GoGold Resources (GGD) - Technical Analysis

GoGold Resources Inc. is a Canadian-based silver and gold producer with projects in Mexico. The company’s Parral Tailings mine is a low-cost silver producer with increasing production. In addition to low-cost gold and silver production, the land is currently occupied by the tailings and is remediated and reclaimed for the city of Parral.

Merlin Marr-Johnson caught up with Brad Langille, President, CEO, and Director, GoGold Resources along with Chief Technical Officer, Jose Carlos Flores. 

Brad was the Co-founder of both Gammon Gold Inc. and Mexgold Resources Inc. He also served as a Director and CEO at both companies. Brad successfully developed both company’s projects from grassroots to commercial production. He was responsible for directing the growth and development of the Ocampo mine and the El Cubo mine from 1999 to 2007. He served as a Strategic Advisor for Nayarit Gold Inc. between 2007 and 2010. Under his guidance, the Orion Project was developed from the initial stages through Scoping Study and was instrumental in the company’s acquisition by Capital Gold in 2010. Brad joined GoGold Resources as a Strategic Advisor in 2010 and took the role of President and CEO in 2016. Over the course of his career, Brad has been involved in raising over $1Bn in capital. 

Company Overview

GoGold Resources Inc is a silver and gold producer. The company’s Los Ricos property is a silver and gold exploration project located in Jalisco, Mexico. The company was founded in 2008 and is headquartered in Nova Scotia, Canada. It is listed on the Toronto Stock Exchange (TSX-V: GGD), and the OTC markets (OTCQX: GLGDF). 

GoGold Resources has an operating mine in Mexico, the Parral Tailings treatment which has been mined for 7 years and currently has an additional 7 years of reserves. 

The company had a maiden resource at the Los Ricos North project which is located 15km from the Los Ricos South project. The company has had the project in its portfolio since 2019 and has drilled 150,000m so far. It plans to advance the project and drill another 100,000m in 2022. 

The majority of these drill metres are targeted towards Los Ricos North. When the company initiated the project in March 2019, it had 29 concessions. During this time, the company drilled 40,000m to define the main zone at Los Ricos South. Ever since then, the company has been consolidating the ground. The company also carried out significant consolidation at Los Ricos North. 

Over the past 1.5 years, the company has drilled 100,000m. It recently published a maiden resource that features 88Moz at 122g in the indicated category along with 73Moz inferred resource at a grade of 111g. Almost the entire resource is pit constrained. At a 29g cut-off, about 90.6% of the resource is pit constrained. The company has developed a bulk resource that it plans to expand through the upcoming 100,000m drill program. Notably, about 80% of the drill metres are focused on expanding the Los Ricos North resource. 

The company is focused on infill drilling to bring the indicated resource into the measured category. Los Ricos North features a significantly large mineralized system and the company seeks to demonstrate the scale of the asset. The first cut of the resource was 161Moz combined, however, the company anticipates that the actual resource is significantly larger. 

Los Ricos

The Los Ricos North deposit features 5 main ore bodies, namely the El Favor, Mololoa, Casados, El Orito, and La Trini. These deposits are low sulfonation epithermal deposits. The company has observed that the deposit contains high-grade veins dotted in between high-grade parallel veins. The company anticipates that it is currently in the mid-level silver-gold portion of the system. El Orito is an exception as it is expected to be an upthrust block. El Orito also has the potential for copper credits. The company is looking for an additional silver base metal portion of the epithermal deposit. 

GoGold Resources has conducted a metallurgical study at Los Ricos South and it is currently at a pre-feasibility level. The company is in the process of finalising the report on the same. It is looking to achieve 90% recovery through crushing, grinding, and leaching. 

The company has found that all the orebodies feature the same mineralogy with the exception of El Orito. The grades are also similar, albeit a little lower. The difference in grade is made up for by the silver mineral presence in the North and South in the form of Argentite. Notably, both Los Ricos North and Los Ricos South feature the same epithermal deposits and have similar heights. 

GoGold Resources has had access to the old workings for the deposits. The company has utilised this data along with the new drill data. It also explored areas that weren’t mined previously. The historic mining at the deposit was mainly focused on narrow veins, while the disseminated zone outside of the narrow vein was largely unexplored. The company is approaching these veins from a bulk operation perspective. 

The main zone in the South features big stopes that were taken out of the block model. The company has well-developed underground plans for these stopes. The remnant mine around these old stopes features a well-developed halo. This halo has contributed to the high grades in Los Ricos South. 

Although GoGold Resources is primarily a silver company, it thinks in terms of gold equivalent terms. In the South, the company has a +2g open pit in gold equivalent terms. This open pit has a high probability of being built. This is further solidified by the lower operating costs in Mexico. 

In Los Ricos North, the company has concluded the first pass metallurgy. Although not optimised, this first pass has shown similar results to Los Ricos South. Both feature 90% recovery on a gold and silver equivalent basis. The El Orito deposit is an exception to the above as it features different metallurgy. El Orito has close to a 40Moz resource. The company believes that the scale of this resource will require separate flotation cells in the combined processing facility. 

The company has carried out the first pass metallurgical work, flotation work, and 90% of the sulphide reports and metal reports. The company is now working towards developing a more economical concentrate, which is the next step in the flotation and metallurgy process. Although both North and South Los Ricos are in the early stages, the company anticipates that these will be a hole or leaching operation. 

As per the company, the PEA (Preliminary Economic Assessment)-level flowsheet will comprise of crushing, and sand mill grinding followed by CCD (Counter-Current Decantation). The resultant solution will be rich in silver and gold. 

Underlying Geology

The grades between the structures, in the stockwork zone, feature smearing of high grades in between. These veins feature grades ranging from 70g silver to high grades. The deposit has a big system where the veins host a good grade, while the stope has close to the same grade as the vein. This leads to a viable model of the complete zone that can be chased through the deposit. The deposit features a 29g silver-equivalent cut-off or 0.3g gold equivalent cut-off. 

GoGold Resource has carried out an additional sensitivity analysis on these grades. In the North, the company utilised the PEA costing that was developed for South Los Ricos. It was later updated with actual work that is being done in the Pre-Feasibility Study. 

The company anticipates that there will be multiple areas with very high grades of over 8m+/kg. In between these grades, the company is expecting 0.4g-0.7g gold equivalent ounces. These reserves will enable the company to generate a significant revenue stream. 

The company believes that carrying out underground mining operations will be a trade-off. Instead, it is looking to develop an open-pit operation that would reach the required depth. This will also provide the company access to the edge of the top of the pit. The low-grade material can be stockpiled for the end of mine life or used to generate decent revenue. In essence, the company’s high-grade material is present within a sea of moderate-grade material. 

The initial work has shown that the deposit features rocks with moderate hardness and higher-than-average abrasiveness. This is because the area is volcanic andesite. Taking these factors into account, the company determined a total processing cost of $16/t for Los Ricos South. 

GoGold Resources is currently advancing the engineering work in the South, this would help the company with the planning for Los Ricos North. The North and South deposits are separated by a distance of 15km. The company has 100,000m drilling planned in the North with 80% allocated towards expansion, while the other 20% will be focused on infill drilling. 

The company is looking to determine the scope of North Los Ricos. Meanwhile, South Los Ricos is well-advanced and the company has plans to carry out a Pre-Feasibility Study. Building a project in Parral is part of the company’s corporate strategy. 

Cash Position

GoGold Resources is a mid-tier company producing over 10Moz in silver equivalent ounces yearly, and generating $100M annually with free cash flow. The project CapEx (Capital Expenditure) is estimated at $125M. The company has $60M in current cash flow with no debt. It is supported by several big institutional shareholders. 

Targets 2022 and Beyond

GoGold Resources anticipates that North Los Ricos has significant exploration potential. In fact, the company expects North Los Ricos to push past a 300Moz resource. From a corporate strategy perspective, the company is looking to get a fair price for its shareholders and a fair price for demonstrating the size and scale of the district. In 2022, the company will focus on growing this opportunity while carrying out engineering studies in the South. In 2023, it has plans to reach a construction decision and build the first piece. 

The North and South deposits are located 15km apart and have a shared processing facility. Originally, the company had planned a 5,000t/day mill in the South. However, now it is looking to develop a 15,000t/day-20,000t/day mill that produces between 300,000t-400,000t gold equivalent material with a 10+ year mine life. 

GoGold Resources is looking to demonstrate the size of the whole district; this will, in turn, provide an option to the company’s investors. At the same time, the company is focused on advancing the Los Ricos South project. The company has previously carried out debt deals ranging in hundreds of millions of dollars and believes that a $125M CapEx for Los Ricos South is easily achievable. Its corporate strategy for 2022 is to keep all options open. 

Los Ricos North features an average width of orebody at 80m, while the South has 18m. The North features a good strip ratio in the 80m-100m wide benches. Based on current data, the strip ratio in the North is higher than South. 

El Favor

The company conducted a geophysics survey in the East, a known part of the ore body that had historical workings. The company found 10 drill holes here. It started out with 90 drill holes that led to the identification of a nice orebody. Following this, the company carried out IP (Induced Polarization) at the El Favor deposit which returned strong results. The company continued to explore the east and ended up with a block model that was very close to the data cut-off. 

The block model features resources from the inferred category. The company drilled the area in a hurry as it was up against the data cut-off point. This caused a 6-8 week delay in the company’s resource. The company found a road that ran across the strike length for about 900m. Drilling the holes was easy, however, the company needed to carry out up-dip drilling. This is because even though the resource is in the inferred category, the drilling led to the intersecting of the ore body 150 from the surface. The inferred resource did not reach the surface. Due to this, the top of the block model was classified as waste. The company is looking to identify where the resource goes to the surface. To add the next 15Moz-20Moz to the resource, the company stopped dip-drilling and began focusing on up-drip drilling. 

Towards the southeast of the block model, the company has additional geophysical targets. These targets hit at the very bottom of some of the deeper drill holes. The company has plans to drill these holes up-dip as well. It anticipates that El Favor East will play a major part in adding ounces during the upcoming 100,000m drill program. 

The eastern part of El Favor had 10 drill holes from historical drill operations in the year 2000. The company saw exploration potential in this area due to the presence of big structures and good sampling on the surface. As the core was still present, the company found that the drill holes were able to achieve only 25% core recovery. Through the team’s experience working on broken rocks, a triple tube setup was utilised to achieve 85%%-88% recovery. 

This resulted in the company attaining good recoveries and samples from the 90 drilled holes. These holes lead to the identification of a large ore body. Half of the ore body was situated in the west. Additional geophysics led to the discovery of the eastern extension, the El Favor ore body. The El Favor area has a 58Moz resource in total, and the company anticipates that it will be able to add another 15Moz-20Moz in a short time period. 

GoGold Resources started exploration at Los Ricos North with 10 holes at El Favor. The company made 50 holes at La Trini that lead to a 90M indicated and 70M inferred ounces. In the past 5 months, the company found the continuation of the same trend as El Favor featuring the same kind of rock and system. 

The company has carried out a total mapping of 1,500m. It drilled the first hole at the Gran Cabrera area recently which showed strikingly similar data points as El Favor. The company has plans to carry out geophysics and extensive drilling in this area over the next 2 months. The company anticipates that it will find a lot of easy ounces here. 

GoGold Resources has carried out extensive surface work in Los Ricos South, in the Homica plane which is an extension of the PEA. The company began with 29 concessions and now has about 44 concessions. It has a strong focus on advancing Los Ricos South in terms of engineering studies. It already has the initial design for the PEA pit. The company has plans for a PFS along with resource expansion. This will have a major impact on the deposit’s NPV (Net Present Value). Currently, the company is focused on additional consolidation and resource growth.

To find out more, go to the GoGold Resources website