GoGold Resources (GGD) - Los Ricos North key to Unlocking Value

October 14 2020, 13:11 GMT+01:00

GoGold Resources

  • TSX: GGD
  • Shares Outstanding: 264M
  • Share price C$1.65 (14.10.2020)
  • Market Cap: C$435M

GoGold is a gold-silver mining and tailings story that is hoping to leverage the gold bull market to create value for its shareholders. When I last wrote an article about this Mexican gold & silver explorer, the management team was preparing to deliver some drill results from the north of their Los Ricos project. Los Ricos itself is a 22,000ha, 35-concession gold-silver exploration project.

The first wave of momentum behind this story was driven by the initial mineral resource estimate announced on July 29th for Los Ricos South. It provided a clear pathway for the company to turn Los Ricos into a c. 3g/t gold eq. bulk tonnage mine. On August 25th, GoGold released a 43-101 Technical Report for Los Ricos South as it aims to complete a PEA ‘before the year’s end 2020.’ The report outlined a resource containing a Measured & Indicated Mineral Resource at 63.7Moz silver eq. grading 199g/t silver eq. contained in 10Mt. Moreover, it included an Inferred Mineral Resource of 19.9Moz AgEq grading 190g/t silver eq. contained in 3.3Mt. Los Ricos South could potentially be amenable to both open put and bulk underground mining methods, which provides the company with some optionality.

GoGold also secured a surface rights agreement on August 9th, 2020, with the Ejido of Cinco Minas. It takes the shape of a 12-year agreement with an additional 12-year renewal period, and it will allow GoGold to conduct exploration and exploitation work on 1280 ha at the Los Ricos South Project.

This story of stable gold growth is similarly exemplified by GoGold’s Parral Tailings operation in Mexico. The company creates consistent cash flow by utilising a heap leach processing facility to produce low-cost silver from historical tailings. This is a 600,000oz silver eq. project with an average AISC of c. US$14/oz. Some investors may feel tailings stories lack the excitement associated with mining, but they often provide an impressive degree of cash flow with less risk. GoGold adds US$2M pq to its bottom line through this operation. Not bad for an ‘exploration story.’

The share price performance has been strong during 2020. In part, this will be down to the gold bull environment, but investors will want to know if there is a USP in this story. In terms of potential catalyst moments, GoGold has been conducting exploration drilling at Los Ricos South for the last 18 months. By spending US$6M and by utilising up to 6 drill rigs, GoGold has been aiming to provide promising gold drill figures to the market. Having declared the maiden resource for Los Ricos South, the north of the property has come into focus in the last few months. With 3 drill rigs currently operating there, and the possibility of up to 10 being used in the months ahead, GoGold is hoping to exhibit a strong resource in an accelerated timescale.

On September 1st, GoGold announced a C$30M bought-deal financing. It plans to use the proceeds to ‘accelerate the advancement of the Company’s Los Ricos project and for general corporate purposes.’ This financing eventually closed on September 18th for an increased C$34.5M after the underwriters exercised their over-allotment option in full.

In a previous article, I mentioned some drill results that had been released for the La Trini silver-gold deposit within Los Ricos North. The most eye-catching stat was an intercept of 8.8m at 670g/t silver eq., comprised of 286g/t silver and 5.11g/t gold. At the time of these results, GoGold was promising more gold and silver to be located via a focussed grid drilling programme in the autumn. In the last few weeks, there have been several results of note. On September 23rd, the company released the first results from Salomon-Favor at Los Ricos North, including 11m of 529g/t silver eq. and 5m of 737g/t silver eq. Just a few days later, on 30th September, GoGold released some additional results from La Trini at Los Ricos North, including 5.6m of 1,070g/t silver eq. and 17.2m of 330g/t silver eq.

With C$34.5M to strengthen his treasury, GoGold’s President and CEO, Brad Langille, has stated: “We’re extremely encouraged with our initial drilling results at Salomon-Favor to see 4 stacked zones of wide mineralization starting from surface.” He went on to add, “With the completion of our C$34.5M financing last week, we have the funds to explore aggressively and drill multiple targets at Los Ricos North simultaneously, including La Trini and Salomon-Favor, and move the project to an initial resource estimate by the second calendar quarter of 2021.” Could this initial resource estimate be a significant catalyst moment? GoGold has previously indicated that Los Ricos North could form a more promising resource than the south, and shareholders will hope to see this speculation confirmed through the drill bit.

Crux Investor will be following this story closely as it develops. Silver has moved into a strong bull cycle in the last few months, and GoGold will aim to leverage this to create value for silver investors. This appears to be systematic progress, and exploration will always bring the outside chance of a major find. The key to unlocking serious value appears to be connecting the dots between the Los Ricos North and Los Ricos South properties. If GoGold can achieve this, it could be transformative. It could go from being a solid bulk-tonnage player with cash flow from a tailings operation to a significant gold-silver developer, and in this environment and with the management's M&A track record, it would be hard to bet against this becoming the next $1Bn company.

How do you think this story will evolve in the weeks ahead? Comment below and we will respond.

Company Website: https://gogoldresources.com/

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