Last September, Timmins Gold made a non-binding proposal to the directors of Capital Gold (TSX:CGC) to merge on a negotiated basis. The proposed value of the transaction was $4.50 per share; shares of Capital Gold were, at the time, trading at $3.89. But from the get-go, Capital Gold’s board was not receptive the proposal. Enter AuRico Gold, and you set the stage for what was a contentious 7 month long take-over battle. The final price tag, AuRico’s winning bid was for $6.34 per share. $1.77 more than what was original agreed upon when Capital and AuRico signed their merger agreement.
Since losing the fight for Capital Gold, Timmins has been quiet on the M&A front but has been making noise elsewhere. The company has been continuously drilling and extending the mineralization at its flagship San Francisco gold mine located in Sonora, Mexico. And on August 11th, 2011, the company reported that it sold 17,965 gold ounces during the quarter. This represents a 59-per-cent increase in gold sales over the first quarter of the previous fiscal year. In addition to the San Franciso mine, Timmins also has a collection of interesting gold assets across Mexico. Most notably a 40,000 hectare land package in the Peňasquito area of Mexico that is contiguous to Goldcorp’s 13 million ounce Peňasquito Gold Deposit.
We caught up with Bruce Bragagnolo, President & CEO of Timmins Gold, to discuss some of the company’s past challenges and learn what’s in store for this emerging junior gold producer.
The economic crisis of 2008 caught a lot of companies off guard and Timmins Gold was no exception – the company’s shares dropped from $1.25 to $0.25. What specific challenges did you face during those difficult times.
The economic crisis caught us at the exact time that we were financing the startup at the mine. At the end of March, 2008 we came out with our initial 43-101 report which recommended the restart of the mine. After March of 2008 there was a softening of the market which we initially attributed to the usual seasonality issue of sell in May and stay away. It turned out that March of 2008 was the precursor to a systemic crash and not just seasonal softness. Despite the softness in the markets we managed to raise $19 million in June of 2008 and the plan was to return to the market in the Autumn and raise an additional $20 million through a combination of debt and equity. By September the market had softened even farther and by October the debt and equity markets dried up completely during the crisis. It was only in April of 2009 that the equity markets recovered enough for us to raise additional funds and eventually the debt market returned as well.
The company’s recovery since 2009 has been nothing short of amazing and your shares are now trading close to $3.00 per share. To what do you attribute this stellar recovery?
I can attribute this to two main reasons. First, the fact that we had a very successful startup period, and second, the high price of gold has increased our operating margins.
Including your flagship San Francisco mine in Sonora, Timmins has six different properties in Mexico. Could you please outline your exploration strategy and development plans heading into 2012?
Right now we are having a lot of success around and beneath the pit at San Francisco. We can not justify moving one of our 11 rigs to go anywhere else at present. We hope this will change in 2012 when we would like to complete at least one drill program on each of our other projects.
Is the company looking at additional projects or is your plate pretty full right now?
No we’re not actively looking, our plate is full.
The price of gold has been on a long term bull trend since 2002. What is your take on the gold market and at what point do you consider hedging production?
I believe the gold market is going much higher. I think you could consider hedging production when gold gets to a price that is so incredible you can’t believe it and, at the same time, the costs of production are dropping.
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