Goldcorp doubles gold reserves at Cerro Negro (April 07, 2011)

With the price of gold in New York’s spot market reaching yet another all-time high close at US$1,456.80 an ounce on April 5, the world’s second largest gold producer by market value, Vancouver-based Goldcorp (G-T, GG-N), has announced a major update for its promising Cerro Negro gold project in Argentina.

The company has released an updated feasibility study for Cerro Negro, from which it expects average annual gold production of 550,000 oz. during the first five years of commercial operations. Average cash costs during those years are predicted to be less than US$200 per oz.

“The positive results in this feasibility study confirm our expectations that Cerro Negro will contribute tremendous value for shareholders as Goldcorp’s next cornerstone gold mine,” said Chuck Jeannes, Goldcorp’s president and CEO, in a recent press release about the results.

“Capital cost estimates reflect more than a doubling of throughput, and the straightforward nature of the project design should result in a smooth construction period toward first gold production in just over two years.”

Mill throughput has increased to 4,000 tonnes per day with gold production over the full 12-year mine life, based only on existing reserves, expected to average 340,000 oz. per year at cash costs of approximately US$290 per oz.

Goldcorp has also upgraded the resource estimate for Cerro Negro, which currently stands at 13 million tonnes grading 10.19 grams gold per tonne for 4.26 million gold oz. proven and probable, a more than 100% increase. The project also hosts another 1 million oz. in the measured, indicated and inferred categories at lower grades.

A high-grade epithermal deposit, Cerro Negro also contains significant silver values including 13 million tonnes grading 86.3 grams silver for 36.16 million silver oz. proven and probable.

Goldcorp acquired the property in late 2010 when it bought Australia-based Andean Resources for $3.6 billion in cash and stock. At the time, Andean had delineated a 2.54-million-oz. indicated gold resource on the 215-sq-km property.

The deposit currently comprises six known veins with significant gold and silver reserves, including Eureka, Mariana Central, Mariana Norte, San Marcos, Bajo Negro and Vein. While the Vein zone is planned as an open pit, the others are all underground deposits that will need to be accessed by separate declines. At the Eureka vein, Goldcorp has already advanced the decline to a depth of around 900 metres. Construction of declines at two other zones is expected to begin in the fourth quarter.

Goldcorp plans to spend US$130 million of the project’s US$750-million initial capital cost in 2011. This will include site access work, camp expansion, geotechnical drilling of the tailings area and plant facilities, power line design and further engineering studies. It will also include US$19 million of exploration drilling, with up to 10 drill rigs on site by the end of the second quarter. The drilling will focus on expanding the three zones scheduled for first production and test several new prospective veins on the western portion of the property.

Goldcorp has already received environmental permitting for the project, but expects to update the permits soon to allow for the increased mill throughput.

At presstime on April 6, Goldcorp’s shares were trading up 25¢ to $50.55. On April 5, as gold reached a new record high, they rose $2.76.