VANCOUVER,
Sept. 3, 2013 /PRNewswire/ -
Goldgroup Mining Inc. ("Goldgroup" or the "Company") (TSX:GGA,
OTC:GGAZF, BMV SIX:GGAN.MX) is pleased to announce the closing of
the acquisition (the "Transaction") of a 100% interest in the Cerro
Prieto Project (the "Project") from Oroco Resource Corp. ("Oroco"),
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.
Transaction Details:
On closing of the Transaction, the Company paid
Oroco US$4.5 million. The
Company 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, the Company'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, the Company issued to Oroco 5,500,000 common
shares. The Company 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. The Company
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, the Company 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, the Company 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. The Company
has been advancing the development of the Project. On
August 8, 2013, the Company 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 the Company 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.
- The Company 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.
- The Company 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.
The Company 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 the Company.
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. The Company also operates
its 100%-owned Cerro Colorado gold
mine in the state of Sonora.
Goldgroup is led by a team of highly successful
and seasoned individuals with extensive expertise in mine
development, corporate finance, and exploration in Mexico. Goldgroup's mission is to increase
gold production, mineral resources, profitability and cash flow,
building a leading gold producer in Mexico.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
INFORMATION
Certain information contained in this news
release, including any information relating to future financial or
operating performance, may be considered "forward-looking
information" (within the meaning of applicable Canadian securities
law) and "forward-looking statements" (within the meaning of the
United States Private Securities Litigation Reform Act of 1995).
These statements relate to analyses and other information that are
based on forecasts of future results, estimates of amounts not yet
determinable and assumptions of management. Actual results could
differ materially from the conclusions, forecasts and projections
contained in such forward-looking information. These
forward-looking statements reflect Goldgroup's current internal
projections, expectations or beliefs and are based on information
currently available to Goldgroup. In some cases forward-looking
information can be identified by terminology such as "may", "will",
"should", "expect", "intend", "plan", "anticipate", "believe",
"estimate", "projects", "potential", "scheduled", "forecast",
"budget" or the negative of those terms or other comparable
terminology. Certain assumptions have been made regarding the
Company's plans at the Cerro
Prieto project. Many of these assumptions are based on
factors and events that are not within the control of Goldgroup and
there is no assurance they will prove to be correct.
Forward-looking information is subject to a variety of known and
unknown risks, uncertainties and other factors that could cause
actual events or results to materially differ from those reflected
in the forward-looking information, and are developed based on
assumptions about such risks, uncertainties and other factors
including, without limitation: uncertainties related to actual
capital costs, operating costs and expenditures, production
schedules and economic returns from Goldgroup's projects;
uncertainties associated with development activities; uncertainties
inherent in the estimation of mineral resources and precious metal
recoveries; uncertainties related to current global economic
conditions; fluctuations in precious and base metal prices;
uncertainties related to the availability of future financing;
potential difficulties with joint venture partners; risks that
Goldgroup's title to its property could be challenged; political
and country risk; risks associated with Goldgroup being subject to
government regulation; risks associated with surface rights;
environmental risks; Goldgroup's need to attract and retain
qualified personnel; risks associated with potential conflicts of
interest; Goldgroup's lack of experience in overseeing the
construction of a mining project; risks related to the integration
of businesses and assets acquired by Goldgroup; uncertainties
related to the competitiveness of the mining industry; risk
associated with theft; risk of water shortages and risks associated
with competition for water; uninsured risks and inadequate
insurance coverage; risks associated with potential legal
proceedings; risks associated with community relations; outside
contractor risks; risks related to archaeological sites; foreign
currency risks; risks associated with security and human rights;
and risks related to the need for reclamation activities on
Goldgroup's properties, as well as the risk factors disclosed in
Goldgroup's Annual Information Form and MD&A. Any and all of
the forward-looking information contained in this news release is
qualified by these cautionary statements. Although Goldgroup
believes that the forward-looking information contained in this
news release is based on reasonable assumptions, readers cannot be
assured that actual results will be consistent with such
statements. Accordingly, readers are cautioned against placing
undue reliance on forward-looking information. Goldgroup expressly
disclaims any intention or obligation to update or revise any
forward-looking information, whether as a result of new
information, events or otherwise, except as may be required by, and
in accordance with, applicable securities laws.
SOURCE Goldgroup Mining Inc.