Vancouver, British Columbia, February 1, 2013 - Junior gold producer, Goldgroup Mining GGA GGAZF is adding to its portfolio of Mexican gold properties, by entering into a binding agreement with Oroco Resource Corp OCO to acquire a 100% interest in the Cerro Prieto Project in Sonora State. Following this news, investment firm Canaccord Genuity reiterated their buy recommendation for Goldgroup, with analyst Nicholas Campbell maintaining his 12-month target price at $1.30, a healthy premium to the current $0.37 price.
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Goldgroup will be making an initial payment of US$4.5 million, a US$1 million private placement, and additional payments of US$13.5 million from future production.
The 7,000-hectare Cerro Prieto project hosts measured and indicated resources of 14.7 million tonnes grading 0.81 grams per tonne gold and 12.82 grams per tonne silver, containing 383,833 ounces of gold and 6.08 million ounces of silver. There are also inferred resources of 281,000 tonnes grading 0.66 grams per tonne gold and 12.6 grams per tonne silver.
The 2010 Preliminary Economic Report outlines a 1,500 tonne per day heap leach operation producing an monthly average of roughly 27,000 ounces of gold over a four-year initial mine life.
In 2012, Oroco received all of the required permits for construction, including the Environmental Impact Statement and the Authorization of Change of Land Use for the property.
Prior to this acquisition, the company had 3 properties in Mexico, and was currently producing 18,000 ounces of gold per year.
Analyst Nicholas Campbell stated, "Given the proximity to Goldgroup's Cerro Colorado mine, we believe there is the potential for Goldgroup to realize significant synergies developing the project. With Cerro Prieto online, we believe Goldgroup could potentially move back into a positive cash flow position in 2014."
This agreement is subject to receipt of regulatory and Oroco shareholder approvals.
Oroco Resource Corp will pay Goldgroup Mining a break fee of US$500,000 if the transaction is not completed by June 30, 2013.
Goldgroup currently trades at $0.37 and with 131 million shares outstanding the company is capitalized at $48.5 million.
For more information please visit the company's website www.goldgroupmining.com, or call Travis McPherson at 1-877-655-6928 or email tmcpherson@goldgroupmining.com.
For more information about Canaccord Genuity or to obtain a copy of their research report, contact your nearest Canaccord Genuity office. Their branches are listed on their website at www.canaccord.com.
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