The company recently sold a 100% interest in the El Porvenir Gold Project, a non core asset, for $25 million to a company controlled by Mexican billionaire Carlos Slim. This cash injection transformed the companys balance sheet overnight, and has set it up very nicely for 2011.
Several high profile investors has certainly helped the companys investment profile too, with Sprott Asset Management, Macquarie Bank, Libra Advisors and Baker Steel Capital among the most notable investors to date. Several high caliber individual investors have also invested, including Clive Johnson founder of Bema Gold and CEO of B2Gold, and Allen Boss, former CEO and Chairman of Placer Dome.
What has attracted them all to GoldGroup Mining are its management and projects, which include Cerro Colorado, San Jose, and El Candelero, that are all located in Western Mexico within a strike line that runs from north to south for 700 kilometers.
This strike line currently hosts 44 million ounces of gold equivalent resources spread out over 7 major projects, ranging in size from 2.5 million to 13 million ounces. The remaining project is known as Caballo Blanco and is located nearby Vera Cruz on the Gulf of Mexico.
The Caballo Blanco Project covers an area of 500 km² hosting multiple mineralized zones and numerous targets, surrounded by excellent infrastructure. Goldgroup acquired an option for a 70% interest in the property in November of 2009, with Almaden Minerals (TSX: AMM, NYSE AMEX: AAU) holding the remaining 30%.
The property currently has a NI 43-101 compliant Indicated Mineral Resource of 6.7 million tonnes at 0.65 g/t for 139,000 ounces of gold and an Inferred Mineral Resource of 27.6 million tonnes at 0.58 g/t for 517,000 ounces, for a total of 656,000 ounces. This resource is located within the La Paila prospect, which covers an area of 800 meters x 400 meters, and is open on all sides and at depth. Recent drilling of hole #48 sited in the center of La Paila recorded 132 meters of 0.57 g/t of gold and ended in mineralization at a depth of 217 meters.
This result was re-confirmed by hole # 49, that was drilled 50 meters to the east, and captured similar grades that widened the mineralized zone. La Paila also exhibits a low strip ratio and high metallurgical recoveries of precious metals.
Goldgroup are in the midst of a 30,000 meter drill program that will cost $8.5 million, and will drill well into 2011. They have deployed 3 drilling rigs to drill out La Paila, Cerro Blanco, Bandera North and South, Las Cuevas and Las Cuevas South West, La Cruz South and North, that all form part of a roughly circular string of mineralized structures that stretch out over 7,000 meters and are collectively known as the Northern Zone. A separate mineralized area is also being drilled at the Highway Zone located 4 kilometers to the south.
The whole area has multi million ounce potential that is also being tested with geochemical analysis, geophysics, metallurgical studies and collection of bulk samples from adits. Goldgroup have projected an annualized production rate of 100,000 ounces to commence within 2 years.
The Cerro Colorado Project is an operating Gold Mine with a NI 43-101 Compliant Measured and Inferred Resource of 170,000 ounces. The project is operated as an open pit and heap leach operation producing at an annualized rate of 25,000 ounces of gold that is sold on an un-hedged basis. New crushing equipment has been installed to boost recoveries from the leach heap and the property has significant exploration upside that should increase resources.
The San Jose de Gracia Project has a NI 43-101 compliant Inferred Mineral resource of 3.4 million tonnes at 5.59 g/t gold, 10.02 g/t silver, for a total of 618,000 ounces of gold and 1,109,000 ounces of silver, contained within 4 vein systems. San Jose de Gracia covers an area of 90,000 hectares, has historical production of greater than 1 million ounces at an average grade of 30 -60 g/t gold, with mineralization recorded down to depths of 400 meters.
Goldgroup can obtain a 50% interest in the property and is currently undertaking a $4.5 million drilling program for 18,500 meters scheduled for completion by March of 2011. Ongoing results from this campaign have intersected multiple, high grade gold intersections, over mineable widths, with only 5 of 50 prospective anomalies drilled to this date.
Most recent results have hit bonanza grades on the north east section of the San Pablo quartz breccia vein, where a very shallow hole at a depth of 70.65 meters recorded 332.86 g/t over 5.5 meters including 2,424.89 g/t over 0.75 meters. A third drilling rig has now been added with the objective of proving up sufficient resources to support an annualized production rate of 100,000 ounces.
The El Candelero Project is an early stage 70 / 30 joint venture, with Goldcorp (TSX: G, NYSE: GG) holding the minority interest, and is located 7 kilometers from the San Dimas Mine that produced over 160,000 gold equivalent ounces in 2008. The Project covers 26,673 hectares and hosts a low sulphidation, epithermal vein system which is up to 2 kilometers in length. Goldgroup has collected and assayed 461 samples across this system, with 118 showing gold grades greater than 1 g/t.
The Santa Cruz Prospect has 5 main vein structures of 5 to 20 meters in width, with a best sample of 10 meters at 17 g/t gold equivalent. The Pino Prospect has 4 main vein structures that average 8 meters width, with a best sample of 8 meters at 32.7 g/t of gold equivalent, and the Soledad Prospect is a single vein up to 20 meters width and 800 meters in length, with a best sample of 3 meters at 8.6 g/t gold equivalent.
Production from Caballo Blanco and San Jose de Garcia is planned to reach a total of 200,000 ounces per year within the next 36 months, with Cerro Colorado Gold Mine adding 25,000 ounces over the next 12 months. This potential ramp up in production to north of 200,000 per annum in the next three years puts GoldGroup among a select few mining companies with serious near term production growth.
The company currently attracts a valuation of US$77 per resource ounce, where its peer group attracts an average valuation of US$258 per ounce, suggesting there is noteworthy upside potential in the companys valuation if can execute on its ambitions, something that several blue chip funds and high profile investors appear to believe it can.
One for the watch list at the very least, especially for gold bulls.
