GoGold Resources (GGD) - Mexico's Next $$ Billion $$ Silver Giant

GoGold has announced the release of financial results for the quarter and year ending September 30, 2020 with record annual revenue of USD$39.5M from the sale of 2.2Moz AgEq million which provided cash flow from operations before working capital changes of USD$8.7M.

Moving into 2021, the key milestones for GoGold will include a Preliminary Economic Assessment at Los Ricos South in January, an aggressive 100,000m drill programme at Los Ricos North focussed on discovery and an initial mineral resource at Los Ricos North in the summer of 2021.

We spoke to Bradley Langille, President & CEO of GoGold Resources for a roundup of 2020 which has been a great year for the company and to look towards plans for 2021 with their exciting discoveries in the Los Ricos district.

Company Overview

We liked this story the first time we talked to Languille in late 2019. A long record of doing what they say they will do, saying what they will do. And we haven't been disappointed. Share price up from $0.40 to $2.60, and starting to show the scale of the project still to come.

2020 has been a strange year for the whole world due to Covid-19 and GoGold continues to deal with those issues but as far as the growth of the assets of the company and their production, it's been a tremendous year. They’ve done very well.

GoGold has been a company for 10-years and Langille has been the CEO for the last 6-years. They have an operating mine, which is making good cash flow. At current prices, GoGold is making well over CAD$2M a month of free cash flow at the mine. The company is self-funding a large exploration development asset in Jalisco State, Mexico. The team has been in Mexico for almost 25-years and has built 3 mines and majorly refurbished a 4th mine in 4 companies. The team is very experienced and have managed some big projects in that time. They sold the Ocampo district to Carlos Slim for CAD$750M. They bought the El Cubo Mine for CAD$20M, doubled the production and sold it for CAD$375M. The GoGold project at the Los Ricos district is very exciting for the company and they think it will be the biggest project they’ve had in 20-years. Drilling at the Los Ricos district started in March 2019 and about 50,000m has been drilled so far. In 2021, they plan to spend another CAD$20M on exploration by drilling another 100,000m at Los Ricos. GoGold is self-funding that exploration and also has CAD$52M in the bank with no debt, so are very well-positioned for 2021.

"My Best Project in 20yrs": Successes of 2020

GoGold is only 325 holes into the project and has more than 100 targets to drill over 35km of strike length in the best undeveloped district left in Mexico. They have a big exploration programme with 8 drill rigs running and expect to be up to 10 drill rigs by February. 

The Los Ricos project has the kilos and has the big widths as well. One of the recent holes they drilled for example was 51m at 300g/t Silver equivalent which is a good grade. You can mine 300g equivalent underground, but this mine is on the side of a mountain, going down the slope of the mountain so it's very nice to bulk mine in those conditions. Also, within that drill hole, there was 5m at 2.5kg which is high-grade within an envelope of broader, moderate to even high-grade that they can bulk mine.

The amount of value per cubic metre mined is the important thing, not necessarily hitting the headline-grabbing high-grades. It all comes down to net asset value so how many dollars are made per tonne and how many tonnes are available. Open-pit mines are generally easier than underground mines from a technical standpoint and GoGold is focusing on bulk tonnage. 

In March 2019, GoGold bought the 29 concessions for CAD$7.2M and since then it's been about consolidation as they have been slowly working away at picking up new concessions, doing deals and have managed to increase it to 40 concessions. 

They started with the 35km in Los Ricos South and had a plan to consolidate everything that was in the first deal there. They started drilling at Los Ricos South as their objective from 2019 was to get that first resource. They drilled about 35,000m and ended up with 63Moz of measured and indicated, and another 20Moz of inferred resource.  

[Measured is the highest level of certainty that it's going to be there, Indicated is the next level, and inferred is the lowest level of confidence that it's going to be there.]

To have such a big portion of ‘measured and indicated’ at their first resource shows the quality of the asset which is why they think this project is the best in 20-years as that is just the first target which is 1hr45 outside of Guadalajara, the second-largest city in Mexico.

Joining the Dots: An In-Depth Look at the District

GoGold also has Los Ricos North where they have many targets and are currently drilling for resources. They were missing 5 critical claims at Los Ricos North and needed those 5 concessions so that they could move ahead with the drill programme there. So, they got those concessions, mainly focused on El Favor, La Trini, and more recently a small one at Casados. GoGold had one team which spent about a year visiting all the old mines from a map from 1916 and found 50 small mines and over 100 targets which they secured in March and then started drilling May 2020. 

Unlocking the Opportunity: Focus & Targets for 2021

At the area called El Favor in Los Ricos North, they started with 1 drill rig, and are now at 3, with the assays coming out in January, they are starting to understand the geometry of the area which looks to be perfect for bulk mining. Los Ricos has the contained ounces, the great grades for bulk mining and also the super high-grade zones within that. So El Favor is one of the new targets for GoGold and another new target is called La Trini which they bought for CAD$475,000 last year.

They’ve been drilling in La Trini and are up to 90 holes now with some more results to be released in January 2021. They have drilled enough in La Trini and now understand the geometry with both the bulk tonnage and great grades. 

All this consolidation work during 2019-2020 is leading GoGold to where they’re going in 2021. In January the PEA for Los Ricos South will be released and they will also be drilling their resources with 10+ drill rigs with the plan that the Los Ricos North resource will come out in the summer.  2021 is going to be a year of discovery for GoGold. They are aiming for exploration drilling at the best 10 of the 100 discovery targets which will set them up for the next resource after the one in the summer.  

One of the most exciting discovery targets is called El Orito which has been accelerated because it's on that same structure as El Favor where they're drilling amazing widths and grades. At El Orito, they've just put the first 6 holes in which have been sent to be assayed with the results due in January. This is one of the 100 exploration targets where they saw some incredible results on the surface, a lot of high-grades, big widths and bulk tonnage again. 

Hold-Ups & Potential Issues

Some people are nervous about security issues in Mexico, changes in tax code, lack of initiatives with the local community, environmental issues. 

GoGold likes working in Mexico and they have always been treated very fairly by all the different parties that have been in power since they've been there, including the current government. The taxation hasn't changed for GoGold and where they are in Mexico, they have had no issues with security. There are other Mexican states further south that had some issues with security and the government has now set up a special protection force.  

ESG is extremely important in mining and the GoGold Parral mine has been a poster project for ESG. They have been operating there for 6-years with their partner as the municipality. GoGold pays them CAD$70,000 a month to move the old tailings away from the middle of the city. They retain the liability for those 300-years of those old tailings in the city, but GoGold has put in a 21st-century environmental compliant facility and generated 200 jobs in the community as well.

The government in Mexico has taken interest in this project as there are hundreds of millions of tonnes of these tailings in Mexico and cities have grown up around these mines. These cities were originally there because of the mines. The technology that GoGold has developed is low Capex, low Opex, it's ESG, and it makes the company money. CAD$2M a month of free cash flow. 

At Los Ricos, GoGold is really focused on community relations and they have signed an agreement in Los Ricos South with the local communal landowners, the Ejido, to build a mine. GoGold realises that you need to have the community behind you in order to build a mine in the community. They've established food banks in both locations, they have opened a clinic and provide education around Covid. 

So, GoGold doesn't see any environmental and community issues. They have built a lot of mines in Mexico and the government is very accommodating and helpful and are keen for economic growth.

Impact of COVID-19

Mining has been designated as essential to the economy of Mexico, so the mines have stayed open during the Covid outbreak. GoGold has very stringent, strong protocols and the government makes inspections to ensure the protocols are maintained. The only issues with Covid were at the lab which had some Covid cases and so slowed things down which is why there are 50 holes in the lab that are yet to be released but they will have the results back in January. 

2021 Expectations: $1Bn Before Production? 

GoGold is excited about 2021 which looks to be a big year for drilling and exploration, the PEA and the next resource. They see the company making discoveries in Los Ricos North and in Los Ricos South in 2021. Parral is also going well with over 8 more years of reserves at Parral and it makes the company good money. 

We are interested in Los Ricos South and Los Ricos North, and believe this company will become a CAD$1Bn company without going into production in 2021? We've enjoyed watching this story grow in 2019, and all of 2020 and are looking forward to watching them in 2021.

To find out more, go to GoGold Resources' Website.