Proactive Investors - Run By Investors For Investors

Patagonia Gold value soars as Cap-Oeste produces

Full leaching capacity was realised within the first three weeks of operation, with metal recovery in line with forecasts
picture of someone mining
Cap Oeste will produce 82,000 ounces over the next 24 months

News that Patagonia Gold plc (LON:PGD) has produced its first gold dore from Cap-Oeste in Argentina is the culmination of a long term operational goal at the miner.

It switched output to Cap Oeste this year from the nearby Lomada mine, never an easy thing to accomplish but the transition had gone smoothly said Carlos Miguens, Patagonia’s chairman.

Full leaching capacity was realised within the first three weeks of operation, with metal recovery in line with forecasts but importantly from a cost perspective cyanide consumption was half the original estimate.

Cap-Oeste is expected to produce 82,000 oz gold equivalent over the next 24 months excluding satellite deposits such as Monte Leon and any underground development.

Miguens added the focus would now be on developing the resource base.

Caps off to Cap-Oeste

Cap-Oeste lies on the El Tranquilo property, and on its own, holds 1.3 mln ounces of gold equivalent in the higher confidence indicated category, with a further 385,000 ounces inferred.

A nearby deposit Cap-Oeste South East (COSE), adds 83,000 further gold equivalent ounces of indicated, with a further 16,000 ounces inferred.

The pit design contains a total measured and indicated resource of 1.56 mln tonnes (Mt) at 2.21 g/t gold and 80 g/t silver for a gold equivalent grade of 3.29 g/t

Cap Oeste has been a stop-start project but in April, when the group  revealed it had raised US$10mln via  placing, the total cost of realising it was put at US$13.5mln, of which US$2.1mln had already been spent.

Carlos Miguens put up half the cash via a subscription, while the rest came from an open offer.

Results underpin improving outlook

The first gold from Cap-Oeste is the latest in a run of upbeat announcements from the Argentina–based miner.

The company reported a US$10mln turnaround from losses into a profit of US$3.6mln in the six months to June, as production jumped by 70% to 16,900 ounces while cash costs almost halved to US$591 per oz.

The political and economic situation is Argentina is also improving and having a very positive effect on the business said Christopher van Tienhoven, chief executive.

What's it worth?

CantorFitzgerald 's sum of the parts (SoP)  valuation  of the company with varying  pricing methods generate valuations of 3p and 6p/share respectively against a current share price for the company of around 3.1p, up 18% today on the dore news. At that price, the miner is worth around £48mln.

If Patagonia can successfully establish production at Cap-Oeste and extend the life of the mine, the broker reckons valuations of around 6p are achievable in time.

Opportunities elsewhere

As well as Cap-Oeste (and COSE almost next door) there is the La Manchuria project around 60km north northeast of Gobernador Gregores in Argentina's Santa Cruz Province.

That hosts the Manchuria Main Zone gold and silver project where plans are afoot to maximise value through some form of joint venture deal.

Exploration has also commenced on the company’s ground in Uruguay.

View full PGD profile View Profile

Patagonia Gold plc Timeline

Related Articles

Gold bullion
March 11 2018
An expanded prefeasibility study has confirmed the potential to generate annual production of 200,000 ounces at Matilda-Wiluna.
Balmoral Resources opening up new gold zones in the Abitibi
May 03 2017
Balmoral has delivered a string of attractive exploration results from its Martiniere gold project on the prolific Abitibi gold belt
March 27 2018
Orsu Metals looks set for a transformative year, with a sizeable gold resource expected in an already prolific area

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use