TORONTO (miningweekly.com) – Mexico-focused Canadian miner Timmins Gold has reached an agreement with a Mexican subsidiary of Goldcorp to acquire the complete process plant and other support equipment previously used at the shuttered El Sauzal mine, in Chihuahua, which it plans to redeploy at its recently acquired Ana Paula project, in Guerrero state.

TSX- and NYSE-listed Timmins’ stock rose more than 22% on Monday morning to C$0.34 a share in Toronto.

“The purchase of the El Sauzal plant is projected to save $40-million to $60-million in initial capital expenditure (capex) when Timmins Gold constructs Ana Paula, not only in terms of equipment and infrastructure direct costs, but also indirect costs and engineering, procurement and construction management costs. In addition, it will derisk the project by reducing the risk of both equipment capex overruns and delays in scheduling equipment deliveries,” Timmins CEO Bruce Bragagnolo stated.

Timmins noted that the El Sauzal flow sheet was similar to the base-case flow sheet outlined in the Ana Paula preliminary economic assessment (PEA) and would make use of all of the equipment acquired through the C$8-million deal with Goldcorp.

The El Sauzal process plant was a nominal 6 000 t/d milling and processing facility, with a cyanide circuit and a carbon-in-pulp circuit.

Bragagnolo noted that some additional items such as a gravity circuit might be required, based on the results of ongoing metallurgical studies.

The El Sauzal mine was operational until December, when it started its closure process.

Timmins had in May acquired the Ana Paula project from project developer Newstrike Capital for about C$140-million.

A PEA completed in 2014 had indicated that Ana Paula represented a robust, high-margin, rapid pay-back, eight-year-life openpit mining opportunity that, once in operation, was expected to generate a pre-tax net present value, at a 5% discount, of $332-million and a 41% pre-tax internal rate of return at a gold price of $1 200/oz.

Timmins expected that the capital savings realised by the plant acquisition would significantly improve the economics of the project and reduce the remaining preproduction capital required for Ana Paula to about $100-million.

The closing of the deal was subject to, among other things, Goldcorp completing a C$6-million investment in Timmins Gold through a non-brokered private placement of 20-million Timmins units at a price of C$0.30 each. Each unit would consist of one share and one half of a warrant, with each whole warrant being exercisable for 24 months into a common share of Timmins at a price of C$0.35 a share. The warrants were subject to an accelerated exercise period of ten days if the company's closing share price met or exceeded $0.60 a share for 20 consecutive trading days.

As a result of the plant acquisition and private placement, Goldcorp would hold about 9.9% of Timmin's issued and outstanding common shares on an undiluted basis.