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Timmins Gold snags Caballo Blanco Mexican project for US$30 mln

Last updated: 10:39 18 Dec 2014 EST, First published: 11:39 18 Dec 2014 EST

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Timmins Gold (TSE:TMM)(NYSE MKT:TGD) has agreed to snap up the Caballo Blanco gold project in Mexico from Goldgroup Mining (TSE:GGA) for a total of US$30 million.

Timmins will pay US$10 million in cash and roughly 16 million in shares, as well as an additional US$5 million when Caballo Blanco receives its permit.

The company said the acquisition will immediately add to its net asset value and mineral resources, enhancing its annual production profile by nearly double to 220,000 ounces of gold. The proposed Caballo Blanco project is a Mexican open pit/heap leach mine similar to Timmins' San Francisco mine in the country.

The project brings 575,000 ounces of gold in the indicated category, as well as 419,000 inferred ounces, along with the potential to expand within a sizeable, under-explored land package, Timmins said. Current projected production is estimated at 90,000 ounces per year, at a cash cost of $784 an ounce.

"The acquisition of Caballo Blanco will accomplish our strategic goal of adding a highly prospective gold mining project at an attractive valuation in Mexico, a very familiar, well-established and low-risk mining jurisdiction," said chief executive officer Bruce Bragagnolo.

"The transaction structure allows us to retain our current financial flexibility, and is expected to improve our corporate operating cash flow once Caballo Blanco is producing."

The company also said that its immediate plan is to update the current resource estimate at Caballo, as well as to improve the existing preliminary economic assessment via drilling, more detailed metallurgical testing and a complete cost analysis. It will also work with local communities and government bodies to revise the previous environmental impact statement.

It emphasized that it believes Caballo is "extremely promising" even at current gold prices. The project, which is made up of two large areas of epithermal gold mineralization, has 13 mineral concessions stretching over 54,000 hectares.

The deal is expected to close this month, subject to regulatory approvals and other conditions.

Shares of Timmins rose almost 1 percent to C$1.07 in Toronto as of 11:20am ET, while Goldgroup's stock jumped over 11 percent to 20 Canadian cents.

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