Timmins Gold announced it will purchase Goldgroup Mining's 100-percent interest in the Caballo Blanco gold project for as much as US$30 million in cash and shares. Projected production from the project could nearly double the company's annual gold production to 220,000 ounces.
On Thursday, Timmins Gold (TSX:TMM) announced it will purchase Goldgroup Mining's (TSX:GGA) 100-percent interest in the Caballo Blanco gold project for as much as US$30 million in cash and shares. Projected production from the project could nearly double the company's annual gold production to 220,000 ounces. Under the terms of the agreement, Timmins will pay US$10 million and issue 16,065,000 shares to Goldgroup (valued at roughly US$15 million, based on Timmins' closing share price on December 17). The company will also make a US$5-million payment to Goldgroup in cash or shares if Caballo Blanco's environmental impact statement is approved or if Timmins undergoes a change of control before October 21, 2019. "This is one of those situations where it's a very good deal for both parties," Timmins CEO Bruce Bragagnolo told Gold Investing News. Similarly, Goldgroup Chairman and CEO Keith Piggott said that while Caballo Blanco is a great asset, it made sense for the company to sell it now. "We are maximizing the capital value of our assets so that we can acquire assets that we think we can put into production," he said. "I fully believe that [Caballo Blanco] will get permits. It just takes time, and we think there are other things we can do that are more time advantageous to us." Caballo Blanco is slated to be an open-pit, heap leach operation, similar to Timmins' producing San Francisco gold mine in Mexico. The company said that will "[provide] opportunity to leverage past success in permitting, building and operations." In terms of where the project is now, Goldgroup completed a preliminary economic assessment (PEA) for Caballo Blanco in 2012; it points to a measured and indicated resource of 575,000 ounces of gold and and an inferred resource of 419,000 ounces. Timmins plans to upgrade the current resource estimate and to carry out an extensive optimization of the PEA. It will also assess whether Caballo Blanco could become a run-of-mine operation.