VANCOUVER (miningweekly.com) – Gold miner Leagold Mining is making good progress with transforming the 200 000 oz/y-plus Los Filos mine into a strong, long-lived growth platform with which it can pursue other growth opportunities in Latin America.

Speaking to Mining Weekly Online in Vancouver (see attached video), president and CEO Neil Woodyer said that, with the recent release of successful drill results from the nearby Bermejal deposit, the market is taking note of Leagold "turning a corner” at Los Filos, and this could be a major catalyst for improving equity value.

The Vancouver-headquartered company recently reported initial results from ongoing drilling of the Bermejal Undergound deposit at its Los Filos mine, in Mexico, which had returned consistent high-grade mineralisation that holds the potential for a significant near-term resource upgrade.

With barely a year’s involvement at the Los Filos mine, Woodyer is confident that TSX-listed Leagold will soon grow the mine to a 350 000 oz/y operation, allowing it the opportunity to hunt for its next acquisition.

Leagold, which on Friday also started trading on the US OTC market to provide its American investors with a trading platform, is following the same tenets that senior management – many of whom are Endeavour Mining veterans – have done before, building on their history of creating shareholder value and operational success, Woodyer said.

GROWTH PLATFORM
Los Filos produced 231 000 oz of gold in 2016 at an all-in sustaining cost (AISC) of $878/oz, making it one of the largest gold mines in Mexico and an ideal platform for growth and regional consolidation.

Leagold acquired the mine for $350-million, when Goldcorp divested its noncore asset in April, transforming the junior into a low-cost gold producer in Mexico. Los Filos is the first step of Leagold’s gold growth strategy, targeting assets with existing or near-term cash flow, he said.

The Los Filos operations comprise two openpit mines, Los Filos and Bermejal, an underground mine at Los Filos, and the opportunity to develop a new underground mine at Bermejal as an expansion project.

After the acquisition, work started immediately on optimising the mine and drilling programmes, and related preparation work for the development of a new underground mine at Bermejal is progressing. To date, Woodyer reported, mine productivity has increased. The company has expanded the resource and it is leveraging further efficiencies by changing from contract mining to the owner-operator model.

The openpit operation started commercial production in 2008 and the asset has a strong record of mineral replacement through exploration. Gold is recovered from crushed and run-of-mine ore via a conventional, low-cost heap leach process.

The Los Filos mine is located 230 km south of Mexico City and is accessible by paved roads and a private airstrip. Grid power is supplied by InterGen with a 20 MVA substation at site.

Los Filos has a significant mineral resource base that includes measured and indicated resources of 422.5-million tonnes grading 0.86 g/t gold, for 11.5-million ounces of gold, and inferred resources of 162.7-million tonnes grading 0.76 g/t gold for four-million ounces, as set out in a March technical report.

Highlights from the 56 000 m Bermejal Underground drill programme include intercepts of 7.2 g/t over 18.8 m, 6.8 g/t over 13.3 m and 26.3 g/t over 2 m from the oxide zone of the Bermejal Undergound deposit.

"These drilling results show the consistency of mineralisation along the contacts of the Bermejal intrusive and sill. Infill holes are tightening up the drill hole spacing and will enable an upgrade of the resource classification,” Woodyer stated.

WAY FORWARD
The Los Filos technical report and subsequent exploration drilling results have determined that the Bermejal underground project is an attractive expansion, with the potential to increase gold production, reduce AISC/oz and extend the mine life, Woodyer pointed out.

Mineralisation at the Bermejal underground deposit remains open in several directions. The drill holes are planned to intersect oxide mineralised zones at the steeply dipping contact of the Bermejal intrusive with carbonate, and upper and lower contacts of the sill. The programme is expected to be completed during the second half of the year.

The Bermejal high-grade underground deposit represents significant potential upside to the Los Filos operations, as it could potentially be developed and mined concurrently with those operations.

Leagold plans to spend about $47-million in capital expenditures on the Bermejal project in 2017/18, with operations slated to start in 2019.

While the current Los Filos reserves can support operations up to 2024, Bermejal will add about 175 000 oz/y and will significantly lift the company’s output from about 230 000 oz in 2018 to about 375 000 oz in 2019, offsetting the expected decline of Los Filos output up to its end in 2024.

At its peak, AISC of the combined operations will fall to around $800/oz, providing wide margins with which to pursue other opportunities in Latin America, Woodyer noted. The company is now working on a feasibility study, slated for publication during the first half next year.

He believes the company’s enterprise value will be rerated once it achieves higher output with the incorporation of the Bermejal underground project.

Leagold is weighing a trade-off study to confirm whether Bermejal ore can be better treated on the existing heap leach facility, or whether the cost of a more advanced carbon-in leach plant is justified.

Permitting for Bermejal is ongoing and no surprises are expected.

Located in the prospective Guerrero gold belt of skarn deposits within carbonates, the large Los Filos land package contains “robust” exploration potential over about 150 000 ha of underexplored terrain.

Meanwhile, there are several brownfield targets that remain to be tested, including the Bermejal East and West, Guadalupe and San Pablo targets.