VANCOUVER, BRITISH COLUMBIA — (MARKET WIRE) — 02/09/11 —
— Total Q4/2010 gold production of 44,449 ounces, an increase of 16% over Q3/2010. Costs for Q4/2010 are expected to be significantly below those of Q3/2010; — Total gold production for 2010 of 137,519 ounces, meeting the upper end of guidance of 130,000 – 139,000 ounces; — 2011 production guidance of 200,000 – 210,000 ounces of gold and approximately 16.5 million pounds of payable copper; — Commercial production for the Aranzazu Mine was declared February 1, 2011, upon the mine and mill having substantially passed mechanical completion and commissioning. All three mills have been operating consistently for several weeks along with the flotation plant, filtration and tailings disposal systems and reached a consistent 2,000 tonnes per day (“tpd”) throughput rate over the past 10 days. The Company expects to ramp up the Aranzazu Mine to achieve full production of 2,600 tpd later this quarter. The Aranzazu Mine is scheduled to produce payable metal of approximately 16.5 million lbs of copper, 10,000 ounces of gold and 200,000 ounces of silver in 2011. Planning is also in the early stages for future expansion of the operation to 4,500 – 5,000 tpd; — Ongoing exploration at the San Andres gold mine, the Sao Vicente gold mine and the Aranzazu Mine, focused on converting resources to reserves; and — Waste stripping program at the Sao Francisco Mine proceeding as planned.
“Although 2010 was a difficult year for the Company, we ended the year on a strong note with production meeting our revised guidance. We also saw significant cash cost reductions in Honduras and Brazil during the fourth quarter, with notable improvements in production levels at all gold operations. We continued to advance the Aranzazu Mine to completion of construction and commissioning during the last quarter. The declaration of commercial production at the beginning of this month for this key asset is a significant milestone for the Company,” commented
Patrick Downey, President and Chief Executive Officer of
Neil Hepworth as Vice-President, Operations – Brazil. Neil was most recently Vice-President, Operations of
Mine Operating Updates and 2011 Production Guidance
San Andres Gold Mine
Gold production at the San Andres Mine for Q4/2010 was 19,469 ounces, which was slightly below target for the quarter, but 21% above the previous quarter’s production. Fourth quarter production was affected by the mining of more mixed oxide/sulphide ore, which has a lower recovery and a longer leach cycle, and by a lower than optimum pH in the heap, which has been rectified. Year to date gold production at the San Andres Mine was 70,640 ounces. As a result of the significant improvements made at this operation over the last two years, the Company expects to see improved recoveries in Q1/2011 and beyond. Production guidance for 2011 for the San Andres Mine is expected to be between 80,000 – 90,000 ounces of gold.
Capital programs are essentially complete at the San Andres Mine with sustaining capital expenditures of approximately $5 million planned for 2011. Included in capital improvements to this operation is a new feed system for the secondary crusher, to ensure a consistent crush size to the pads. This is scheduled for completion Q2/2011.
The focus at the San Andres Mine will be on exploration and reserve expansion. The San Andres Mine has approximately 1.6 million ounces of gold in resources outside of current reserves. Most of these resources are in the Measured and Indicated category and are mainly located just outside of the reserve pit. The Company received its drill permit in Q4/2010 and completed drilling within the Twin Hills pit in late January.
Sao Francisco Gold Mine
As previously announced, to allow mine operations to focus solely on waste stripping and provide adequate time to complete needed upgrades at the crushing and gravity circuits, the Company implemented a three to four month dedicated waste stripping program at the Sao Francisco Mine, effective December 1, 2010. During this period, mining of ore is being deferred, but heap leaching of the ore on the leach pads is continuing. Gold production at the Sao Francisco Mine for Q4/2010 was 12,922 ounces, 4% above the previous quarter’s production. Year to date gold production at the Sao Francisco Mine, since acquisition on May 1st, was 36,278 ounces.
Capital spending at the Sao Francisco Mine for 2011 is approximately $21 million, of which $15 million relates to the cost of the dedicated waste stripping program to the end of Q1/2011 and the balance is sustaining capital. Starting in Q2/2011, the Company expects to recommence mining of ore and operation of the crusher-gravity circuit at the Sao Francisco Mine, with the mining of increasingly higher head grades later in 2011. This will result in ongoing improvements in production and corresponding reductions in cash costs. The Company continues to review all operating aspects at the Sao Francisco Mine, including changing to larger, more efficient haul trucks. The Company will provide ongoing updates throughout 2011.
Production at the Sao Francisco Mine in 2011 is expected to be between 60,000 – 65,000 ounces of gold. Certain additional operational initiatives are still being evaluated which would be expected to increase operational productivity, improve overall gold recovery and continue to lower cash operating costs. These initiatives include:
— Using an owner-operated fleet to transport crushed ore from the crushing/gravity plant to the leach pad, instead of the current contract fleet. The estimated capital cost for this program is less than $2 million and the change from contract to owner-operated haulage of crushed ore is expected to occur later in 2011; — Installation of a 1,000 tpd agitated leach circuit to treat the gravity circuit tailings and to increase overall gold recovery by approximately 10,000 ounces per annum, at an estimated capital cost of $12-16 million; and — Modifying the operation of the crushing/gravity circuit, including a possible relocation of the primary crusher to the pit rim, thereby significantly reducing haulage costs.
The Company believes that achieving a sustainable mine plan through the dedicated waste stripping program, combined with the operational changes outlined above, is expected to allow production of approximately 100,000 ounces of gold at estimated cash costs of between $700 and $800 per ounce in 2012 when mine grades are significantly higher. However, one of the key challenges facing the Company is the continued strength of the Brazilian Real currency and the high local inflation rate which continues to have a negative impact on smaller scale operations.
Sao Vicente Gold Mine
Operations are generally on a steady-state basis at the Sao Vicente Mine with the key focus being on improving maintenance practices to ensure better availability of the process plant. Gold production at the Sao Vicente Mine for Q4/2010 was 12,058 ounces, 22% above the previous quarter’s production. Year to date gold production at the Sao Vicente Mine, since acquisition on May 1st, was 30,601 ounces.
Capital expenditures at the Sao Vicente Mine will be approximately $6 million for 2011. The main focus will be exploration as there is significant opportunity to grow both the resource and reserve base at this mine. Production guidance for the Sao Vicente Mine for 2011 is 45,000-52,000 ounces of gold.
Aranzazu Copper-Gold-Silver Mine
The Company declared commercial production for the Aranzazu Mine effective February 1, 2011, at which time the mine and mill substantially passed mechanical completion and commissioning. All three primary grind mills have been operating consistently for several weeks along with the rougher flotation plant, filtration and tailings disposal systems. The Aranzazu Mine has not yet reached design capacity of 2,600 tonnes per day due to certain mechanical issues with water supply pumps and mill bearing failures which have now been rectified, as well as the late mobilization of the mining contractor and the slow ramp-up of underground operations due to severe competition for skilled labour in Mexico. The Company expects the Aranzazu Mine to achieve full production at 2,600 tpd later this quarter. The Aranzazu Mine is scheduled to produce payable metal of approximately 16.5 million lbs of copper, 10,000 ounces of gold and 200,000 ounces of silver for 2011. Mining for 2011 will be a combination of open pit and underground, including underground development. The open pits are currently mining a mixture of oxide and sulphide ores, which effects recovery in the mill. However, concentrate grades are at 25% with excellent precious metal grades and with the commissioning of the re-grind milling circuit and cleaner flotation circuits later this quarter, these grades and recoveries will increase to design. The Company will also transition to a majority sulphide feed by the end of Q1/2011.
Engineering studies are in the early stages for future expansion of the operation to 4,500 – 5,000 tpd. The Company also plans to release further drilling results later this month, from along strike and at depth.
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