New mill at La Guitarra to boost Genco’s production

With silver prices at the start of February 27% higher than a year earlier, Genco (GGC-T, GGCRF-O) wants to fast-track production expansion at its La Guitarra silver mine in central Mexico.

“These cycles don’t last forever and you’ve got to take advantage of them when you can,” says Greg Liller, who postponed his retirement last year to join the company as president.

That’s one reason behind Genco’s decision to purchase a 3,000- tonne-per-day ball mill for US$1.65 million.

“We turn an operating profit but the only way to really grow the company and give true value to shareholders is to increase production tenfold,” Liller says from Mexico.

Last year, La Guitarra produced about 700,000 oz. silver. Now Genco is undertaking a feasibility study on expanding production through a new mill and heap-leach operation.

Liller expects the feasibility study will be completed by mid-year. The company believes it will have its permits by the third quarter with construction of a new mill and heap-leach facility starting shortly afterwards and taking 12 to 16 months.

“We’re an underground mine, so we’re looking at a combination of open-pit and adding more underground production centres,” Liller says.

As for the ball mill, Genco skirted long delivery times for new ball mills of one-and-a-half to three years by purchasing a used mill from Louisiana, where it had been used at a phosphate mine.

“It was a good deal,” Liller says, adding that it “had pretty light duty” because phosphate is a fairly soft rock.

La Guitarra, about a 2.5-hour drive southwest of Mexico City in the Temascaltepec mining district, sits in the prolific silver belt of the Sierra Madre mountains.

Genco hopes to take advantage of silver prices that have reached record highs.

“The bull trend for silver remains on course to enter the US$17.75 to US$18 (per oz.) area,” wrote Standard Bank in a research note on Jan. 31.

“When the price does turn down, I want to be in a position where I can take out other companies,” Liller says, explaining why fast-tracking La Guitarra is so important. “You want to be in a position where you’re not in debt and have a healthy bank account and can take advantage of that,” he adds.

“This is what happened in the last big cycle that ended in the early 1980s. There were a lot of projects coming on-line and they didn’t get into production in time.”