Timmins Gold gets San Francisco production-ready (August 11, 2008)

A new crusher is on the way to Timmins Gold’s (TMM-V, TMGOF-O) San Francisco heap-leach open-pit operation in Sonora state, Mexico, where the company is getting ready to restart production at the past-producing operation by the end of the year.

Timmins recently closed the second and final tranche of a $19.3- million private placement with Pacific Road Resources, and that money will allow the company to move closer to producing 80,000 oz. gold per year for at least the next five years.

“This gives us all the money we need for equipment. . . everything we need to go to production,” says Timmins CEO Bruce Bragagnolo. “The next step is to raise some money for working capital, which we’ll probably be doing by debt.”

Bragagnolo says the company will need an additional $10-15 million for working capital; a prefeasibility study released earlier this year put total capital costs at about $33.8 million.

For now the focus is on getting things ready at the mine site, including the construction of new heap-leach pads.

The company has already refurbished the gold plant and is waiting for the crusher to arrive.

“We just have to pour the concrete and get the steel up for the frame for the crusher,” Bragagnolo says.

The new equipment will help Timmins achieve better gold recovery grades because the ore will be crushed into smaller pieces — half an inch to a quarter of an inch compared with three-quarters of an inch historically. Leucocratic granite, gneissic granite, and leucogranite, gabbro and pegmatite had recoveries of 83.2%, 93.9%, 50.7% and 78.5%, respectively. A recovery of 70% was used for the prefeasibility study.

Past recoveries averaged about 63%. Bragagnolo says financial constraints due to the low price of gold forced the previous operator to use second-hand crushing equipment, which meant settling for a larger size of ore.

“This is why we are buying brand new crushing equipment,” he says. “It’s designed specifically for this mine.”

Bragagnolo says having the right crush size, capacity, coarseness and throughput will save the company money.

“It reduces downtime and maintenance.”

The San Francisco mine was in operation between 1995 and 2001. About 13.5 million tonnes of ore grading 1.13 grams gold per tonne was treated by heap leaching, producing about 300,000 oz. gold.

The project has a probable reserve of 22.6 million tonnes grading 0.84 gram gold per tonne for 611,000 oz. gold. The stripping ratio is 2:1, while cash costs are about US$412 per oz.

Bragagnolo wants to add to those reserves and is in the process of designing an exploration program. The company has already detected mineralization surrounding the pit but the mine is a part of a 420-sq.- km property that will see drilling in the future.

“We are in the middle of a huge trend and we think we can identify two million plus ounces in and around the mine,” Bragagnolo says. “Once we start cash flowing, we’ll get more of a budget for drilling. We don’t want to dilute too much right now.”

The second tranche consisted of 11 million special warrants at $1.30 apiece, exercisable into units. Each unit comes with 0.318 of a share purchase warrant. Special warrants are exercisable into one convertible preference share at a price of $1.50.

At presstime, Timmins Gold shares traded at 75 in a 52-week window of 39.5-$1.48. The company has 65 million shares issued and outstanding.