Torex Gold Resources Inc. [TXG-TSX, OTC-TORXF], due to security concerns, continues to have no access to a key area of its ELG Mine Complex in southwest Mexico, it was reported Wednesday March 14.
“With 80% of production expected to come from the El Limon pit area, the company is running out of ore,” Scotiabank analyst Trevor Turnbull said in a report. “If the current situation persists, it is inevitable that mill feed will run out within weeks unless employees can return in full force or the company receives unfettered access to the El Limon pit,” Turnbull said.
The warning comes after the company announced on January 29, 2018, that an illegal blockade by an external union was removed at the ELG Mine Complex.
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 that the blockade led to conflict between communities and denied to thousands of citizens their constitutionally protected right to work. The efforts by the governor enabled Torex to regain 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’s Turnbull reacted by upgrading his rating on the stock to “sector outperform” as he said the worst appeared to be over following the escalation and subsequent government intervention.
However, that analysis appears to have been premature.
As stated on the company’s fourth quarter conference call, the company needs a full complement of workers to ramp up its mining rates, but there is not enough living space for them.
“The reason is that the Los Mineros Union supporters continue to be a security concern on the public access road and the worker accommodation camp is deemed inaccessible,” Turnbull wrote.
“On Monday, trespassers apparently backed by Los Mineros, attacked mine workers when they came to mine in the El Limon pit,’’ the Scotiabank analyst said.
“In our opinion, the issues facing Torex are directly related to the Los Mineros Union and not a function of being in Guerrero State or a lack of social license,’’ he said.
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.
On Wednesday, Torex Gold shares eased 2.34% or $0.23 to $9.61. The 52-week range is $28.32 and $8.85.