Torex Gold Resources (TSX: TXG) is proving that its Morelos gold-silver project in Mexico isn’t just about near-term production, but also exploration upside.
The company released impressive drill results from its Media Luna target on the 290 sq. km land package that makes up Morelos, which lies within the Guerrero gold belt, 180 km southwest of Mexico City.
Highlight intercepts at Media Luna came from two areas: the West zone and the Northeast zone.
At the West zone the best results were 27.02 equivalent grams gold over 5.2 metres and 17.54 gold equivalent grams over 5.2 metres from two boreholes.
At the Northeast zone the highlight returns were 7.68 equivalent grams gold over 16.7 metres; 3.91 equivalent grams gold over 49.5 metres; and 13.61 equivalent grams gold over 8.4 metres from three holes.
Media Luna was discovered last June and Torex has been drilling the anomaly on a 100-by-100-metre grid. The spacing will help it put together a maiden inferred resource estimate on the zone early in the fourth quarter.
So far Torex has drilled 80,000 of the planned 90,000 metres at Media Luna and has focused on demonstrating the mineralization’s continuity within the magnetic anomaly, as well as stepping out to expand the resource base. One of the intercepts in the West zone came from an area outside the magnetic anomaly, which indicates that a future deposit could be expansive.
Gold, silver and copper mineralization at Media Luna occurs as a replacement of skarn minerals, sometimes preserving garnet and pyroxene outlines, or as veinlets with black chlorite or phlogopite halos cutting across massive skarn bands.
The skarn is thicker, and the grade and thickness of gold, copper and silver mineralization increases closer to the granodiorite-marble contact, especially where the contact steepens or forms a trough.
The strong drill results represent only the latest good news from the project, which recently announced receiving environmental permits for the Northern mine. The permits allow for construction to begin north of a river that divides the property with Media Luna to the south.
Torex plans to mine three open pits at Northern mine: El Limon, North and Los Guajes.
Last October the company completed a feasibility study that envisioned mining proven and probable reserves of 48.8 million tonnes grading 2.61 grams gold at a life-of-mine strip ratio of 5.6-to-1 over a 10.5-year mine life.
The mine is expected to reach commercial production in October 2015 and would produce 375,000 oz. gold per year between 2017 and 2024, at average cash costs of US$421 per oz. gold. Capex up to commercial production, not including revenue credits from by-products, is expected to be US$675 million.
In February Torex executed an engagement letter for a US$250-million debt financing for the project.
Using a US$1,276 per oz. gold price, the project generates an after-tax net present value of US$900 million using a 5% discount rate.
BMO Capital Markets analyst Andrew Breichmanas rates Torex as “outperform,” with a $2.50 price target.
On July 5 its shares were trading for $1.23 apiece.
“The company remains the preferred gold development company offering exposure to a quality development project, with further upside from significant exploration potential at the same property,” Breichmanas says.
Ahhh … if only it were true!
Torex’s results are report by the Company as g/t Au equivalent – not ounces as your June 18th article states.
From TXG’s News Release:
“West Zone, 27.02 g/t Au eq. over 5.2m in borehole WZML-28 located outside the magnetic anomaly, and 17.54 g/t Au eq. over 5.2m in borehole WZML-24. Highlighted intercepts in the North East Zone include, 7.68 g/t Au eq. over 16.7m in borehole NEZML-04A; 3.91 g/t Au eq. over 49.5m in borehole NEZML-20 and 13.61 g/t Au eq. over 8.4m in borehole NEZML-27.”
They are nonetheless excellent, of course:)
Kind regards,
Harold Clifford