Chesapeake Gold

Location: Durango, Mexico
Commodity: Gold
Project Phases: M&A Due Diligence / Project Due Diligence

Client Overview

Chesapeake Gold, headquartered in Vancouver, British Columbia, is a gold mining company focused on strategic asset acquisitions and operational growth in North America. The company acquired regional assets in Durango, Mexico, with the objective of expanding its portfolio and improving long-term operational profitability through detailed technical and economic assessments.

Client Needs

Chesapeake Gold required independent due diligence to support its acquisition of the Trident Project. The goal was to evaluate the project’s technical feasibility, mine plan risks, capital cost accuracy, and operational readiness. Clear insights into potential operational challenges and cost exposures were essential to ensure alignment with Chesapeake Gold’s strategic and financial objectives prior to finalizing the acquisition.

TMG’s Contributions

• Mine Plan Fatal Flaw Review: TMG conducted a detailed review of the mine plan, validating geotechnical recommendations and pit designs while assessing mine sequencing for efficiency and safety. The team identified potential risks, including optimistic OPEX forecasts, increased waste mining impacting leach pad capacity, and an ongoing environmental concern related to a leak beneath one of the leach pads. Operational constraints, including manpower shortages and maintenance challenges, were flagged for future mitigation planning.
• Sustaining Capital Program and CAPEX Review: TMG evaluated sustaining capital allocations for heap leach pad expansions, leak mitigation, and reclamation. The review highlighted underestimated future costs for expansions and the need for capital spares to avoid operational disruptions. While one expansion project was trending below budget, TMG cautioned against potential delays that could impact the project schedule.
• Operational Improvement Review: TMG assessed cost variability in mining operations, particularly labor, fuel, and contractor expenses. The team recommended implementing a Management Operating System to improve planning, control, and reporting, which could yield significant cost savings and enhance financial predictability.

Results

TMG’s due diligence provided Chesapeake Gold with actionable insights and recommendations critical to the acquisition decision:

• Budget Optimization: Identified underestimations in sustaining capital and proposed cost allocation strategies for improved financial accuracy and risk mitigation.
• Operational Efficiency: Highlighted inefficiencies and recommended measures to reduce cost variability, improving cash flow stability and operational control.
• Strategic Alignment: Delivered independent technical and economic assessments to support Chesapeake Gold’s investment decision, ensuring alignment between planning, budgeting, and long-term growth objectives.

The due diligence assessment for the initial phase was completed and submitted to Chesapeake Gold, enabling the company to proceed with informed decision-making. This case study demonstrates the value of rigorous due diligence in M&A transactions and highlights TMG’s ability to identify risks, uncover opportunities, and strengthen strategic investments in complex mining environments.