, including a 20% contingency, GoGold can build a mine with a US$150-million net present value after taxes (using a 5% discount rate ), and a 58% internal rate of return, assuming a gold price of US$1,250 per oz.

The operation, fed by several open pits, would produce 56,000 oz. gold per year over a 12-year mine life for a total of 671,300 oz.

Sustaining capital costs are estimated at US$15.6 million.

The study, which only considers oxide and mixed (oxide and sulphide) material, projects cash costs of US$622 per oz. gold and all-in sustaining costs of US$699 per oz. After-tax net cash flow is estimated at US$232 million.

The facility would include a heap-leach pad and carbon-in-leach and ADR hydrometallurgical plants. Life-of-mine metallurgical recoveries are estimated at 73.3%.

GoGold also boosted the project’s resources for the second time since acquiring it in April.

Indicated resources stand at 23.3 million tonnes grading 1.08 grams gold per tonne for 809,700 oz. — a 33% increase. Inferred resources add 7.7 million tonnes at 1.02 grams gold for 254,500 oz., which is an 80% increase.

The estimate includes oxide, sulphide and mixed material, and was calculated with a 0.16 gram gold cut-off grade for oxide material (which is most of the resource). The cut-off grade was lowered from 0.23 gram gold per tonne in the previous resource, thanks to  the improved economic parameters in the new PEA.

Santa Gertrudis operated as an open-pit mine from 1991–2000, producing 564,000 oz. gold before closing due to low gold prices.

Like its Parral silver-gold project in Chihuahua state, GoGold acquired Santa Gertrudis because it could advance to production quickly and cheaply. (The company won the project over a rival bid for Animas from Marlin Gold Mining [TSXV: MLN; US-OTC: MLNGF].)

It acquired Parral — a tailings dump with remains from over 300 years of mining operations — in 2012, and expects to begin commercial production this year. Parral is forecast to produce 1.2 million oz. silver and 11,000 oz. gold annually.

On the PEA news, GoGold shares gained 9¢, or 6%, to $1.50 on 200,000 share volumes. Shares have traded in a 52-week range of 89¢ to $1.75, and the company has 147.8 million shares outstanding.


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