Pan American Goldfields Ltd. (OTCQB: MXOM) recently announced record production results for its Cieneguita gold-silver project in Mexico’s Sierra Madre.
Gold production averaged 524 ounces per month between March and October 2012. Silver production increased from 36,517 ounces during March 2012 to 68,758 ounces in October. Gold equivalent production (using a $1600 per ounce gold price and $30 per ounce silver price) for the month of October reached 1,795 ounces, compared to an average of 1,287 ounces for the preceding seven months.
The Cieneguita deposit contains a NI 43-101 compliant resource of 1.1 million measured and indicated gold equivalent ounces, and a Preliminary Economic Assessment (“PEA”) is currently underway to establish the potential for a much larger operation. MXOM currently is anticipating the completion of the PEA in January 2013.
In the first eight months of the Company’s 2012 fiscal year, which began March 1, the Cieneguita pilot operation generated net cash flow of approximately $6.0 million, of which $1.7 million is attributable to MXOM under its joint venture agreement with partner Minera Rio Tinto (MRT). MXOM’s percentage interest in the cash flow from the pilot project recently increased from 20% to 29% retroactive to March 1, 2012 through December 31, 2012, as per the Company’s amended agreement with MRT. The Company’s percentage interest in the cash flow will increase to 35% beginning in January 2013.
The sizable increase in its cash flow share with MRT comes at a great time for MXOM. While eight truckloads of concentrate were sold and shipped to Trafigura in September and October, shipments are expected to increase to eight trucks in November alone. Moving forward, the average daily production of ore processed is expected to jump to 800 tonnes per day after a plant upgrade at Cieneguita is completed in December.
MXOM also secured drilling and environmental permits for its Cerro Delta project in Argentina. Cerro Delta is geologically analogous to one of the world’s largest undeveloped gold and copper deposits, the Barrick-Kinross 23.2 million ounce gold and 5.8 billion pound copper Cerro Casale resource, located a short 12 miles west. Drilling at Cerro Delta is expected to commence in 2013.
With shares trading for near $0.10, and RedChip analysts recently issuing a price target of over $1.00, MXOM represents a compelling opportunity for fast-acting investors. As already mentioned, near-term catalysts set to drive the stock higher include the pending completion of the Cieneguita PEA, which explores the possibility of a 100,000 ounce gold equivalent per year operation, and the sizable jump in cash flow starting in January 2013 from the Company’s JV agreement with MRT.
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