Los Filos

On Jan. 12, 2017, one of Mexico’s largest precious metal mines changed hands. Leagold Mining, a newly incorporated company based in Vancouver, reached an agreement to acquire the Los Filos gold asset in the Guerrero gold belt from fellow Canadian Goldcorp in a deal worth US$350 million. The mine, which started commercial production in 2008 and was Mexico’s fifth-highest gold producer in 2016, formally became Leagold’s first project when the purchase was completed in April for US$279 million in cash and a further US$71 million issued in common shares.

Although new to Mexico, Leagold has considerable operating experience. CEO Neil Woodyer played a vital role in converting Endeavour Mining into a leading, midtier gold producer in West Africa. The group plans to do the same with Leagold and Los Filos will provide the foundation for a Latin America-centric vision with a clear focus on assets that offer existing or near-term cash flow.

“Today marks a strong beginning for Leagold with the Los Filos  mine becoming our platform for growth,” said Woodyer in a statement when the deal was confirmed. “We will immediately focus on optimizing the mine and progressing the drilling programs.”

There is certainly work to be done to convert the mine into a long-term cash producer. In 2016, gold production at Los Filos fell by over 15 percent to 231,000 ounces from 272,900 ounces the previous year and the current life-ofmine plan suggests that the two heap-leach open-pits will cease production in 2024. According to Michael Harvey, Director of Corporate Affairs and Security at Goldcorp, the decision to sell was part of the company’s strategy to focus on “assets of a certain size and quality.” Despite boasting measured and indicated mineral reserves of 422.5 million tons at 0.85 g/t grade, the world’s fourth-largest gold producer clearly saw no long-term future at Los Filos.

But Leagold has a different view of Los Filos. The company has outlined plans to spend a total of US$47 million in capital expenditures to develop the Bermejal undergound mine, also located on the Los Filos property. Initial results from a US$7.7 million, 56,000m drilling program were encouraging and Leagold is now aiming to build a second underground mine at Bermejal that could start operations as early as 2019. The company hopes the new mine will add 200,000oz/y to its production until 2025 at least, while the Guadalupe and San Pablo brownfield exploration targets could extend that further. There may be life in Los Filos yet.