Using the proceeds from a $45-million private placement,
The Nova Scotia-based company paid US$13.5 million for the project and assumed US$7 million of debt held by the vendor.
El Cubo has been in continuous production for more than 200 years and is in a historic mining district with recorded production of 1.2 billion oz. silver and more than 4 million oz. gold from various mines.
Over the past five years, El Cubo has produced an average of 58,000 oz. gold-equivalent annually (65 oz. silver assumed to equal 1 oz. gold).
The current mine is an underground operation with access ramps and two vertical shafts for ore hoisting. It has a modern but under-utilized mill with a rated capacity of 1,400 tonnes per day that would cost an estimated US$13 million to replace.
Mexgold believes the full potential of the project has yet to be realized, owing to the lack of capital expenditures on exploration and development. The company intends to boost production and operate at the mill’s full rated capacity.
The company will use about $27 million from the recent financing to expand and upgrade the operation. It will also carry out a program aimed at increasing reserves and resources, which are now estimated at 2 million contained ounces. Some of the proceeds will be used at the company’s other Mexican projects, notably the wholly owned, advanced Guadalupe gold-silver project in Chihuahua state.
At El Cubo, Mexgold plans to carry out a 60,000-metre program of exploration and development drilling, along with about 8,500 metres of underground development in tunnels and ramps. Improvements to the mine design and mining methods are also planned.
Mexgold hopes to increase annual output to more than 100,000 gold-equivalent ounces by year-end and, over the same period, reduce cash costs to US$190 per oz. from US$265.
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