Given the turn for the worse in Argentina, I’m all the more pleased that Mexico remains a solidly pro mining jurisdiction, though parts of it have become more dangerous. Fortunately, Guanajuato, one of the most famous historic silver-producing districts in Mexico, is close to Mexico City and far from the areas where the drug war is raging. Past production at Guanajuato surpassed 1.2 billion ounces of silver, with the
cut-off grade for the Spanish being about 700 g/t silver. Just imagine how much material there must be left behind that was waste to the Spaniards but is now high-grade ore – not to mention all the veins they didn’t discover because they don’t outcrop.

Guanajuato is prime elephant-hunting country for silver miners. These two area plays are the ones charging up the production growth curve the fastest.

Though we decided to buy back into GPR, I had not returned to the company’s primary Mexican asset, the Guanajuato mine complex, prior to our re-recommending the stock. I wanted to verify that management really has mended operations and really can deliver on the expected growth that was our reason for buying back into the story.
The answer is basically yes. I saw much-improved operations at Guanajuato, compared to the last time I was there, in 2007. I expected this, given the company’s greatly improved profitability this year, but it’s good to have confirmation.

Here’s what I liked most about what I saw:
• New Outotec flotation cells and other modifications to the milling circuit in the plant have greatly improved recovery of metals, to around 90%. These cells take up half the space in the mill, where a foundation for an additional ball mill remains unused. This leaves plenty of room for expansion on site, which is important because the mill is in the city of Guanajuato, which would make it difficult to expand the plant’s footprint.

Mike Clemson is the the owner of
Gold Stocks web blog.