GoGold eyes silver-gold production by early 2014 with $40m financings

GoGold eyes silver-gold production by early 2014 with $40m financings

GoGold is hitting the ground running now it has $40 million in financings arranged through Red Kite and CAT to build the Parral silver-gold tailings project in Chihuahua, Mexico.

Speaking with Mineweb Friday, GoGold President and CEO Terence Coughlan says he expects to receive exploitation permits for the project in the next few weeks and that construction could begin thereafter. Assuming all goes according to plan, Coughlan says GoGold would start producing gold and silver in early 2014 after a ramp-up in late 2013.

The project centers around tailings from the long-running Mina la Prieta, which was last in production under Grupo Mexico ownership. The tailings sit on the edge of Chihuahua City, Mexico. In fact, the city owns them. It bought them in 2008 and wants them cleaned up, Coughlan says.

To that end GoGold has the rights to reprocess the tailings and plans to do so at a heap leach operation about 10 kilometres from Chihuahua. In all, GoGold has estimated reserves of 20.4 million tonnes @ 38.43 g/t Ag and 0.31 g/t Au.

Up and running with a 5,000-tonne-per-day heap leach operation, GoGold says it would produce, on average, 1.2 million ounces silver and 11,000 ounces gold a year over a 12-year mine life. Coughlan says the financings - a $30 million loan and $5 million equity investment from Red Kite, along with a $5 million equipment leasing loan from CAT - are enough to fully fund construction. GoGold says it has signed definitive agreements covering the financings with Red Kite and Cat.

Mining Parral would be quite straightforward, according to GoGold's prefeasibility study of the project. GoGold would excavate the tailings - piles of relatively fine, previously processed material with residual precious metals in it - and then truck them to heap leach pads and a process plant site about 10 kilometres east of Chihuahua. It would leach with cyanide and use zinc precipitation for recovery of precious metals.

As set out in the prefeasibility study, the operation is to cost about $35 million to build and would produce silver at an operating cash cost around $6.48 per ounce. The City of Chihuhua gets a share of profits through a 12 percent net profit interest. Assuming $1,350 an ounce gold and $28 an silver, the project returned an 80-percent internal rate of return. Clearly precious metals prices, silver especially, are a fair bit off those pricing assumptions. But then Red Kite signed on nonetheless, suggesting it expects the project to turn a profit even with lower silver and gold pricing.

“They've run their numbers and obviously they must be confident in what they see,” Coughlan says, referring to Red Kite.

The financing package from Red Kite comprises a $30 million loan due in equal quarterly payments over three years starting in late September, next year, and also a $5 million equity investment. Separately, CAT is to lend GoGold $5 million for equipment leasing, also on a three year payback.
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