Quarterly operations update, Q2 2012
Mexico quarterly operations update - 1 April to 30 June 2012 ("Q2")
VANE is pleased to announce an operational update on its gold and silver operations in Mexico.
- Total revenue of US$2,772,286 generated in Q2 (Q1 2012: US$2,612,564)
- 8,105 tonnes of ore in total processed during Q2 (Q1 2012: 8,113 tonnes) with average grades 5.70g/T Au and 127g/T Ag (Q1 2012: 6.87g/T Au and 156g/T Ag)
- Average recovery rate of 80.6% Au and 77.8% Ag (Q1 2012: 80.3% Au and 77.0% Ag)
- 1,028 oz. Au and 22,147 oz. Ag produced in Q2 (Q1 2012: 1,180 oz. Au and 26,164 oz. Ag) at a direct production cost of $763 per oz. Au equivalent or $13.9 per oz. Ag equivalent (Q1 2012: $582 per oz. Au equivalent or $10.7 per oz. Ag equivalent)
- 63.1 tonnes of concentrate held in inventory at period end (Q1 2012: 70.8 tonnes)
- All gold and silver sold unhedged
The Company announced in its Q1 update that development work had commenced on removing ore from its Diablito Mine ahead of its planned closure. This production fed the Company's SDA Mill during the month of June with ore averaging 2.2g/T Au and 143g/T Ag. This in turn facilitated the build up of a substantial inventory of Ruiz joint venture ore from its La Colorada Mine ahead of the rainy season, which can impact road conditions and therefore the ability of the joint venture to transport ore to the SDA facility on a timely basis. This build up of ore inventory at the SDA Mill accounts for the higher than usual cost per ounce calculations. This action has provided the SDA Mill with sufficient feedstock to ensure that any disruption to production as a result of the rainy season this year will be minimal. Mining of the higher grade ore remaining in the Diablito Mine referred to in the Q1 update is underway and scheduled to feed the Merrill Crowe plant over the upcoming months.
The Company also announced in its Q1 update that additional revenue was expected to arise in Q2 as a result of producing Au-Ag precipitate from the Company's Merrill Crowe facility. This production commenced in Q2, but initially at lower levels than anticipated, due to difficulties arising in separating suitable quantities of higher grade ore from lower grade feedstock. The revenue from material processed to date is expected to be realised in Q3. Production at the Merrill Crowe facility will slowly improve over the second half of the current financial year until it reaches the projected operating capacity of 80 tonnes per month by the end of the year.
NOTE: The production figures stated in this announcement include the June Diablito production, but not the revenue arising because revenue is accounted for at the time concentrates are shipped to the smelter. Therefore, this revenue is expected in Q3 2012, and whilst it is expected to be lower than would be achieved on joint venture production (on account of the lower grades), 100% of profits are attributable to the Company, whereas joint venture production is subject to the 60:40 profit share arrangements as set out in previous announcements.
Commenting today, David Newton, CEO of VANE said: "These are very satisfactory results for our gold and silver operations as revenue has remained at historically high levels. Our production costs have risen due to the high cost of mining at Diablito, but the one-off cost of building a stockpile of ore at the mill will help safeguard processing in future periods and provides the Company with a degree of financial security that it has not previously had."
Kristopher K. Hefton, BSc Geology, Chief Operating Officer VANE Minerals plc who meets the criteria of a qualified person under the AIM Rules - Note for Mining and Oil & Gas Companies, has reviewed and approved the technical information contained within this announcement.