GoGold Resources: Los Ricos Projects Eyes 16MOz Potential in Evolving Mexican Mining Scene

• Mexico's new president Claudia Sheinbaum is pro-mining and expected to allow open pit mines, a positive development for the mining industry
• GoGold Resources is optimizing production and cash flow from its Parral tailings project in Mexico using new zinc circuit technology
• The company plans to build its Los Ricos South silver and gold mine, with production expected to reach 8M oz/year at $12/oz AISC
• A Preliminary Economic Assessment for Los Ricos North outlines potential for another 8M oz/year open pit mine
• Exploration drilling is underway to test for mineralization 300m below the Los Ricos South deposit, which could become another mine, sharing infrastructure

GoGold Resources, a Canadian silver and gold mining company operating in Mexico, is well-positioned to benefit from an increasingly favourable political environment and the company's strong pipeline of development and exploration projects. With a new pro-mining president in Mexico, optimized production at its Parral tailings project, and plans to build two new mines at its Los Ricos property, GoGold has good potential for growth and value creation.

Mexico's New Political Environment 

The election of Claudia Sheinbaum as Mexico's new president in 2024 marks a positive shift for the mining industry. In contrast to her predecessor Andrés Manuel López Obrador's restrictive policies, Sheinbaum is expected to support mining development, including allowing open pit mines in most areas. GoGold CEO Bradley Langille noted,

Claudia Sheinbaum won in a landslide in the election. She is definitely pro-environment, she's green transition, but she also knows that to do the social things she wants to do, to do the environmental things she wants to do, she needs to have – her country needs to have – a strong balance sheet.

This political change is a significant tailwind for GoGold and other miners in Mexico. The government has indicated it will grant permits for open pit mines and is working to process a backlog of permit applications. GoGold expects to receive a key permit for its Los Ricos South project by the end of Q1 2025.

Optimizing Production at Parral 

GoGold's Parral tailings project, which reprocesses historical mine waste to produce silver and gold, is an environmental remediation project that aligns well with the Mexican government's priorities. Parral is generating increasing cash flow for GoGold, with free cash flow reaching US$1.5 million per month following the implementation of a zinc recovery circuit that is optimizing metal recoveries. Langille highlighted the importance of the Parral project:

Parral, you know, we're one of the first companies who have applied technology around agglomeration heap leaching – that's mixing these old tailings with cement and making a pellet that we put out on a heap leach... In that meeting on November 8th, I had an opportunity to talk to the Director of Mines for a couple minutes and I mentioned the Parral project and that we had developed this new technology... We'll be working with them closely on this technology that we've developed and how it might fit into their agenda, and of course, that helps us a lot.

Interview with CEO Bradley Langille

Building Two New Mines at Los Ricos 

The centerpiece of GoGold's growth strategy is the development of two new mines at its Los Ricos property in Jalisco, Mexico. The company is completing a Definitive Feasibility Study for its Los Ricos South project, which is expected to produce 8 million ounces of silver equivalent per year at an all-in sustaining cost of approximately $12 per ounce.

Los Ricos South will be developed as an underground mine, with a capital cost of just over $200 million and an estimated after-tax net present value of $350 million. GoGold is shovel-ready, with a strong balance sheet, $72 million in cash, and access to debt financing. The company plans to break ground in Q1 2025 providing the permit is granted, with first production expected 24 months later.

Really, we could probably sign a term sheet today on the financing because we have such a strong balance sheet. The debt component is there for us, and we're just looking at the real details of all the financing offers, and we'll pick the best one… It's not just cost of capital – we're going to pick one that lets us have flexibility because the next thing here is Los Ricos North.

Los Ricos North is GoGold's second development project, with a Preliminary Economic Assessment outlining the potential for another 8 million ounces per year of production from an open pit mine. The company plans to begin infill drilling and complete a Definitive Feasibility Study for Los Ricos North while Los Ricos South is under construction.

If both projects are developed as planned, GoGold's total production could reach 16 million ounces per year, putting the company in the ranks of mid-tier producers like First Majestic Silver and Hecla Mining.

Exploration Upside 

In addition to its development pipeline, GoGold is investing in exploration to drive further growth. The company is currently drilling to test for mineralization 300 meters below its Los Ricos South deposit, where historical records indicate the potential for high-grade silver mineralization.

Wouldn't it be exciting if at the same time we're working towards first pour up here, we can announce that we have another one down here, 300 meters below our reserves. I mean, I think that would really ignite some excitement about discovery and value again. So beyond having the next mine in Los Ricos South, and Los Ricos North –  there is another one right below what we're [currently] building, which then we use the same infrastructure, the same mill?

GoGold is investing $3 million in this exploration program, which is expected to deliver about 20,000 meters of drilling. Positive results could add significant value for shareholders.

The Investment Thesis for GoGold Resources:

• Strong balance sheet with $72M cash and access to debt financing for Los Ricos South construction
• Near-term production growth from 2M oz/year to 10M oz/year with Los Ricos South
• Potential for further growth to 16M oz/year with Los Ricos North
• Low-cost production with AISC around $12/oz at Los Ricos South
• Exploration upside from drilling below Los Ricos South deposit
• Favorable political environment in Mexico supports mine development
• Experienced management team with track record of building and operating mines
• Attractive valuation with potential for re-rating as production grows

Macro Thematic Analysis: 

The election of pro-mining President Claudia Sheinbaum in Mexico marks a significant shift in the country's stance towards the mining industry. After years of restrictive policies under the previous administration, mining companies operating in Mexico can hopefully now look forward to a more supportive environment.

This change comes at an opportune time, as demand for silver and gold is expected to remain strong due to their use in green energy technologies, electronics, and as a store of value in an uncertain economic environment. Mexico is a major producer of these metals, and the government's support for the mining industry should help to unlock the country's mineral potential.

For companies like GoGold Resources, this macro backdrop provides a favorable environment for growth and value creation. With a supportive government, strong demand fundamentals, and attractive projects in the pipeline, GoGold and other mining companies operating in Mexico are well-positioned to benefit from the country's rich mineral endowment in the years ahead.