Cerro Caliche is Sonoro's Future Cash Machine OpportunityBy Paloma Duran | Wed, 03/31/2021 - 14:15
Sonoro Gold Corp. (Sonoro) expects Cerro Caliche to be in production next year, if all goes according to plan, and its shares should trade early with a market capitalization of at least two times its indicated cash flow, which is approximately US$86 million. In addition, Cerro Caliche also has an exceptional exploration potential, which could bring its resources in the Au range of two million oz.
Sonoro’s technical report NI 43-101 of Cerro Caliche estimated inferred mineral resource “at a 0.25 g/t gold equivalent cut-off grade of 11.5M tons at an average grade of 0.495 g/t gold and 4.3 g/t silver.” The company plans to start production by building a heap leach mining operation (HLMO) at Cerro Caliche, for which it has signed a Memorandum of Understanding with three China-based EPC companies for financing and development.
Sonoro's engineering work has indicated the potential and feasibility of the project. Cerro Caliche's management includes Glamis Gold Alumni, which is one of the most successful mine builders in the region. Jorge Diaz, Sonoro's Head of Development, is an expert due to his ability to rapidly build very low-cost heap-leach gold mines and operate them ultra-efficiently. Additionally, Sorono's Senior Management includes Curtis Turner, Former Senior Executive at Argonaut Gold, who is a highly successful low-cost heap leach gold producer.
Sonoro’s team is committed to develop and unlock the potential of Cerro Caliche. "It would not be a surprise if Cerro Caliche is another of the dozen gold deposits that have been discovered, developed or mined in the region," Sonoro told MBN.
Sonoro's target production is of 20,000 tons per day (TPD). While the 43-101 report amounts to just over 200,000 ounces of Au, averaging 0.5 grams per ton, this is already enough for the first 2.5 years of production. Additionally, the company has factored an earlier estimate of a 72 percent gold recovery.
Over 14,000m have been drilled since September, showing some exceptional drill intercepts in both infill drilling and expanding at known gold zones, while additional gold zones have also been established, resulting in a new resource estimate 43-101. The completion of this estimate is scheduled for April-May, and Sonoro has reported it expects a substantial increase in gold resources.
In March, Sonoro announced the test results of a drilling program at Cerro Caliche. The company explained that at the Japoneses drilling zone, it identified several mineralized intersections and the extension of the zone’s western boundary where there may be a pit optimization due to the potential convergence of the Japoneses and Buena Suerte open pits. This potential coverage will not only increase the size of the project, but will also optimize its economics.
The mine’s development is expected to be a catalyst for massive cash flow for the company. At the Mines and Money conference, Kenneth MacLeod, President and CEO of Sonoro, stated that the drilling results maintained the grade of 0.5 grams per ton and that, according to internal calculations, the already established resource supported an operation of 15,000 TPD, which means that 20,000 TPD can be reached. MacLeod also estimated CAPEX and said the startup would not exceed US$12 million, he added that using the estimated revenue of 15,000 TPD, the CAPEX payback would be in 91 days.
Sonoro explained to MBN that even being conservative in calculating the company's operating potential of 15,000 TPD averaging 0.5 g/t ton Au, it should produce the equivalent of approximately 264 ounces of gold per day. Sonoro said that by using cash costs from similar mines in the area, it is reasonable to expect an AISC cash cost in the range of US$1,200 per oz/Au.
The records show a potential free cash flow, using a gold price of US$1700 per oz, and a gold price of US$500 per oz of profit margin, of US$132,321.00 per day. This amount must be multiplied by 330 business days, assuming there will be 35 days without production due to holidays and maintenance, which shows that its free cash flow would be of US$ 43,665,000 per year.
Sonoro expects that its shares trade with a market capitalization of at least US$86 million (CAD$106 million), which is a significant increase from its current US$16 million and yet it is a low-risk development opportunity. The company told MBN, that Cerro Caliche is expected to increase its resources with the new exploration programs and that its project San Marcial is just starting.
The company has 40 years of experience in developing successful mines and it seems unlikely that they will stop when Cerro Caliche begins production. What is even clearer is that Sonoro has a unique opportunity to significantly increase its profits.