Torex

Torex Gold will begin production in Mexico later this year.

Not  many exciting press releases out this morning but the following did catch my eye.

Torex Gold - (TXG:TO) - Torex's construction at the large El Limon mine in Mexico is now two-thirds complete.  The project remains on schedule for first pour in the fourth quarter of this year. Torex also drew down $50 million on its debt faciliity at the end of May.

All construction appears to be moving along well with over 3000 contractors and employees on site.

Commercial production remains on track for the 2nd quarter of 2016.

Torex remains fully funded to production and is on budget for the estimated $800 million dollar capex.  A total drawdown of $205 million has been made so far on the project finance facility.

Of note is that security issues in the region have quieted down according to Torex.  State police and military continue to be at access points at the local communities near the project.

Torex 2 year chart

A two year chart is a good example of how gold stocks can stay fairly range bound when constructing a gold mine. Torex started construction on November 1st, 2013 and the share price was around the $1 level and this morning is trading at $1.13.

I will be looking hard at Torex when production (cash flow) starts as a potential investment. I am a little concerned about the 785 million shares out though as that will limit the upside.

Read: Torex Achieves the 2/3rds Completion Milestone at its Morelos Gold Property and receives the Fourth Drwa on the Debt Facility

Related: Daniel Earle: “Risk Level a Concern As Torex Gold (TXG.TO) Progresses”

West Kirkland Mining - (WKM:TSXV) - West Kirkland is out with a PFS on the Hasbrouck project in Nevada. The project will be small producing 567,000 ounces over 8 years. Project economics show an 26% internal rate of return (IRR) and an after-tax $75.3 million net present value (NPV) at a 5% discount rate using $1,225/oz gold and $17.50/oz silver.

West Kirkland acquired the project from now bankrupt Allied Nevada at the end of January 2014 for $30 million. West Kirkland currently holds a 75% stake with another $10 million owed to acquire the remaining 25%.

Allied Nevada released a preliminary economic assessment on the project in April 2012.  That report envisioned an open-pit heap leach operation with average annual production of 135,000 ounces of gold and 540,000 ounces of silver at an average annual adjusted cash cost of $555 per ounce for a five year mine life.

These couple sentences caught my eye in the news release. Initial capital expenditures to construct the Three Hills mine and ADR plant are estimated at $54.3 million. Further project investment of $83 million in Year 1 and 2 of production is required to construct the larger Hasbrouck mine. Of this, $43.5 million will be from free cash flow generated by Three Hills.

"The Hasbrouck Project is simple and straight-forward," said Sandy McVey, West Kirkland's Chief Operating Officer. "Both mines have low stripping ratios, minimal pre-strip, and no adverse environmental or cultural factors. Good infrastructure exists with nearby grid electricity, paved highways and water sources. We are targeting construction permits for late 2015 following the recent decision by the Bureau of Land Management to review the Three Hills mine under an Environmental Assessment."

I see no reason to buy West Kirkland stock at these levels as Rick Rule says "small mines make small money" and if something goes wrong with a small mine they don't have the leeway to fix it like a large mine.

I could easily be wrong though as Sun Valley Gold fund has been purchasing shares and must like what they see.

@PamplonaTrader also brought up a good point about West Kirkland this morning in CEO Live that majors are not interested in takeovers of small projects like this.

View the West Kirkland presentation posted today here.

Read: WKM/ANV – West Kirkland to Buy Allied Nevada’s Hasbrouck Property for $30 Million

Related: WEST KIRKLAND ANNOUNCES HASBROUCK PREFEASIBILITY RESULTS US$75.3 MILLION AFTER-TAX NPV, 26% IRR

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This is not investment advice. All facts are to be checked and verified by reader. As always please do your own due diligence.