By: Simon Russell, GoldSeek.com Mining Analyst


Timmins Gold Corp. (NYSE: TGD | TSX: TMM) is a Canadian based mining and development company with a portfolio of exploration properties in northern Mexico, who also owns and operates the San Francisco mine. Recently GoldSeek.com’s President Peter Spina and I visited the company’s flagship mine in Sonora State. Peter had previously visited in 2007 soon after their IPO and first drill results were announced. Today the San Francisco gold mine is a state of the art modern open pit and heap leach operation that is on target to produce over 100,000 ounces of gold in 2012, and is undergoing an expansion to produce at least 130,000 ounces in 2013. Their exploration drilling has also increased the total Resource to over 2.92 million ounces of gold, which includes 1.33 million ounces of Reserves.

Timmins has experienced managers in Mexico and Canada who have grown their mine’s gold resources, production, recoveries and profits. They currently are reinvesting the mine’s cash flow into increasing production and developing other mineralized targets on their 200,000 hectares of prospective claims near the San Francisco mine. Furthermore, the company is also preparing for a 55,000 meter drill program to explore their TMM project, which borders Goldcorp’s PenÞasquito gold mine and Camino Rojo deposit in Zacatecas State.

When visiting the San Francisco mine and meeting with management it was obvious that Timmins is a rapidly growing junior gold producer, mine developer and explorer. Today’s volatile market has the company’s shares on sale with the current prices steeply discounted considering their record of performance, underlying value and plans to continue growing over the upcoming months and years.

(Secondary and tertiary crushing expansion was completed Q1 2012)


Timmins Gold Corp. has 142.7 million shares outstanding, plus 9.8 million warrants and options at an average price of $2.10. With shares currently trading around $1.84 their market cap is about $262.6 million. The company also has approximately $18 million in debt and $20 million in working capital. Their profit from operations in Q1 2012 was $12.7 million.

Timmins has continued to grow as a company since their IPO on the TSX-V in August 2006. They moved to the TSX in March 2011 and began trading on the NYSE Amex in November 2011. Management owns about 5% of the company, and over 55% is owned by institutions such as Sprott, Sentry Select, Van Eck, RBC, and Oppenheimer. Members of the GoldSeek team also own shares, including Peter Spina and myself.

The company’s mine expansion and exploration project are being entirely funded from production profits, so the company should continue developing with limited dilution of their share structure.


Timmins Gold Corp’s President and Director Arturo Bonillas is based in Hermosillo, and he guided us around the company’s San Francisco mine operations during our site visit. Mr. Bonillas grew up in a mining family at the famous northern Sonora copper mining town of Cananea, and he has an extensive network with over 23 years of industry experience in Mexico. After earning his B.Sc degree in Industrial Engineering from the University of Arizona he worked as an engineer and manager for Compania Minera de Cananea and a Placer Dome subsidiary in Mexico, prior to co-founding Timmins.

Timmins CEO and co-founder Bruce Bragagnolo is a Canadian securities lawyer with over 27 years of experience in the resources sector, and manages the company from their Vancouver office. Mr. Bonillas and Mr. Bragagnolo also co-founded and were previously Directors of Silvermex Resources Inc., which recently announced a proposed merger with First Majestic Silver.

Surface mining operations at San Francisco are carried out by the experienced Spanish open pit contractor Peal. By having the contractor provide and maintain their own mining equipment and skilled labor force Timmins was able to quickly start-up operations while substantially reducing the project’s initial capital expenditure and financing requirements. The company’s geologists, engineers and managers are responsible for generating production plans and providing survey plus grade control in the pit. Ore crushing and processing is also handled by the company’s in-house employees who are mostly from neighboring communities. Several mining equipment vendors and suppliers are also located nearby in Hermosillo and Tucson, Arizona.


Timmins’ San Francisco mine is easily accessible with excellent infrastructure in a mining friendly region. The mine is located next to the village of Estacion Llano and about 10 km from the town of Santa Ana in the northern Mexico State of Sonora, which is approximately 150 km north of the State capitol Hermosillo and 100 km south of the United States border. We found it was a very straightforward 2.5 hour drive heading southwards from Tucson about 235 km (146 mi). Especially because the main highway to Hermosillo (Interstate 15) crosses the claim block about 1 km east of the open pit mining operation.

The Mexico side of this international trade corridor is a “U.S. Hassle Free Zone” and even though we both have limited Spanglish speaking skills we had no problemos with the Federales at security checkpoints, or otherwise, during our entire journey. After visiting Timmins we drove over to SilverCrest’s Santa Elena Mine the next day, which is about 75 km due east of the San Francsico mine in the Sierra Madre mountains, and 150 km northeast of Hermosillo.

This borderland region contains numerous world class precious and base metal mines, and is just as rich in mining history and culture as it is in mineral deposits. Geologically, Timmins’ San Francisco mine is located along the northwest trending Mojave-Sonora Megashear belt, which hosts many significant gold and silver mines. Nearby Sonoran operations include Fresnillo and Newmont’s JV’d La Herradura Mine, AuRico’s El Chanate Mine, plus numerous historic mines that are being explored by junior companies. This mineral trend continues over the US border to New Gold’s Mesquite Mine near Indio, California.

(San Francisco Property Location Map, Figure 4.1 from Micon’s November 2011 NI 43-101)

The San Francisco mine is also just east of the Arizona Copper Belt’s southern end. On the way to Timmins’ mine we drove past several large open pit copper mines between Tucson and the Mexico border, including Freeport McMoRan’s Sierrita, Twin Buttes, and Bisbee mines, plus Grupo Mexico’s (ASARCO) Mission mine. This geological trend extends southeast-wards across the border to Grupo Mexico’s (Southern Copper) mines at Cananea and Nacozari in northern Sonora.

Timmins owns 100% of their San Francisco property, which is not encumbered with any royalties and does not have any hedged gold production. When the company IPO’d with an option to acquire this property in the second half of 2006 this was an old underground district with two small pits and an historic resource estimate of 683,000 ounces of gold. Since then the company’s geologists and consultants have explored and drilled around the old workings to grow their total mineral resource by an additional 3.3 times. Having recently found over 2.2 million more ounces, the property now has a total resource of 2,926,000 ounces of gold.

In November 2011 the company’s reputable independent third party engineering consultants Micon International Ltd. updated the San Francisco Mine’s NI 43-101 compliant resource and reserve estimate. The total Measured & Indicated Resource of 1,575,000 ounces of gold is contained within 81.8 million tonnes grading 0.60 g/t. This includes Proven and Probable Reserves of 1,330,000 ounces of gold within 72.3 million tonnes grading 0.572 g/t. The property also has an Inferred Resource of 1,351,000 ounces of gold within 93.2 million tonnes grading 0.45 g/t. The Measured & Indicated and Inferred Resource estimates use a cut-off grade of 0.128 g/t gold based on $1,200 per ounce gold price.

(Panoramic photo of Timmins’ San Francisco mine looking northeast, taken by Peter Spina. In the background L to R is the leach pads, ADR plant, crushing circuit and office buildings)

Most of the property’s known metal is at the main San Francisco deposit, but the smaller historic La Chicharra pit located 1.5 km to the west has a separate deposit with 395,000 of ounces of gold that is contained in the total resource. Interestingly, La Chicharra occurs along a second parallel mineralized structure instead of being the direct extension of the main San Francisco deposit. Since both zones remain open along strike and at depth the company continues to test their potential for additional mineralization with an on-going exploration program.

The company’s concessions along the Mojave-Sonora Megashear near their San Francisco mine total almost 200,000 hectares, as shown on the adjacent map from their May 2012 Presentation. These claims host numerous historic mines and under-explored mineralized areas that the company intends to prospect using profits from production.

Geologically, Timmins’ flagship property hosts a mesothermal type of gold system that is associated with contact metamorphism along the northwest trending Megashear fault zone. This type of ore deposit often contains relatively large quantities of gold, and the technical data in Micon’s 43-101 reports and their news releases show their property has realistic potential to grow beyond their current total resource of 2.92 million ounces of gold with more exploration and drilling.

The gold mineralization occurs here as several stacked parallel veins along the shallow dipping structure. Each vein can range in thickness from about 4 to 50 meters with shoots up to hundreds of meters deep, and many are still open to exploration along strike and at depth. Between July and November 2011 Timmins drilled 370 holes totaling 85,166 meters. The adjacent map of cross section 840 W shows that many of these 2011 holes found gold mineralization continues beyond the currently designed San Francisco pit boundaries laterally and below the reserve depth of 240 meters. This diagram is part of a series of drill maps and data directly linked to Timmins’ homepage.

At San Francisco the precious yellow metal mostly occurs here as free gold and electrum, which is the natural alloy of gold and silver. Relatively minor amounts of gold are found in sulfide minerals like pyrite. Consequently, this ore does not require conventional milling and flotation with haulage of a concentrate to a smelter. Instead the metal can be processed and transported to market much cheaper using heap leaching and a standard ADR (Adsorption-Desorption-Recovery) plant, where carbon in tanks recover the gold and any silver from a sodium cyanide solution. The precious metals are then electroplated and melted into doré bars, which they ship to Johnson Matthey’s refinery near Salt Lake City, Utah.

Timmins’ began open pit mining operations at their San Francisco Mine in early 2010, and reached commercial production in Q2 2010. In Q1 2011 the company completed the first of a three stage expansion project that is already helping increase production in the second quarter. A second primary crusher was just added to create a “two headed monster” that feeds their impressive new tertiary crushing plant. Both of these primary crushers can receive ore simultaneously, as shown in the photo below, which was taken from the top of the ADR plant (while gold in solution from the leach pads was being adsorbed onto carbon in the tanks underneath us). This has increased the crushing capacity from 14,000 tpd to 18,000 tpd.

Instead of using haul trucks to deliver ore to the pad with top stacking the mine is using a conveyor system with radial stackers for retreat stacking. This system decreases the trucks’ haul cycle time, and therefore overall haulage and operating costs. Plus this method enables them to add sodium cyanide and lime at various transfer points along the conveyor belt, which helps increase the saturation rate. They also upgraded the heap’s stacking, pumping and irrigation capacity to match the crushing plant’s expanded production rate.

These improvements enable an optimal leach cycle of 90 to 100 days instead of the previous 60 days. Still, their engineers are continuously looking at any other potential ways to optimize the pads, such as possibly increasing the height of lifts on the pad. Timmins also recently upgraded their mine’s ADR plant, which now has the capacity to produce up to 175,000 ounces per annum. This combination of equipment and operational improvements at the leach pad and ADR plant in Q4 2011 subsequently increased recoveries from about 53% to the expected Life of Mine level of 69% in the first quarter of 2012.

Timmins announced their Q1 2012 results in a press release on May 15th, which shows they are continuing to expand their operations and remain on track to reach this year’s production target of over 100,000 ounces of gold. During the first quarter they produced 21,532 ounces of gold and 11,740 ounces of silver, which is a 15% increase in gold production of the same period last year. In similar comparison, this quarter’s metal revenues increased by 41% to $35.7 million while operating profits increased 32% to $12.7 million. The cash cost per gold ounce increased to $759 due to both recurring and non-recurring items, and for 2012 the company anticipates their cash costs will be $700 per ounce as throughput expands and they realize the economy of scale. The company spent $4.5 million on expansion of the crushing system during the quarter and will spend an additional $10 million for completion during 2012. This project is being funded internally from their mine’s cash flows.

(Photo of radial stacking on the leach pad with the conveyor system, taken by Peter Spina)

Stage two of the expansion project is scheduled for completion by the end of Q3, during which a rock scalping system will be added to the existing crushing circuit to increase capacity to between 22,000 and 24,000 tpd of ore. The gold plant will also be refurbished to increase production capacity.

The company anticipates completing the third stage of this project by the end of Q4 2012, which will install a 10,000 tpd portable crusher plus additional equipment in order to double their current crushing capacity to 32,000 tpd. Consequently, their mining contractor will also be increasing their equipment fleet and work force as production ramps up in the second half of this year. In 2013 the mine should reach its planned production rate of +130,000 ounces of gold per year, which they expect to maintain as a minimum rate for at least the next 7 years. The company’s engineers are currently updating their mine plan, and they continue working to increase the mine life with ongoing drilling.

Timmins also intends to bring their La Chicharra pit into production later this year, which should utilize some the additional capacity from this crushing circuit and ADR plant expansion project. They have already completed all of La Chicharra’s land acquisitions and permits so now they are preparing to start in-fill drilling and detailed engineering. The company’s 2012 budget includes an additional 100,000 meters of drilling between the San Francisco and La Chicharra deposits. This should help them to optimize their reserves and mine plans for near term production growth while the plant’s capacity is increasing over the upcoming months.

In addition to bringing much needed good paying mining jobs back to the area, Timmins Gold Corp. is also a regional leader in modern Corporate Social Responsibility. At Estacion Llano and surrounding communities they have assisted with education, medical assistance, social service, environmental stewardship, public works, athletics, and cultural events. The company continues to assist the local communities improve in areas related to health, safety, and general wellbeing.


Timmins is preparing for a 55,000 meter drill program at their TIMM project in northern Zacatecas State. Their primary 45,000 hectare claim block here is adjacent to Goldcorp’s PenÞasquito gold mine (17.0 million ounces of gold), and 20 km north of the major miner’s Camino Rojo deposit (3.4 million ounces of gold and 60.7 million ounces of silver). While the target is a buried skarn type deposit that is implied by a magnetic geophysical anomaly, geologists have recovered grab samples with significant gold and silver assays from rock outcrops nearby. In this important Mexico mining district the company also has another three satellite projects that total over 5,000 additional hectares.


Timmins Gold Corp. has an accomplished management team with a proven track record of growing value for their shareholders since 2006. Over this time they have continuously developed San Francisco’s resources and reserves with ongoing exploration while bringing the mine into production, and then improving the mine’s recoveries and production rates to keep increasing cash flow. We anticipate this trend to continue as they reinvest profits for further development and exploration of their mine and portfolio of other highly prospective properties nearby in Sonora. The company is also preparing for a 55,000 meter drill program at their TIMM project next to Goldcorp’s PenÞasquito gold mine and Camino Rojo deposit in Zacatecas, so they have significant potential to grow through exploration too.

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