New York-based junior Capital Gold (CGLD-O) and Denver-based precious metals royalty company Royal Gold (RGL-T) have ended negotiations aimed at financing construction of Capital’s El Chanate open-pit gold mine in Sonora, Mexico.
Royal Gold was to have supplied the entire capital cost of the project, US$13.8 million, in return for a royalty on production. Capital Gold says it is actively negotiating for capital financing with several financial institutions.
A positive feasibility study completed last August pegged El Chanate’s reserves at 13 million tonnes grading 0.83 grams gold per tonne. The mine is expected to churn out 50,000 oz. of gold annually for five years at an operating cash cost of US$229 per oz. Capital had hoped to begin construction early this year.
Mexico’s Department of Environmental Affairs and Natural Resources recently granted Capital the permits required for construction and operation of a heap-leach gold recovery system at El Chanate.
Capital’s stake in El Chanate recently climbed to 95% after partner Grupo Minero converted part of its stake into restricted shares of Capital Gold; Grupo Minero retains a 5% interest in the project.
Shares in Capital gold were US2 higher at US36 in over-the-counter trading; Royal’s shares were 71 lower at $20.60 in late-afternoon trading in Toronto.
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