Pan American Goldfields (OTCBB: MXOM), a Canadian junior mining company, recently announced mineral production and revenues received from pilot production at its Cieneguita gold-silver project in Mexico’s Sierra Madre.
During the first quarter ended May 31, 2012, the project generated approximately $3 million in net cash flow, $0.6 million of which was attributable to Pan American under its joint venture agreement with partner Minera Rio Tinto. Pilot production in June reached a record 1,624 ounces of gold equivalent compared to 1,280 ounces in May. Production during the first quarter averaged 471 tons per day with an average gold recovery of 89.5% and an average silver recovery of 90%.
Under the agreement, MXOM receives 20% of the net profits from current production to a depth of 15 meters, and 80% of the net profits below 15 meters. After December 31, 2012, 100% of the net profits revert to MXOM, although Minera Rio Tinto can earn a 20% interest in the project by contributing on a pro-rata basis to the mine’s development.
The Cieneguita mine contains an estimated 1.1 million oz. gold equivalent, or 474,900 oz. gold and 33.5 million oz. silver. MXOM plans to use a portion of the proceeds from its recent $2.1 million private placement to complete a preliminary economic assessment (PEA) for a larger mining operation at the site.
Additionally, MXOM plans to begin a drilling program this winter at its Cerro Delta gold project in Argentina’s mining-friendly La Rioja Province. The Cerro Delta is on the same structure, 12 miles east of the geologically similar Barrick-Kinross 23.2-million-ounce-gold Cerro Casale porphyry deposit. Adding to its potential is the fact that an upper layer of epithermal mineralization overlays the porphyry system. In Cerro Casale’s case, the epithermal layer has been eroded away. Drilling the porphyry system targets at Cerro Delta will first intersect the epithermal metasomatic halo in the upper portion of the drill holes. In case of a discovery, the epithermal mineralization could result in a low-cost gold mine, which could produce early cash flow and help to develop the deeper porphyry mineralization.
MXOM’s executive team has a track record of building and discovering major gold deposits. This includes Barrick Gold’s (NYSE: ABX) largest producer, the Veladero mine. Even more impressive is MXOM Director Andre Koniuhov, who is credited with the discovery of more than 40 million ounces of gold when he directed exploration for Polyus Gold International, the largest gold producer in Russia. With stable revenues from its Cieneguita mine, and potential near-term catalysts in the Cieneguita scoping study and the Cerro Delta drilling program, combined with the executive team’s commitment to acquire multi-million ounce projects, MXOM is a junior miner with huge upside potential.
To learn more about MXOM, watch our interview with the Company’s chairman, Neil Maedel, from the RedChip Small-Cap New York Conference.
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