GoGold Resources (TSX-V: GGD) - New Plan Means Quick Production & Cash

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.

Matt Gordon caught up with Brad Langille, President, CEO, and Director, GoGold Resources. 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 companies’ 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 is a Mexican company with an operating mine. It is one of the best development assets in Mexico. The company is well-financed with over $75M in current cash flow and no debt.

The Market Landscape

The mining industry is cyclical in nature and investors need to recognize the cycle. According to the company, it is currently at the bottom of the cycle. Investors need to take a contrarian view of the metal price. In the current market landscape, the US dollar is close to a 20-year high, and since precious metals are priced predominantly in US dollars, it reflects a lower gold-silver price.

The company anticipates that the gold price is bound to break at some point, which would allow metal prices to jump again. The market tends to pull the herd a little bit. The weaker marginal projects are going to go by the wayside, while the stronger projects will continue to maintain a great position.

The company is in a great position from a financial perspective. It has been criticised in recent times when it raised capital at $1.50, $2.50, and $2.85 as the money was offered. The company is well-positioned with a healthy cash flow and no debt.

The current generation hasn’t shown a comparable interest in precious metals and has been focused on investing in the tech sector. However, the tech sector has also taken a beating in recent times and is expected to re-emerge first. Over the last 30 years, the NASDAQ and the tech industry have taken a long time to bounce back. On the back of the collapsing tech sector, the precious metals sector has had enormous room for a decade of growth. The company anticipates that this could happen once again.

GoGold Resources is focused on building good businesses in the mining sector, specifically in Mexico. The last time the dollar was in a strong position, gold was trading between $400-$600. Companies ended up making a lot of money over the 20-year period and a substantial amount of debt was created in the market. Currently, gold seems to be at the bottom of the cycle, despite trading at $1,600-$1,700, which is a long way from the $400-$600 price range. Gold serves as a true indicator of truth as it’s a natural currency when compared to paper banknotes. Gold has played its role over the last 20 years, which has led the dollar to reach an all-time high. The company anticipates that the dollar is going to crack at some point and gold is going to take off again. The current situation is ideal to position funds in gold, as it truly serves as insurance.

When the market landscape changes, it often changes at a rapid pace. During this time, investors need to position themselves. Even a lower price makes for a good entry position. In the current environment, investing in companies that are well-financed with great projects can help investors make the most of the market cycle.

Ongoing Operations

GoGold Resources has an operating mine that also functions as a great ESG (Environmental, Social, and Governance) project. The company is re-processing the old mine waste in order to generate revenue.

The company started working on the Los Ricos project in March 2019. Over the course of the last 3.5 years, the company has spent about $60M on the asset in order to achieve phenomenal results. A large portion of the project’s success is credited to a highly-experienced team. The company has demonstrated its ability to raise billions of dollars from capital markets over the last 2 decades. Over the past 3.5 years, the company has drilled between its Los Ricos South and Los Ricos North project to identify about 242M silver equivalent ounces in all categories along with good, high-quality resources.

Over the years, the company’s investor base has shifted more towards institutional and retail investors. The company is in a strong position with a cash project from a technical perspective, and it is ready to launch.

Project Management

GoGold Resources has been working diligently on its North and South projects, which are separated by about 15 kilometres. In the South, the company has identified good grades and defined 62Moz of M&I (Measured and Indicated) and 20Moz of inferred resources. The company also carried out a PEA (Preliminary Economic Assessment) on the asset. At Los Ricos South, there’s a piece of ground that the company wanted to acquire. It took 2 years for the company to acquire the Eagle Concession. During this time, the company focused on Los Ricos North, where the company has already carried out significant consolidation. Since March 2019, the company has drilled about 200,000m. In the north portion of the deposit, the company has developed a 162Moz silver equivalent resource. It has continued to drill in the region and published a few press releases. The company anticipates that by Q1, 2023, it will be in a position to publish a PEA on the resource, giving the first economic look at the deposit.

At Los Ricos South, the company put in a lot of effort to acquire the Eagle Concession. It has carried out drilling and due diligence on the ground, leading to highly-favourable results, which have the potential to add a lot of value.

The grades at Los Ricos North are slightly lower compared to the South and have a lower strip ratio and pit. Using half a 50g silver cut-off in the pit leads to grades of about 140g silver equivalent. In gold equivalent terms, the company has 60% silver and 40% gold at the deposit. This is similar to having close to a 2g open pit, which is exceptional in its own right. In the North, the company has high-quality ounces, while the south deposit has higher grades. The company expects to see much higher grades in the South, following the acquisition of the Eagle Concession. The company has spent a lot of time and resources to include the piece of ground in its land package.

Financial Considerations

GoGold Resources has $75M in current cash flow. It is expecting a lower CapEx (Capital Expenditure) number in the South since it features super high grades, giving it the flexibility to obtain permits easily and quickly enter production.

Following a discussion with one of the Mexican majors, the company decided to re-evaluate Los Ricos South and went through the old drilling data and past discoveries. The deposit has really high grades which can be turned into a bulk-underground mining operation. The company is looking at 5m, 10m, and 20m or even wider-spaced drilling to target the really-high grades. The company intends to drill the area, run engineering studies, and fast-track the deposit into production. It does not plan on cutting any corners. The company anticipates that the Los Ricos South deposit has the potential to generate a lot of revenue. It could be the engine that can effectively get the whole district into production, the company already has a pipeline to achieve that. The Los Ricos South deposit is going to be the catalyst that gets the news flow running again, taking the company to new heights.

Targets 2022 and Beyond

GoGold Resources has plans to continue drilling at Los Ricos North. It intends to carry out an Economic Study on the deposit by Q1 2023. It is looking to demonstrate that beyond the 162Moz, the project has a really good NPV (Net Present Value) as well. This would become part of the project pipeline while the company focuses on Los Ricos South.

According to the company, the resource update is merely ounces. There needs to be a context in place surrounding these ounces in order to determine their actual worth. The company is focused more on buying dollars rather than simply mining gold and silver. It is looking to demonstrate that good dollars are associated with the ounces, which can be achieved through an Economic Study. The company is looking to publish additional studies by the first quarter of the next year. It plans to carry out a new study as drilling unfolds in the South, leading to a new resource. The company is also working on a Feasibility Study in the South. In Q2, 2022, it is looking to publish a PFS on the deposit. In the meantime, the company will also work on fast-tracking the permitting process. The Feasibility Study will incorporate some of the engineering changes along with new resources that were recently added in the South.

At the northern portion of the gold district, the company consolidated the resource and carried out about 120,000m of drilling. It has consolidated the resource in the South as well. In recent times, the company has been focused on drilling the Eagle Concession.

The company has 83Moz of resources in a structure that spans for tens of kilometres and runs through the Eagle Concession. The Eagle claim continues for 3.7km and back onto the company’s claims. At Los Ricos, the company has drilled off ounces in the underground portion of the deposit. The ounces added through this drill operation are believed to be a part of the Eagle vein. The company is awaiting the assay results to confirm the vein. Notably, the company has identified grades of 20kilos or 20,000ppm (parts per million) silver equivalent ounces. It has carried out extensive drilling which has enabled it to postulate the vein’s position by visually examining the deposit’s core. It is important to note that the vein isn’t narrow and it features variable thickness.

GoGold Resources has drill intercepts that feature up to 70m of good grade over 460g of silver equivalent ounces. Notably, the area was mined and explored about 110 years ago, and as a result, there is extensive historical data available.  Based on the past workings, the company realised that only 1Moz of the resource was extracted, while the remainder was left as is. The operators missed the mark by about 50m. The company anticipates that this area will have incredibly high grades, and it plans to explore the underground portion of the deposit in January 2023.

Notably, GoGold resources has already carried out some rehab work in the El Troce area. For the underground operations, the company needs to drill a few 100m away from its current position. It was found that the really high grades tend to be in a band from about 1,100m-1,250m above sea level. Based on this data, the company has devised a drilling strategy that has led to some tremendous grades so far. It anticipates that carrying out a bulk underground mining operation could lead to really good project economics. The company is mining the zones at 10m, 15m, and 20m widths. The company has found that the material grades here are similar to its Mexican peers.

Combining high grades with wide widths leads to an operation that requires significantly less development. It needs far fewer stopes in operation and the material can be processed using a smaller mill. The company only needs a 1000t-1500t a day mill, which requires substantially less capital. It is looking to demonstrate through studies that feeding very high-grade material into the smaller mill can generate enormous cash flow. This will result in extremely cheap operating costs. Once a resource is in place, the company can quickly update the PEA and demonstrate the alternative approach, which can be followed up with a more concise PFS in the second quarter of 2023.

In the past, the company has carried out a PFS because it isn’t in favour of a small debt facility. Given its cash position, the company has a lot of offers to raise additional capital. The company has the option to bring the deposit into a FEED (Front-end Engineering Design), which would be a Feasibility-level study. The company is well-positioned with a $75M cash flow, which is quite a bit lower than the $125M from the previous study. Notably, the previous study took a significantly bigger mill and a $10M pre-strip into consideration.

GoGold Resources has existing workings which can be brought into development through rehab. The wide, super-high grade material can feed a much smaller mill, which would lead to lower CapEx, generating a substantial cash flow that can propel the district. While the company is relying on the studies as they are published, it has identified a route where operations can be carried out with a small mill. The company has past experience in building a smaller 1,500t a day mill which can be expanded to 3,000t/day in the future.

Using the super-high grade to fund the project, the company can build its pipeline below the district. The company is open to a potential M&A (Mergers and Acquisitions). Currently, it is focused on creating the best value for the shareholders. It has extensive experience in mine-building.

According to the company, acquiring VAT tax refunds is a long process. In a recent press release, the company recovered over $5M in VAT (Value Added Tax) from 2017. The company was also paid interest on the $5M. Out of the $20M VAT, the company has recovered $5M so far. It is yet to receive the remaining $15M plus interest. The VAT tax serves as an additional source of savings for the company.

Over the next 12 months, the company is looking to publish a large number of drill results. It is anticipating highly favourable assay results from the labs. In fact, the grades are expected to be so high, that the company is looking to carry out an extra QA/QC (Quality Assurance/Quality Control) on the assays.

In Q1, 2023, the company will focus on a PEA for Los Ricos North. Following this, It will then consider revising the PEA in the South, which will be shortly followed by an Engineering Study or a PFS in Q2, 2023. The company is looking to publish extensive news flow over the next 12-18 months. Over the next 5 years, the company plans to build the project to be really special in the silver business and potentially one of the top assets in Mexico.

To find out more, go to the GoGold website