Goldcorp to build Penasquito bigger, sooner

Vancouver – Goldcorp (G-T, GG-N) is expanding the Penasquito mine in Mexico before it’s even built, announcing a plan to increase mill throughput by 30% and accelerate the project development schedule.

The expanded Penasquito operation will process 130,000 tonnes of ore per day to produce an average of 400,000 oz. gold, 31 million oz. silver, 97,000 tonnes lead, and 189,000 tonnes zinc annually. Pre-expansion plans formed in a 2006 feasibility study called for a 100,000-tonne per day milling operation.

Capital cost for the expanded project is expected to reach $1.49 billion, compared to the previous capital expenditure requirement of $882 million. According to Goldcord, the throughput increase accounts for 40% of the increase in capital cost. Another 40% of the increase can be traced to changes in project scope brought about by the growing project footprint, facilities optimization, and revised infrastructure requirements. The remaining 20% of the capital cost increase is attributed to cost escalation since the 2006 study.

Equipment will be added to each of the two milling circuits and mobile mining equipment will be utilized to increase the production rate at Penasquito, which will peak at 216 million tonnes of ore and waste rock processed per year. The new plan also calls for accelerated development: construction of the second SAG mill line is to start immediately after the first mill line is complete, eliminating the previously-schedule 18-month delay.

Goldcorp is investigating the possibility of constructing a power plant that would be dedicated to its Mexican operations. The company is also looking into in-pit crushing and conveyor haulage at Penasquito. And metallurgical testing is indicating that recovery rates will be better than expected, an increase that has not been included in project economics.

In June, a 48% increase to the proven and probable reserves at Penasquito defined a 917-million tonne deposit containing 13 million oz. gold, 864 million oz. silver, 2.7 million tonnes lead, and 5.8 million tonnes zinc.

According to the new timeline, the company expects the first gold ounces from heap leaching of oxides in 2008 and mill start-up in 2009.

Pre-stripping has begun on the initial benches of the Penasco pit. Goldcorp has finished upgrading the road between Pabellon and Salaverna and opened it to public traffic in September. And the towers and cables for the 400-kV power line servicing the project have been installed; Goldcorp expects the line to be energized in early 2008.

Goldcorp’s share price climbed 20 on Dec. 3 after the news was released and 51 on Dec. 4 for a 2.2% gain, closing at $33.02. The company has a 52-week trading range of $22.40 to $35.86 and has 705.7 million shares issued.