Extorre sees potential for 1 million ounces gold equivalent production over just 8 years

Extorre Gold Mines (AMEX:XG, TSE:XG) announced Thursday the results of a new, recently completed Preliminary Economic Assessment (PEA) on its Cerro Moro project in Argentina.
The new PEA increased the mining and processing rate of the property to 1,000 tonnes of ore per day (tpd), up 33% from the original estimate of 750 tpd.
Open pit production is expected to reach 1.69 million tonnes, up from the October 2010 estimate of 903,000 tonnes, while ore produced underground remains relatively unchanged from its original estimate - approximately 1.04 million tonnes.
The Vancouver, B.C.-based company expects the same 95% gold recovery, totaling 494,700 ounces recovered over an 8.25 year mine life.
While it has dropped its silver recovery down to 87.4% from the original 90%, Extorre said is now also expects recovery of approximately 26.6 million ounces of silver.
The updated assessment also involves increased metal prices, to US $1,320 per ounce of gold, and US $26 per ounce of silver - formerly US $950 per ounce of gold and US $16 per ounce of silver - and added that mining on the property will now cover all ore zones using both open pit and underground methods.
This second PEA, however, does not include mining from the recently discovered Zoe vein, or potential resources from the Martina, Carla, and Esperanza veins. But, it does include drilling completed up to January 2011 on the Escondida, Loma Escondida, and Gabriela zones.
Capital costs for the mine have also increased, reflecting higher mill throughput, extra costs of a conventional tailings facility, larger mining fleet, and other industry-related cost escalations.
Extorre now expects direct costs for the initial project CAPEX to be $149.8 million, plus $25.7 million value added tax (VAT). The original PEA from October 2010 estimated this cost at $131 million, plus 21% VAT.
Costs for open pit and underground mining have dropped to $2.15 per tonne and $45.91 per tonne, respectively. The original assessment had these costs at $3.40 per tonne for open pit mining and $50 per tonne for underground mining. Milling and processing costs have risen to $67 per tonne, up from $38 per tonne in the original PEA.
The company said it based this updated assessment on indicated resources of 660,000 tonnes at 19 grams per tonne (g/t) gold and 835 g/t silver at the Escondida and Loma Escondida zones, and indicated resources of 530,000 tonnes at 2.0 g/t gold and 371 g/t silver at the Gabriela vein.
Inferred resources used to build the assessment were from the Escondida, Loma Escondida, Gabriela, Esperanza, and Deborah veins, and totaled 1.86 million tonnes at 3.0 g/t gold and 182 g/t silver.
In April 2011, a mineral resource estimate for the whole Cerro Moro project found 443,000 ounces of gold and 24.2 million ounces of silver in the indicated category, and 178,000 ounces of gold and 10.8 million ounces of silver in the inferred category.
Currently, Extorre has six drill rigs at the Cerro Moro property, dedicated to drilling a new resource there, and evaluating the recent high-grade discovery at the Zoe vein.
Drilling will also continue to test new targets on the Santa Cruz Regional prospect, to begin in the second half of 2011.
Extorre said it plans to release a new mineral resource estimate in the fourth quarter of 2011, which will include maiden resources for the Zoe, Carla, Martina, and Esperanza Northwest-Nini regions.
In-line with the TSX metals and mining sector, which has fallen 3.3% this morning, Extorre's stock slipped 3.2% to trade at $12.16 per share.