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Hochschild ups stake in Gold Resource Corp for El Aguila development

Last updated: 21:28 18 Dec 2009 GMT, First published: 22:28 18 Dec 2009 GMT

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Silver miner and FTSE 250 constituent Hochschild Mining (LSE: HOC) has upped its stake in Denver headquartered Mexico operating mining company Gold Resource Corp (GRC; FSE: GIH, OTCBB: GORO) to 27% from 23.9% via entering a private placement.


Hochschild purchased 1.95 million shares in GRC for US$8.2 per share for a total consideration of US$16 million, which will be funded entirely in cash, taking Hochschild’s total investments in GRC to US$54 million. The company said that its most recent investment demonstrated its commitment to its strategy of pursuing further acquisition opportunities following the US$260 million capital raising conducted in October 2009, also increasing its exposure to GRC’s assets, which include 100% interest in five potential high-grade gold and silver properties in Mexico's southern state of Oaxaca.


GRC will use US$8 million of the proceeds will be used to fund the development of the El Aguila project including working capital for GRC’s recently commissioned Aguila mill which is expected to produce 70 moz (thousand ounces) of gold in 2010, and the remaining US$8 million to accelerate the underground mine development of GRC’s gold-silver polymetallic deposit Arista, one of the three high grade deposits discovered at the El Aguila project.


El Aguila, which Hochschild said had “enormous potential,” comprises 75% gold and silver and 25% zinc, copper and lead at current prices.


“We must have the Arista underground mine developed sufficiently over the next twelve months to deliver sustainable polymetallic vein ore to the mill on a daily basis by the time the open pit mine is finished. If we had to rely solely on the ramping up of sufficient cash flow this important aspect of the project could have been delayed,” said President of RGC William Reid.


The US$3.5 million left from the US$4 million previously escrowed for exploration and underground development will now be used solely for exploration. The exploration operations conducted by the company over the past year have borne fruit, doubling the project’s mine life to an estimated nine years and showing “tremendous upside potential.”


“Equally as important is the $8 million for accelerated underground development of the Arista deposit so the Company can make a seamless transition from the Project’s El Aguila open pit mining in year one to La Arista underground mining in year two and beyond,” added Reid.


The El Aguila project has yielded several high grade gold and silver surface samples, including a 36 g/t (grammes per tonne) gold sample and a 3,100 g/t silver sample.


Based on the assumptions made at the time of the scoping study, cash costs of producing an ounce of gold would be US$102 using silver revenues as a credit against costs. The payback of the capital for the project would be 7 months.

Gold Resources One2One Forum presentation - December 9th 2010

Gold Resources One2One Forum presentation - December 9th 2010

on 23/12/10