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San Francisco Production Helps Long Term Growth Strategy for Timmins

Published: 00:01 11 Aug 2010 BST

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Through a combination of production and advanced exploration projects, a junior resource company can often ensure its long term growth and shareholder value. Realising the potential of a current asset, while continuing to develop the next, can be a key strategy that will see a company on a long and prosperous road. It is this strategy that Timmins Gold Corp (TSX: TMM) believes in, placing itself in a prime position for continuous growth as a gold production and development company.

Focused in Mexico, Timmins have recently brought their San Francisco Gold Mine into production, and while intending to expand the current reserves and mine life of the project in the short term, is also looking to advance its other gold exploration projects while ‘keeping an eye out’ for potential strategic acquisitions.


For some background, Timmins Gold is a Canadian based mining and exploration company, with a market capitalisation of C$180 million. The company focuses solely on Mexico, where it holds seven properties, including the aforementioned San Francisco Gold Mine property, a past producing open pit heap leach operation, from which Timmins expects to be producing at a rate of 80,000 - 100,000 ounces of gold per year. Timmins other significant properties include the TIMM Claims property, a 40,000 hectare land package contiguous to Goldcorp’s Peňasquito Gold Deposit, and approximately 20 kilometres north west of Canplats’ Camino Rojo project.


The San Francisco Gold Mine is located in the state of Sonora, Mexico, with a well developed infrastructure in place, and good access to a main highway, railroad and a skilled workforce. A gold plant with a capacity in excess of 100,000 ounces per year is on site and has been completely refurbished and tested. All plant and equipment necessary for production is fully operational, including crushing, leaching and extraction facilities, with commercial production having commenced in April this year. For the quarter ending June 30, 11,319 ounces of gold were sold, 5,068 of which was sold in June alone. In the quarter, daily production from the mine averaged over 10,000 tonnes, and the strip ratio for the quarter averaged 4.5 to 1.


A NI 43-101 compliant preliminary feasibility study completed in March 2008, showed projected production levels from San Francisco in the range of 80,000 to 100,000 ounces of gold per year, averaging a cash operating cost of US$412/oz over a five year mine life. Capital expenditure (CAPEX) at the project, has, and is expected to remain, comparatively low, with US$40 million in initial costs, including the land package, and with an expected US$12.7 million in sustaining capital costs. According to the study, probable mineral reserves of the San Francisco Project are reported to be 611,000 ounces of gold, from 22.6 million tonnes of mineralised material, grading 0.84 grams per tonne (g/t).


In March of this year, Timmins’ efforts to expand know mineralisation and resource estimates on the property paid off, mineralisation was located contiguous to the north west and south east of the previously defined pit limit, increasing the NI 43-101 resource estimate for the property by around 25% from the previous 717,000 measured and indicated ounces (as of previous NI 43-101 report January 2007). This brings the measured resource to 13.8 million tonnes, grading 0.83g/t for 367,470 ounces of gold, and brings the indicated resource to 23 million tonnes grading 0.71g/t for 528,257 ounces of gold. Inferred resources stand at 7.4 million tonnes, grading 0.65g/t for 154,040 ounces of gold.


Timmins is currently undertaking an initial 2010 drill program at the San Francisco mine, consisting of 50,000 meters of reverse circulation (RC) drilling and 20,000 meters of rotary air blast (RAB) drilling, which is scheduled to be completed by the end of September this year. This initial 2010 program is expected to cost $4.5 million. This drill program will be followed up with another new resource estimate, a reserve estimate and a mine plan – all of which are scheduled to be completed by the fourth quarter of this year.


So where does Timmins stand with projects that may lend themselves to future growth for the company? In addition to San Francisco, Timmins holds six other gold properties in various stages of development and exploration. Some of the key properties include the previously highlighted TIMM Claims, located in Zacatecas, Mexico, which are Contiguous to, and geologically similar to, Goldcorp’s Peňasquito gold deposit (a resource of 17 million ounces of gold). Timmins have drill program planned for the summer 2010.


A second drill program is also being prepared for the Cocula property in Jalisco, Mexico, following up on results from the first phase drill program in 2008. Highlights from this first program included an intercept of 38 metres grading 1.3g/t gold and 13g/t silver, an intercept of 54 metres grading 0.72g/t gold and 10g/t silver, and an intercept of 38 metres grading 1.2g/t gold and 13g/t silver. A gold resource is expected following the second phase drill program this year.


Properties in the early stage of exploration include the Norma and Patricia claims in Sonora, Mexico, where initial exploration is set to take place this year. These properties cover 20,000 hectares west of the San Francisco block claims, and is along trend with the principal San Francisco mineralisation. Defining drill targets is currently underway, for the first phase RAB drilling this year.


With this combination of an in production, more advanced stage mine project, as well as ‘middle’ and ‘early’ level exploration projects, Timmins looks to secure its future going forward in the years to come. Securing revenue from one project, while exploring others, is a fluid strategy that ensures Timmins will be making the most of  each property, and for investors, offers the prospect of continued value growth for many years.

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