Analyst upgrades Torex Gold, says worst may be over in Mexico

Torex Gold's ELG Mine in southwest Mexico. Source: Torex Gold Resources Inc.

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Torex Gold’s ELG Mine in southwest Mexico. Source: Torex Gold Resources Inc.

Torex Gold Resources Inc. [TXG-TSX; TORXF-OTC] said Monday January 29 that an illegal blockade by an external union has been removed at its ELG Mine Complex in southwest Mexico. Hector Astudillo, the Governor of Guerrero State, acted decisively on January 26, 2018, to lift the illegal blockade by the Los Mineros Union and peacefully re-established the rule of law, the company said in a press release.

The company went on to add the blockade let to conflict between communities and denied to thousands of citizens their constitutionally protected right to work. The efforts by the governor means Torex now has access to the main plant access gate, the company’s accommodation facilities, security for the main plant site, and for the El Limon Pit – which has been previously inaccessible, the company said.

Scotiabank mining analyst Trevor Turnbull reacted by upgrading his rating on the stock to “sector outfperform” as he said the worst appears to be over following the escalation and subsequent government intervention.

Torex Gold shares rose 15.5% or $1.87 to $13.94 on mid-afternoon trading, Monday.

The El Limon-Guajes Mine (ELG), located north of the Balsas River, is an open pit gold mine. It started production in December 2015 and reached the commercial production stage in March, 2016. Once in full production, the mine will rank amongst the largest and lowest cost gold operations in the world, with expected life of mine (LOM) annual production of 370,000 ounces of gold at a LOM all-in-sustaining cost of US$616 per ounce.

In an investment report, Turnbull said seven Torex Gold employees were kidnapped briefly on Friday (January 26, 2018) and released later the same day prior to the police intervention. Two weeks ago, the company established an alternative route to its site and began restarting the plant.

However, access to the El Limon pit, where 80% of the 2018 production is scheduled to come from, was not available until now.

For its part, Torex said that with the help of supportive communities of Nuevo Balsas and Valerio Trujano, the ELG Mine Complex has been re-started and has been in continuous ramp-up mode, behind the blockade since January 12, 2018.

“The processing plant start-up team has ramped up throughput levels nicely, with production now achieving between 12,000-13,000 tonnes per day,”  the company said.

It said gold recovery levels have been on an upward trend as well, with 12,100 ounces of gold already poured. Gold has been shipped and revenue from early shipments received.

Crushing of stockpiled ore in El Limon will begin this week, and mining will resume shortly thereafter as additional crews and supervisors return to the ELG Mine Complex.

However, the company warned that tension and violence in the surrounding communities has been increasing. On January 24, 2018, the company said Quintin Salgado was killed in Nuevo Balsas by unknown assailants. Salgado had been an employee of the company for four years, until 2014.

On January 25, 2017, there was a killing in the more distant town at the crossroads of Tierra Colorada in Tepecuacuilco, near the entrance to the East Service Road. The company said it has been told that the assailants left a written message threatening the incumbent CTM union and their representatives in Nuevo Balsas.


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