Extorre Gold Mines (TSE:XG)(MKT:XG)(AMEX:XG) Wednesday provided details of a preliminary internal study for the proposed staged mine development of its Cerro Moro gold-silver project.
Cerro Moro is located in Santa Cruz province, Argentina and in early
April, the company unveiled a preliminary economic assessment (PEA-3)
putting gold yield at 248,036 ounces per annum in the first five years.
Based on the new internal study, for the first five years, the
company said annual mine output is 60 to 70 percent of that modelled in
the preliminary economic assessment in April (193,000 ounces per year
versus 248,000 ounces per year gold equivalent).
"This is achieved against a 57 percent reduction in the up-front capital requirement," said Extorre CEO Trevor Mulroney.
The new internal study indicates potential mine development capex of
roughly $124 million in stage one of a two-stage approach, while
maintaining initial production exceeding 170,000 ounces per year gold
equivalent in the first year.
Initial operating costs are seen at $200 per recoverable gold
equivalent ounce and potential free cash flow is pegged at $190 million.
These figures exclude royalties and taxes.
"Cerro Moro is very well suited to our preferred staged development
approach because of the reduced initial capital requirements and our
ability to rapidly and selectively access very high grade mineralized
zones," said Mulroney.
"In fact the head grade on a diluted basis exceeds 30 grams per tonne for the first stage of production.
"The staged development allows Extorre to meet its objective of
commencing production in 2014 and train a workforce while significantly
reducing initial capital requirements, which is an important
consideration given the state of current capital markets.
"The strong operating cash-flows allow for future development expansion.
"Operating cash costs on a gold equivalent basis are in fact lower
than in PEA-3 because of the higher head grade feed being supplied to
the processing plant. That is to say the higher grades more than offset
the higher unit costs associated with a smaller mine throughput."
The first year of a potential two-staged mine development foresees an
initial mine throughput of 500 to 600 tonnes per day (tpd), increasing
to 1,000 to 1,100 tpd levels within eighteen months of production
This approach potentially reduces the initial capex to $110 million
(excluding recoverable tax of $14 million) while the balance of the
mine's capital expenditure requirements could be funded through
operating cash flow, the company said.
Potential early cash flows would be generated from mining high grade
open pit mineralization, which would fund ongoing development costs and
allow process plant and infrastructure expansion, as well as underground
mine development to commence within six months of mine start up,
For the first stage, with production pegged at 500 to 600 tpd, a
small processing plant and minimum infrastructure for open pit mining
only is planned.
High grade mineralization from open pits will be blended with
lower-grade material to maintain a constant feed grade to the plant.
Open pit mining at this level is potentially sustainable for up to three
years, the company said.
For the second stage, with production seen at 1,000 to 1,100 tpd,
expansion of the processing plant is planned, alongside the completion
of full infrastructure.
Underground mining operations will begin with mining of the remaining
open pit material, and blending such feed with high grade underground
material. A plant expansion is to be completed within 36 months of mine
Total life of mine metal production is seen at 889,500 ounces of gold
and 48 million ounces of silver (1.8 million ounces gold equivalent or
92 million ounces silver equivalent).
In the first year, production of 170,000 to 180,000 gold equivalent
ounces is expected, rising to between 190,000 to 200,000 gold equivalent
ounces over the first five years.
Average life of mine production over 12 years is pegged at 154,000
ounces per year gold equivalent, comprising gold production of 74,000
ounces per year plus silver production of 4.0 million ounces per year.
Operating costs at the minesite, excluding royalties and export tax
for the first stage, is seen at approximately $250 to $260 per recovered
gold equivalent ounce. Life of mine cash cost per ounce is seen in the
range of $330 to $340.
Extorre Gold Mines' principal assets comprise C$27 million in cash and the Cerro Moro, Puntudo, and Falcon projects in Argentina.
Detailed engineering and development planning continue at Cerro Moro,
with permitting in place for the initial proposed throughput.
Exploration with two drills continues at the site, with the aim to
increase the total resources on the property and to in-fill drill
certain areas for mine planning purposes.
Drilling with one rig recently started at the company's Falcon project in Santa Cruz Province.