Potentially huge good news for GGA. SJDG mine back in play? I’m so used to bad news in the mining sector that I have to pinch myself when I see so much good news the last few weeks re: GGA. While the run-up in the stock was expected as GGA successfully put Cerro Prieto mine in commercial production, the following is unexpected.
I just found out the San Jose de Gracia (SJDG) mine owned 50% by the operator Dyna Resources, and 50% by Goldgroup, was just shut down by the Mexican state government of Sinaloa where it is located.
Background: GGA spent millions of dollars in exploration to earn its 50% share. They and Dyna have been involved in legal battles for years as Dyna has been operating the mine extremely badly, unprofitably, and it turns out, very unsafely (there have been mining accidents and workers have died). Due to this, GGA investors have been valuing SJDG at $0 (I know I have) as they have given up on it ever being monetized. Dyna has been mining low quantities of gold and furiously burning through their cash. Every once in a while, they raise more money (I have no idea what kind of promises were made to these investors to disregard Dyna’s awful track record!), diluting the current Dyna investors, and showing no progress except for enriching Dyna management!
Now that the mine is shut down, I don’t think Dyna will continue to be able to raise money. And from the article, who knows if Dyna’s track record will ever allow them to convince the Sinaloa government to allow them to reopen the mine.
Maybe, just maybe Dyna will wise up and come to a win-win agreement so that Goldgroup becomes the operator of the mine! Goldgroup has a much better track record of operating mines safely and profitably, which might convince the Sinaloa government to allow Goldgroup to reopen SJDG under new management. This would make it a win for everybody: the mine workers who will be safer and will get paid, the investors of both Goldgroup and Dyna (once in effective production SJDG could make the production and profitability of Cerro Prieto look like an afterthought!), and the people of Sinaloa who have the right to see their mining crown jewel treated the way it deserves. If this happens though, GGA management had better make sure they protect GGA before spending one red cent in SJDG! They were fooled once before!
See the following link I stumbled on for the translation of the Spanish article written about it:
https://classicvalueinvestors.com/2016/06/26/mexican-government-shut-down-san-jose-de-gracia/