Goldcorp building Penasquito bigger, sooner

Vancouver — Goldcorp (G-T, GG-N) is expanding the Penasquito mine in Mexico before it’s even built, announcing a plan to increase mill throughput by 30% and accelerate the project development schedule.

The expanded Penasquito operation will process 130,000 tonnes of ore per day to produce an average of 400,000 oz. gold, 31 million oz. silver, 97,000 tonnes lead and 189,000 tonnes zinc annually. Pre-expansion plans formed in a 2006 feasibility study called for a 100,000-tonne-per-day milling operation.

Capital costs for the expanded project are expected to reach $1.49 billion, compared with the previous estimate of $882 million. According to Goldcorp, the throughput increase accounts for 40% of the rise in capital cost. Another 40% of the increase can be traced to changes in project scope brought about by the growing project footprint, facilities optimization, and revised infrastructure needs. The remaining 20% of the capital cost increase is attributed to cost escalation since the 2006 study.

Equipment will be added to each of the two milling circuits and mobile mining equipment will be used to increase the production rate at Penasquito, which will peak at 216 million tonnes of ore and waste rock processed per year. The new plan also calls for accelerated development: construction of the second semi-autogenous grinding (SAG) mill line is to start immediately after the first mill line is complete, eliminating a previously scheduled 18-month delay.

Goldcorp is investigating the possibility of building a power plant that would be dedicated to its Mexican operations. The company is also looking into in-pit crushing and conveyor haulage at Penasquito. Metallurgical testing is indicating that recovery rates will be better than expected, an increase that has not been included in project economics.

In June, a 48% increase to the proven and probable reserves at Penasquito defined a 917-million-tonne deposit containing 13 million oz. gold, 864 million oz. silver, 2.7 million tonnes lead and 5.8 million tonnes zinc.

According to the new timeline, the company expects the first gold ounces from heap leaching of oxides in 2008 and mill startup in 2009.

Prestripping has begun on the initial benches of the Penasco pit. Goldcorp finished upgrading the road between Pabellon and Salaverna and opened it to public traffic in September. And the towers and cables for the 400-kilovolt power line servicing the project have been installed; Goldcorp expects the line to begin transmitting power in early 2008.

Goldcorp’s share price climbed 2.2% on the news, closing at $33.02 the following day. The company has a 52-week trading range of $22.40-35.86 with 705.7 million shares issued.