Company press release distributed by PR Newswire (edited)
VANCOUVER — Goldgroup Mining Inc. (TSX:GGA, OTC:GGAZF, BMV SIX:GGAN.MX) has announced the closing of the acquisition of a 100% interest in the Cerro Prieto Project from Oroco Resource Corp., previously announced January 28, 2013.
Due to the current market conditions and the deterioration of the gold price since January 2013, Goldgroup and Oroco have agreed to restructure the terms of the transaction. The original terms of the transaction can be found in Goldgroup’s news release dated January 28, 2013: “Goldgroup Signs Agreement to Acquire the Cerro Prieto Gold Project.”
Transaction Details:
On closing of the transaction, Goldgroup paid Oroco US$4.5 million. Goldgroup also issued to Oroco a promissory note in the principal amount of US$1.5 million (the “First Loan”), with the principal amount of the First Loan bearing simple interest at a rate of 8% per annum and repayable in six equal monthly instalments of US$250,000 each, commencing on the later of January 31, 2015 and the first day of the month following the date the Project achieves commercial production. Interest will accrue on the principal amount of the First Loan from the date of closing of the transaction and will be payable quarterly in arrears, on a declining balance, however, Goldgroup’s obligation to deliver such quarterly interest payments will be suspended until the Project achieves commercial production.
As additional consideration, upon closing of the transaction, Goldgroup issued to Oroco 5,500,000 common shares. Goldgroup also issued to Oroco a promissory note in the principal amount of US$4.125 million (the “Second Loan”), with the principal amount of the Second Loan bearing no interest and repayable on the second anniversary of the closing of the transaction. Goldgroup may elect at its sole discretion to repay the principal amount of the Second Loan in cash or by issuing to Oroco 16,500,000 common shares.
Additionally, Goldgroup will pay Oroco a production royalty of up to a maximum of US$90 per ounce of gold produced from the Project, for the greater of (i) the first 90,000 ounces of gold produced from the Project and (ii) all ounces of gold produced from the Project until the completion of five full years of commercial production. Further, Goldgroup will also assume from Oroco the obligations and liability to pay a 2% net smelter return royalty on the Project.
Cerro Prieto — Project Status Update
Cerro Prieto is located in northern Sonora, Mexico within 150 kilometers of Goldgroup’s Cerro Colorado gold mine. Goldgroup has been advancing the development of the Project. On August 8, 2013, Goldgroup announced an updated National Instrument 43-101 (“NI 43-101”) Measured and Indicated and Inferred mineral resource estimate for the Project. Please refer to the NI 43-101 technical report prepared for Goldgroup by Duncan Bain Consulting Ltd. and Giroux Consultants Ltd. titled “Report on the 2011-2012 Exploration Program including an Updated Resource Estimation on the Cerro Prieto Project, Magdelena de Kino Area, Sonora State, Mexico” dated June 10, 2013 and filed on SEDAR on August 8, 3013. Highlights of the NI 43-101 mineral resource estimate include:
- The Measured Mineral Resource category was comprised of 1.18 million tonnes grading 1.56 grams per tonne (g/t) gold, 30.28g/t silver, 0.15% lead and 0.33% zinc for a total of approximately 59,000 ounces of gold.
- The Indicated Mineral Resource category was comprised of 4.92 million tonnes grading 1.03g/t gold, 22.12g/t silver, 0.32% lead and 0.80% zinc for a total of approximately 163,000 ounces of gold.
- The Inferred Mineral Resource category was comprised of 5.025 million tonnes grading 0.75g/t gold, 20.62g/t silver, 0.49% lead and 1.28% zinc for a total of approximately 121,000 ounces of gold.
- Goldgroup is pleased to announce that site construction and development efforts are well underway at the Project and include the following highlights:
- Site access road capable of supporting heavy truck traffic.
- Acquisition of process water by utilizing a well to drain the old mine workings.
- Metallurgical lab and a column leach testing facility.
- Construction of a trial leach pad, ponds and a Carbon Adsorption Plant.
- Crushing and metallurgical testing to optimize recovery rates.
- Goldgroup intends to begin small-scale trial mining and leaching in the fourth quarter of 2013 in order to determine the ideal parameters to put the Project into production in 2014.
Goldgroup wishes to make clear that it is not basing its production decision on a preliminary economic assessment demonstrating the potential viability of mineral resources or a feasibility study of mineral reserves demonstrating economic and technical viability, and as a result there is increased uncertainty and multiple technical and economic risks of failure which are associated with this production decision.
Loan Facility Status Update
Goldgroup is also pleased to announce that it has closed a CDN$4.25 million senior secured loan facility (the “Loan Facility”), which was previously announced in a news release dated July 16, 2013. The proceeds from the Loan Facility have been applied to the closing of the transaction. Under the Loan Facility, Goldgroup will pay 15% interest annually, with nine equal principal and interest repayment installments, commencing April 30, 2014 and ending December 31, 2014. The Loan Facility can be repaid at any time without prepayment penalty. The Loan Facility is secured by a first priority lien on all assets of Goldgroup.
Keith Piggott, Chairman, President, CEO and Director commented: “We are excited about the developments to date at the Cerro Prieto gold project. As we begin slowly winding down mining operations at Cerro Colorado, we are successfully transitioning equipment and personnel from there to the Cerro Prieto project. Furthermore, with the project finance in place, we are able to move the Cerro Prieto project closer to gold production which we anticipate over the next twelve months.”
About Goldgroup
Goldgroup is a Canadian-based gold production, development, and exploration Company with significant upside in a portfolio of projects in Mexico, including its flagship 100%-owned advanced stage gold development project Caballo Blanco in the state of Veracruz, and a 50% interest in DynaResource de Mexico, S.A. de C.V., which owns 100% of the high-grade gold exploration project, San José de Gracia located in the state of Sinaloa. Goldgroup also operates its 100%-owned Cerro Colorado gold mine in the state of Sonora.