Western Goldfields aims to fire up Mesquite

Vancouver – A 70,000-foot drill program launched by Western Goldfields (WGI-T, WGDF-0) is aimed at expanding the resource base as part of a broader plan to revive the past-producing Mesquite gold mine in Imperial County, California.

A previous operator placed Mesquite into production as an open-pit heap-leach mine in 1985. The mine was eventually acquired by Newmont Mining (NMC-T, NEM-N), which placed expansion plans and the mine on hold in 2001, during a period of low gold prices. The senior producer continued the permitting process and obtained permits for the proposed expansion in 2002. Western Goldfields acquired the property and related permits in 2003, and has since continued residual leaching, with this year’s production estimated at about 14,000 oz.

The company announced the completion of a positive feasibility study earlier this summer, based on a proven and probable reserve of 130.9 million tons grading 0.018 oz. gold per ton, or about 2.36 million contained oz. Measured and indicated resources (exclusive of reserves) are estimated at another 74.4 million tons at 0.017 oz. gold, or 1.25 million contained oz.

Western Goldfields plans to place Mesquite back into production at an average annual rate of 165,000 oz., with an initial project life of 9.5 years. Capital costs are estimated at US$88.2 million, not including a pre-production stripping expense of US$18.7 million, mostly in 2007. Cash operating costs are estimated at US$346 per oz., with total costs of US$408 per oz.

The ongoing drilling program is focused on expanding the non-oxide resource base at Mesquite through at least 70,000 feet of reserve-circulation drilling. Because many of the previous drill holes stopped in mineralized non-oxide material, the company sees excellent potential to increase resources.

Initial metallurgical testing has indicated that a recovery of gold-in-concentrate of more than 80% can be achieved from a gravity and flotation circuit. More test work is planned to optimize recoveries.

Western Goldfields recently began trading on Toronto Stock Exchange and has about 69 million shares outstanding, or 111.3 million fully diluted. The management team includes Chairman Randall Oliphant, a former president of Barrick Gold (ABX-T, ABX-N), and President and Chief Executive Officer Raymond Threlkeld.