Chesapeake Gold sold off after Mexican project costs come in on (very) high side

Vancouver-based Chesapeake Gold (TSX-V:CKG) lost 5.7% on Monday as investors continued to digest the results of a prefeasibility study for a gold and silver mine located in Durango, Mexico.

According to the report, the proposed Metates mine's  annual production would reach 659,000 ounces of gold, 15.9 million ounces of silver and 143 million pounds of zinc during its 25-year useful life.

Average cash cost is pegged at $489 per ounce of gold equivalent.

The initial cost of the project amounts  to $4.36 billion – a full $1.2 billion more than the forecast capex in an earlier report on the project released in 2011.

Tightly-held Chesapeake's stock market losses in Toronto where it is now worth $393 million, could make it an attractive takeover target.

But even  major gold producers which need to secure new supplies ahead of what has been dubbed a gold 'production cliff' may baulk at the initial outlay for the Mexican mine.