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$8.20 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 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 are pleased to have the continued support and financial assistance of Hochschild Mining as we make the transition from an explorer to producer. Hochschild continues to assist us in many ways, in addition to financial support, which has been much appreciated,” said President of RGC William 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 only US$102 when using silver revenues as a credit against costs. The payback of the capital for the project would therefore be 7 months.