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GoGold Resources runs the Parral tailings operation in Chihuahua, which is generating cash flow, while developing the Los Ricos district in Jalisco, Mexico. In this interview, we talked mostly about Los Ricos South, a low sulphidation epithermal silver-gold vein system about 100 km northwest of Guadalajara that just moved into construction, plus the parallel work at Los Ricos North.

TL;DR

GoGold broke ground in August, roughly two months after receiving the final SEMARNAT approval, and the clock is now 24 months to first pour plus another 6 months to full commercial production. He says detailed engineering is 85% complete, the SAG mill was ordered six months ago on a 54 week lead time, and the underground contract has been awarded. They had US$284M in cash at quarter end with no debt. The inflation adjusted capex is about US$260M of which only US$7M to US$8M has been spent. Parral throws off another US$80M to US$90M a year at current prices, roughly US$60M after tax, though it only has about four years of reserves left. I also asked directly what would force an equity raise, he said capex would have to blow out to around US$400M, which he does not expect. Los Ricos South adds 7.2 Moz AgEq a year at all-in costs under US$12, and Los Ricos North on a PEA basis would add another 8.8 Moz, taking the company to 15 to 17 Moz AgEq a year.

What have they done for shareholders lately?

Since we last spoke they got the final permit for the bulk tonnage underground mine, took a board construction decision, and started earthworks on site last week. They used the three and a half year permitting wait to push detailed engineering to 85%, bring on M3 as EPCM, order long lead items including the SAG mill and filter presses, and run a year long selection process for the underground mining contractor, which landed on Cominvi, the largest underground contractor in Mexico. That underground contract alone is over US$200M for the first five years. WSP is currently drilling 20 more geotechnical holes to finalise exactly where the portal goes. The power line from the La Yesca hydro dam, about 36 km away, is underway and will be two 35 kV lines for redundancy. Parral has now been in continuous production for twelve years since first pour in June 2014.

How much money do they have and what are they spending it on?

US$284M in cash at the end of the quarter, no debt, and he thinks closer to US$290M today. The last raise was in November of last year, a C$144M bought deal at C$2.65 with a half warrant at C$3.50 for three years. There are 434M shares out, with 14M options and 27M warrants making up less than 10% of the 475M fully diluted count. The feasibility capex was US$227M; applying the 8% to 10% Mexican inflation over the roughly 18 months since the study gets you to about US$260M, and with US$7M to US$8M already spent he says around US$255M is left to go. Underground development is the single biggest line item, followed by the 2,000 tonne per day whole ore leach mill, a small SART plant and the paste backfill plant. He said interest on the bank balances alone covers G&A, and that Parral cash flow has been funding the engineering and the Los Ricos North work. They have been offered revolvers but have not taken one, saying US$3M to US$4M in standby fees for US$50M of insurance is not needed right now.

Upcoming catalysts

Technical: trade-off studies and an underground mine plan for Los Ricos North before the end of 2026, followed by infill drilling, water resource work and a feasibility study through 2027; results from the 20 portal geotechnical holes being drilled now; and eventually drilling of the deeper “second horizon” at Los Ricos South from underground drill stations or a rehabbed shaft, which he ranks as the second priority target after Los Ricos North.

Operational: portal establishment in the first four to five months of the build, a hill slope stabilization cut that could drop roughly 150,000 tonnes of early ore, SAG mill delivery in about six months, progress updates through construction, first pour 24 months out and full commercial production six months after that.

Corporate: a permit application for Los Ricos North targeted for Q1 2027 or midyear at the latest, with Langille guessing about a year and a half for the permit itself given how the current administration has been moving, then 24 to 30 months to build. He explicitly said Los Ricos North is where he expects most of the news flow over the next six to twelve months.

Risks

Brad said the underground is the critical path and the highest relative risk, on the basis that you do not really know the ground until you are in it, and the mine plan carries 32.1% planned dilution partly from mining around old voids. Capex inflation in Mexico at 8% to 10% is the other cost pressure, and if the number ran toward US$400M they would have to go back to the market, though he said he doesn’t expect it to go that high. Beyond that there is commodity price exposure, which is unhedged and which they have no plans to hedge, plus community relations, safety, and permitting for anything outside the current approval, since the small open pit at Los Ricos South and whatever hybrid plan emerges at Los Ricos North both need new applications. Water availability is a live question at Los Ricos North and will determine the mill size there, though at Los Ricos South it comes from underground. Parral’s four year reserve life is a slower burning issue, and on security in Jalisco he said they have had no incidents since entering in March 2019.

GoGold Resources CEO Interview

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