Local opposition to Caballo Blanco spooks Goldgroup investors

Vancouver — Facing rumours of permitting problems at its Caballo Blanco project in Mexico, Goldgroup Mining (GGA-T) was compelled to issue a press release on February 28 stating that its environmental permitting remains on track despite potential local opposition.

Questions around the company’s permit process came to the fore after local media reported that Veracruz Governor Javier Duarte de Ochoa had expressed his opposition to the project, apparently due to concern over the project’s incompatibility with the local environment. The reports of state rejection of the project, and the potential misunderstanding of those reports, led Goldgroup to issue its clarification.  

“We just wanted to make sure there was no confusion in the market,” said Stephanie Batory, investor relations for Goldgroup in a phone interview, “because there had been, I think, some people believing we had been denied our permit, which is not the case.”

Goldgroup reminded investors that the permitting process takes place at the federal level in Mexico, not the state level, and that it continues to work with the government to advance approval of its environmental permit for the project.

“Our past experience has been that we’ve been granted all of our permits with the Federal Government thus far. We strongly feel we will continue to do so,” said Batory.

Numerous groups have opposed the project on various environmental grounds, including concerns over water use, cyanide transportation, and the uncomfortable proximity of Mexico’s only nuclear power plant, sitting about 4 km east of the site.

Batory explained that on the nuclear issue, Goldgroup had already engaged the government, military and local university to complete a study on the potential seismic effects of mine blasting. The findings showed blasting would not cause seismic activity and the government subsequently issued the company its blasting permit, which it is now using to develop the access tunnel at the Paila deposit. Incidentally, the power plant also provides ample power for the mine.

On the water issue, Batory said there is plenty of water available, including lots of rainfall. The company also has access to several water wells and has drilled several more water wells for local use.

As to the mine itself, Goldgroup continues to advance the project with a significant resource update out in mid-February and numerous drill results out from its 2011 drill program.

The resource update established an indicated resource of 28.9 million tonnes grading 0.62 gram gold per tonne and 2.32 grams silver per tonne for 575,000 oz. gold and 2.15 million oz. silver. Inferred resources now total 24 million tonnes grading 0.54 gram gold and 2.5 grams silver for 419,000 oz. gold and 1.9 million oz. silver. The update increased contained gold by 436,000 oz., decreased inferred contained gold by 98,000 oz, and was the first time silver was included in the resource.  

The company submitted its environmental impact statement on the project in December, and should get a response by the end of March. In the second quarter Goldgroup plans to release a preliminary economic assessment on the project, incorporating the latest resource.

Goldgroup issued the press release after its share price dropped 7¢ to $1.30 on February 27, while the release saw the company’s share price drop as much as 30¢ at on point before ending down 9¢ with 6.4 million shares traded. The following day the stock recovered somewhat, up 7¢ to $1.28 with 1.7 million shares traded.