Genco buys new ball mill for La Guitarra in Mexico

With silver prices at the start of February 27% higher than a year-earlier,Genco Resources (GGC-T) wants to fast-track production expansion at its La Guitarra silver mine in central Mexico.

“These cycles don’t last forever and you’ve got to take advantage of them when you can,” says Gregory Liller, who postponed his retirement last year to join Genco as president.

That’s one reason behind Genco’s decision to purchase a 3,000-tonne-per-day ball mill for US$1.65 million.

“We turn an operating profit [at La Guitarra] but the only way to really grow the company and give true value to shareholders is to increase production tenfold,” Liller says in a telephone interview from Mexico.

Last year La Guitarra produced about 700,000 oz. of silver. Now Genco is undertaking a feasibility study on expanding production through a new mill and heap-leach operation.

Liller expects the feasibility study will be completed by the middle of the year. The company believes it will have its permits by the third quarter with construction of a new mill and heap-leach facility starting shortly afterward and taking between one year and a year and a quarter.

“We’re an underground mine so we’re looking at a combination of open-pit and adding more underground production centers,” Liller says.

As for the ball mill, Genco skirted long delivery times for new ball mills of between one and a half to three years by purchasing a used mill from Louisiana where it had been used at a phosphate mine.

“It was a good deal,” Liller says, adding that it “had pretty light duty” because phosphate is a “pretty soft rock.”

The La Guitarra mine, located about a two- and a half-hour drive southwest of Mexico City in the Temascaltepec mining district, sits in the prolific silver belt of the Sierra Madre mountains.

Liller says he hopes to take advantage of silver prices that have reached record highs. “The bull trend for silver remains on course to enter the US$17.75 to US$18 area,” writes Standard Bank in a research note on Jan. 31.

Today the spot price for silver hovered between US$17.12 and US$17.61 per oz.

“When the price does turn down I want to be in a position where I can take out other companies,” Liller says, explaining why fast-tracking La Guitarra is so important. “You want to be in a position where you’re not in debt and have a healthy bank account and can take advantage of that.”

“In the last big cycle that ended in the early 1980s there were a lot of projects coming on line and they didn’t get into production in time.”

In Toronto, Genco shares closed down 6 at $3.07 apiece, on a trading volume of 75,844.