Stockholders will vote July 2 on proposed Gold Resource-Goldgroup merger.
Cash from Gold Resource would pay to reopen Goldgroup’s San Francisco mine.
Revenue from that mine could then be used for Gold Resource initiatives, including the Back Forty.
The proposed Back Forty mine is back in play after dropping off the radar as its owner suffered a financial downturn.
The mine would be located close to the Menominee River, on the ancestral homeland of the Menominee Indian Tribe, about 65 miles due north of Green Bay, WI.
Menominee River near the location of the proposed Back Forty mine. Photo: Mark Doremus.
Aquila Resources was the original mine developer. It spent more than $100 million to advance the project. It suffered a huge setback when opponents got a crucial permit for the mine canceled in 2021 after years of litigation. Later in 2021, Aquila was bought out by Gold Resource Corp. (GORO).
The new owner experienced three years of unrelated operating losses starting in 2023 and couldn’t afford to pursue the Back Forty project. Now, it’s set to merge with Goldgroup Mining, Inc. (Goldgroup). And that means the Back Forty may emerge, Phoenix-like, from the ashes after Aquila’s failure to advance the project.
Proof of the pudding is a feasibility study, now in the works
Gold Resource Corp. has hired SLR Consulting, Ltd. to come up with a new feasibility study for the Back Forty project.
A feasibility study is a highly technical, comprehensive document that establishes whether a project like the Back Forty can be built and operated at a profit. The Back Forty study is expected to be done around the start of 2027.
Why all this is important
If the merger goes through, GORO and Goldgroup will then have to walk a multi-year tightrope to long-term profitability.
Hold on, here’s where it gets complicated (but you want to know this if you’re concerned about the potential social and environmental impact of the Back Forty if it ever gets built).
The merged GORO and Goldgroup would go forward under the Goldgroup name. The management team would be holdovers from Gold Resource Corp., committed to making the Back Forty a reality after defending it for years as a potentially lucrative project.
But the board of directors would be dominated by Goldgroup, 3-2. They have always been focused on Mexico, where they own and operate the Cerro Prieto mine and now, the San Francisco mine.
So, when it comes time for a “go, no-go” decision on the Back Forty, which side will prevail?
Too soon to predict, but here are some things to consider.
There’s another player in the mix
Back in 2017, Osisko Gold Royalties committed $50 million to the Back Forty project. Aquila spent about $37 million of that trying to get the mine permitted and into operation.
In return for its investment, Osisko got the right to buy future Back Forty gold and silver production at a discount. There was a deadline attached: if Aquila failed to get the mine up and running, Osisko could recover its money with the Back Forty as collateral.
Of course, the mine never happened, and the original deadline is long past. Osisko extended the deadline to Nov. 30, 2026, in hopes that something good might still happen to the project.
So, it’s clear that Osisko will put a heavy thumb on the scale when the Goldgroup board makes a “go, no-go” decision on the Back Forty, maybe in 2027, maybe later.
Walking a tightrope
Gold Resource and Goldgroup are trying to thread the very narrow eye of a needle, financially.
Right now, Gold Resource (GORO) has $31 million cash on hand, thanks to a rebound in profitability at its Don David mine. But the Don David will be depleted by 2030, and opening up new deposits for production will take lots longer than that (and lots of money).
Gold Resources’ Don David mine. Photo courtesy Diemme Filtration Srl.
Goldgroup, on the other hand, is short of cash. It wants to use the GORO funds to get its newly acquired San Francisco mine into full operation.
Then Goldgroup and Gold Resource together could revitalize the flagging Don David mine and, finally, decide what to do with the Back Forty.
Confused yet?
All this is probably hard to digest. Here’s a recap:
Gold Resource and Goldgroup plan to merge, subject to stockholder approval.
The Back Forty would be an asset of the new enterprise, and a cash cow if it goes into operation.
Osisko Gold Royalties still needs to recover its $37 million investment in the Back Forty, one way or another (preferably by taking delivery of future gold and silver production).
A feasibility study, now in the works, will determine whether the Back Forty is worth pursuing, or should be off-loaded or abandoned outright.
Gold Resource veterans will be running the company, but Goldgroup will have a majority on the board. Osisko will also have a voice, but not a vote. All those players will jointly decide whether to pursue the Back Forty mine as a live project. That won’t happen ‘til 2027 at the earliest.
Gold Resource Corp. was given the opportunity to comment on this report.
Research was facilitated by Google Gemini Pro AI.
