Timmins Gold Corp. acquired full ownership in the past producing San Francisco gold mine just a few years ago. Since then Timmins Gold has produced a 43-101 compliant resource of over 600,000 gold reserve ounces, advanced the project to pre-feasibility stage and now has made the decision to commence producing gold as early as fall 2009. Preliminary economics of the project were recently released and investors will likely concur with my assessment that current market valuations offer investors large upside potential to this emerging gold producer.

Here is an overview of the San Francisco Gold Project.

San Francisco Gold Mine – Economics:

-         $412/ounce cash costs

-         80,000 ounces/year production

-         $40 million a year in cash flow assuming $912 gold

-         Fully diluted share structure estimated to be around 100 million shares = $0.40+/share in cash flow

Brand new crushing system – 95% complete.

San Francisco Gold Mine – Additional Information:

-         11,000 tons/day crushing operations

-         New crushing system 95% construction completed

-         Production capacity 100,000 ounces

-         Heap leach pads are being completed

-         Refurbished gold mill on site

-         Permits: All in place

-         Initial 5-year open pit mine life

-         Potential to expand mine life

-         42,000+ hectares property

-         Sizeable upside deposit growth through exploration

-         High potential for 1+ million economically recoverable gold ounces

-         Past production 300,000+ ounces (1996-2001)

-         13.5 million tonnes of ore grading 1.13 grams/tonne

During the severe gold market correction in the later part of 2008, time tables were shifted as far as financings were concerned, project advancements, etc. Although Timmins Gold was not immune to this, it did not halt progress during the market meltdown. Construction continued and the project was advanced closer to production ready status. Currently the company is looking at the last stage of capital requirements to restart mining operations, around $25 million – likely to be a combination of equity and debt. That equivalent amount has already been invested by Timmins into the San Francisco mining project to bring it to the current near-term production point.

Once the financing is complete, it should take roughly 100 days to begin gold production. So this could be considered one of the last remaining key risk factors to producing cash flow, certainly one of the reasons why the stock price has been depressed even as the general gold mining stocks have rallied. Taking a look at its share price history to the right, the stock remains stuck around $0.40 Canadian, and with the recent strength in the US Dollar the share price is even less expensive for US investors. I believe once the financing is complete, likely within the next month or two, then we should see a re-pricing of the stock. From a pure technical perspective, the stock could see a solid move once it breaks above $0.60 technical resistance.

Update: Timmins Gold has announced on April 28^th that it has raised roughly $5 million so far, with about ½ of that coming from Sprott Asset Management. The equity financing was done at C$0.40 with a ½ share warrant at $0.60.

Outside of technical charting, one popular method to provide a share price target for producing miners is to use cash flow analysis. So when comparing Timmins Gold to its industry peers, we see a range of 6 to 10+ times cash flow expansion multiples to determine the appropriate market capitalization (note this is somewhat of a rudimentary method since investors would incorporate other criteria such as asset reserve life, other overhead costs, exploration projects, risk factors, etc..). 

But using this method would provide Timmins Gold with a $2 - $4 per share valuation range. I believe such a range is more likely to be achieved upon a couple quarters of successful and steadied operations, likely to be achieved in 2010.

This price target range is assuming the current gold price of $900, which I believe has significant upside potential in the coming few years. Combine that with declining input costs, improving production inefficiencies (such as crushing the ore to under ½ inches) and profit margins could expand further.

Also, Timmins Gold has a pipeline of other exploration projects, some with production potential such as the Cocula Project which the company believes could be a low cost, small scale production project that could start production as soon as the end of 2010.

 Timmins Gold Property Map.

Therefore I continue to hold TIMMINS GOLD as one of my top 3 gold mining investments for the coming year+. I believe once production commences, the market will have or will be in the process of attributing a higher valuation to the stock and after months of consecutive production, Timmins can begin to move into the appropriate valuation range we see for its gold mining peers.

-         Website: www.timminsgold.com

-         43-101 Report: http://www.timminsgold.com/i/pdf/NI43-101.pdf

-         Google Maps: San Francisco Gold Open Pit Mine

-         Google Earth: San Francisco Gold Project

o       This requires the free Google Earth: http://earth.google.com/

-         Company Contacts:

Bruce Bragagnolo, LLB.

Timmins Gold Corp.

Chief Executive Officer

(604) 638-8980

(604) 682-4003 (FAX)

Email: bruce@timminsgold.com

Investor Relations:

     Leighton Bocking

     Corporate Development

     (604) 638-8977

     Email: leighton@timminsgold.com

     Alex Tsakumis

     Corporate Development

     (604) 638-8976

     Email: alex@timminsgold.com

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