Timmins Gold Acquires Process Plant and Infrastructure for Ana Paula

Timmins Gold (TSX:TMM) reported that it has entered into an agreement with a Mexican subsidiary of Goldcorp (TSX:G) to acquire a process plant and select auxiliary equipment. The equipment was used at Goldcorp’s El Sauzal Mine in Chihuahua until it was closed in 2014.
As quoted in the press release:

The Plant will be acquired by Timmins Gold for future use at its recently acquired Ana Paula project in Guerrero, Mexico. A preliminary economic assessment (“PEA”) completed in 2014 indicates that Ana Paula represents a robust, high-margin, rapid pay-back, 8-year life open pit mining opportunity which once in operation is projected to generate a pre-tax NPV_5% of US$332 million and a pre-tax IRR of 41% at a gold price of US$1,200 per ounce. It is anticipated that the capital savings realized by the Plant Acquisition will significantly improve the economics of the project and reduce the remaining pre-production capital required for Ana Paula to approximately US$100 million.
The total purchase price to be paid by Timmins Gold to Goldcorp for the Plant is C$8.0 million to be paid as follows:

1. C$1.0 million in cash payable to Goldcorp immediately;
2. C$3.0 million by the issuance of 10 million common shares in the capital of Timmins Gold at a price of C$0.30 per share.
3. C$4.0 million in cash payable to Goldcorp one year from today’s date.

The closing of the Plant Acquisition is subject to, among other things, the completion of a C$6.0 million investment by Goldcorp in Timmins Gold by way of a non-brokered private placement of 20 million units of Timmins Gold (the “Private Placement”) at a price of C$0.30 per unit. Each unit will consist of one share and one half of a Warrant, each whole Warrant being exercisable for a term of 24 months into a common share of Timmins Gold at a price of C$0.35 per share. The Warrants are subject to an accelerated exercise period of 10 days if the Company’s closing share price meets or exceeds $0.60 per share for 20 consecutive trading days.
As a result of the Plant Acquisition and Private Placement, Goldcorp will hold approximately 9.9% of Timmins Gold’s issued and outstanding common shares on an undiluted basis. The closing of the Private Placement is expected to occur on or about September 30, 2015 and is subject to all necessary regulatory approvals, including approval of the TSX. All securities issuable pursuant to the Plant Acquisition and Private Placement will be subject to a statutory four-month hold period. The use of proceeds of the Private Placement will be to pay for the cost of the removal of the plant from the site.

Timmins Gold CEO Bruce Bragagnolo said:

The purchase of the El Sauzal Plant is projected to save in the range of US$40-60 million in initial capital expenditure when Timmins Gold constructs Ana Paula, not only in terms of equipment and infrastructure direct costs, but also indirect costs and EPCM costs. In addition, it will derisk the project by reducing the risk of both equipment capex overruns and delays in scheduling equipment deliveries. The El Sauzal flowsheet is very similar to the base case flowsheet outlined in the Ana Paula PEA and will require essentially all of the items we have acquired. Some additional items such as a gravity circuit may be required based on the results of ongoing metallurgical studies.

Click here for the full press release.