Torex Gold Resources (TXG:TSX)

Torex Gold Resources (TXG:TSX)

Torex Gold (TXG:TSX) released the final batch of results from its Media Luna target at the Morelos Gold Project in the Guerrero Belt in Mexico.  The company expects to release a maiden resource by mid-September on the Media Luna zone.  Highlights of the final holes include 19.9m of 11.56 gold equivalent (8.17g/t gold, 24.53g/t silver and 1.96% copper) and 17.3m of 10.55g/t gold equivalent (10.06g/t gold, 6.34g/t silver and 0.25% copper).  The deposit remains open in multiple directions and the company says it will continue to test along the Media Luna, Media Luna West and Todos Santos anomalies.  The company also flew a new ZTEM survey over the entire property and found a number of other exploration targets.

As Fred Stamford, President and CEO of Torex put it “they have executed through a process that has taken us from discovery hole to, what promises to be a significant maiden resource, in just 18 months.”

Torex completed a feasibility study in September 2012 which showed a 4 million ounce gold reserve (48.8Mt at 2.61g/t gold) with an initial capex hit of $550 million and cash costs of $421 per ounce.  Shortly after that, in October, the company did what most people thought was impossible; they raised $350 million in a bought deal financing.  Then in early 2013 they announced a $250 million project finance deal which they are working on closing and should provide them with sufficient funding to build the Morelos Mine.

Beyond the geologic merits of Torex's projects, the benefit to this funded-developer is that they have the option of delaying going into production if the gold price softens further (or even if it just simply remains stagnant).  These types of stories are some of the best to own in a low gold price environment because they are not stuck with the fixed costs associated with an existing mine and can simply reduce spending, conserve cash and wait for the markets to recover before they build and produce at their projects.  However, given the grade of this world-class asset, I don't see Torex as being that vulnerable at $1,350 per ounce gold and would expect them to continue their rapid pace of development.

News Release here: Torex Complete Initial Resource Drilling at Media Luna