GoGold sees Los Ricos South permits in March

GoGold Resources (TSX: GGD; US-OTC: GLGDF) says a new feasibility study shows the Los Ricos South (LRS) project in Mexico would cost US$227 million to build and provide a 28% internal rate of return. 

The rate would rise to 34% using spot prices of US$30 per oz. silver and US$2,608 per oz. gold for the underground mine in Jalisco state, about 500 km northwest of Mexico City, the company said Friday. 

The base case net present value, using a discount rate of 5%, is US$355 million, rising to US$469 million with the higher metal prices, it said. The payback period would fall from 2.6 years to two.

“Our expectation is that we will receive a positive outcome on our permit application for our underground mine by the end of March,” CEO Brad Langille said in a release. “Once we have obtained the permit, we should be able to formally make a construction decision and begin building the mine,” he added.

Shares of GoGold Resources rose 1.5% to $1.39 apiece by early Friday afternoon in Toronto. This gives the company a market capitalization of $473 million.

Underground

The mine would have a 15-year mine life beginning with a dozen underground, followed by an open pit operation that begins in the 10th year, according to the study. 

Total production is pegged at 80 million silver-equivalent oz. (41 million oz. of silver, 424,000 oz. of gold and 11 million lb. of copper), including average annual production of 7.3 million oz. silver-equivalent in the first five years.

The detailed process plant design by Ausenco contains front-end engineering that would “allow for a quicker transition to the detailed engineering and field execution” stages, the company said. It re-engineered the 2,000-tonne-per-day plan from a 2023 preliminary economic assessment.

The capital spending includes US$21 million in contingency over an expected two-year build. Sustaining capital costs are calculated at $100 million over the life of mine.

Exploration

Looking beyond the imminent construction, GoGold also sees opportunities for more near-mine exploration with a focus on growing additional high-grade underground resources at LRS.

It will also look to advance the Los Ricos North (LRN) project located 25 km away. LRN represents the other part of its 240-sq.-km property, and is subject to a May 2023 PEA that showed an NPV of US$413 million.

The feasibility study released Friday incorporates an updated mineral resource estimate for LRS totalling 11 million tonnes grading 162 grams silver per tonne, 1.56 grams gold and 0.12% copper in the measured and indicated category.

It also has 2.2 million inferred tonnes at 106 grams silver, 1.11 grams gold and 0.27% copper. Over half of the contained metals are from out-of-pit resources.

Some resources have been converted into proven and probable reserves, now estimated at 10.2 million tonnes grading 145.4 grams silver, 1.39 grams gold and 0.1% copper.