Canadian gold-miner Goldcorp, which will own and operate the three biggest gold mines in Mexico by 2010, is studying a number of optimisation possibilities for the third, and largest, of the three - its $1,5-billion Penasquito project.

The company expects to have some answers on the viability of underground mining at Penasquito, as well as a possible investment in power generation, early next year, president and CEO Kevin McArthur said at an investor briefing.

When it reaches full production, Penasquito will eclipse the firm's most recently-completed mine, Los Filos, which, in turn, is expected to surpass the group's El Sauzal operation this year as the country's biggest producing gold mine, Mexico VP Salvador Garcia said on Wednesday.

Goldcorp poured the first gold bar from heap leaching of oxides at Penasquito earlier this month, and will start up the milling circuit next year.

The company announced in December last year that it had increased the planned output of the project by 30 000 t/d of ore, or 30%, although the expected capital outlay for the mine's construction leapt too, by 69%.

According to the current plan, Penasquito is expected to produce an average of 400 000 oz of gold, 31-million ounces of silver, 189 000 t of zinc and 97 000 t of lead, over a 19 year life-of-mine.

The mine will have cash costs of about minus $500/oz of gold, after byproduct credits.

However, the project's economics may be even further improved, as the company considers a number of 'optimisations', including using conveyors instead of diesel haul trucks, Goldcorp's COO for Mexico, Barry Olson, said.

Metallurgical testing is also under way to improve recovery rates and concentrate grades, and Goldcorp is currently drilling in order to make a decision on underground mining.

It expects to have an initial underground resource estimate by the end of the year, McArthur said.

“Once we have indications there... we can tie this all together, see what our power needs are, and that starts to confirm what size power plant we would be talking about.”

Goldcorp was looking at the possibility of becoming involved in power generation in Mexico, but had not made any firm decisions in that regard.

The mine as currently planned will consume roughly 180 MW of power.

“If you look at adding the conveyor and the underground mine concepts, which do consume power, they will add to that 180,” Olson said.

The company was in the “initial stages” of a study to determine whether it should participate in some way in a proposed power plant in Mexico.

“We are looking to a third party vendor to help us there...we may not even participate in the capital for the power plant, because we have a lot of options, where third parties can build the plant and we become the biggest customer,” McArthur said.

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