VANCOUVER — Last year, GoGold Resources (GGD-T) issued millions of shares and worked for months to acquire Absolute Gold Holdings for its Parral project in Mexico, home to a huge heap of tailings left behind after 300 years of operations at the Mina La Prieta mine.

Now a prefeasibility study has shown why GoGold so wanted that tailings dump. For just US$35 million, GoGold could turn the dump into a heap-leach operation that produces more than 1 million oz. silver a year.

The Parral tailings repository lies within the city limits of Hidalgo del Parral, in Chihuahua. The town of 100,000 grew up around Mina La Prieta, a historic silver, gold and base metals mine that operated on and off for 300 years.

Metallurgical techniques have improved dramatically since the mine started operating, and the tailings contain more than enough gold and silver to recover economically using modern methods.

The Parral tailings comprise 20.4 million proven-and-probable tonnes of mineral reserve grading 0.31 gram gold per tonne and 38.43 grams silver per tonne. GoGold’s metallurgical test work indicates that a modern heap-leach operation would recover 58% of the silver and 64% of the gold remaining in the rocks.

The pre-mined and milled rocks will be easy to process. The operation planned at Parral would involve moving 5,000 tonnes of tailings each day onto an engineered heap-leach pad, and processing the leach solution to recover the leached metals. Such a simple operation would be inexpensive to develop — capital costs are estimated at US$35 million, while sustaining capital over the mine’s 12-year life is expected to total US$27.5 million.

The operation would produce 1.2 million oz. silver and 11,000 oz. gold annually. Using a 5% discount rate and assuming US$1,475 per oz. gold and US$29 per oz. silver, the planned Parral operation carries a pre-tax net present value (NPV) of US$159 million and would generate an 80% pre-tax internal rate of return (IRR). After incorporating taxes, Parral’s NPV falls to US$107 million and its IRR sits at 54%.

But this is still a healthy rate of return. The prefeasibility study predicts it would take just 1.7 years after the start of production to repay Parral’s capital costs, using after-tax revenues. That estimate incorporates two other payments that matter at Parral: a 12% net-profit interest and a US$30,000-per-month property payment, both of which are payable to the Municipality of Parral.

GoGold also announced that it secured the property it needs at Parral to build the heap-leach facility. The company says it will spend the next three months completing final design, engineering and permitting work, and plans to begin construction thereafter.

GoGold is also advancing its San Diego property, a 710 sq. km property in Durango, and recently released results from drilling at the Chispa De Oro target. Chispa is one of three mineralized zones discovered to date at San Diego, where gold and silver exist within the quartz vein, breccias and stockworks that stem from an epithermal system that stretches along 35 km of strike.

Eight holes drilled into Chispa returned mineralized intercepts. Hole 62 produced one of the best results, returning 50.5 metres grading 158.5 grams silver, 0.76 gram gold and 0.53% copper from 18 metres downhole, followed by 13 metres of 63.75 grams silver and 1.2% copper from 244 metres. Hole 64 also produced promising results, returning 175 metres averaging 59.2 grams silver, 0.25 gram gold and 0.75% copper from 59 metres depth. The intercept included a 24-metre segment grading 304.7 grams silver, 1.03 grams gold and 2.08% copper.

GoGold intends to define a resource at Chispa, though for the moment the company has moved its drills to another target, known as Las Europas, while it waits for permission to build a drill road. Drilling to date at Chispa has relied on helicopter support.

Now that initial holes have proven the area’s merit, GoGold wants to make the target road accessible and reduce exploration spending.

Las Europas is a high-grade silver target located 4 km south of Chispa, where mapping has identified eight structures aligned along 1.2 km of prospective strike. Trenching at the target has returned such results as 10 metres grading 318 grams silver and 0.62 gram gold.

News of the Parral prefeasibility study did little for GoGold’s share price, which lost 2¢ to close at $1.22. The company has a 52-week trading range of $1.12 to $1.78, and 128 million shares outstanding.