New Mine Plan in MarchThey expect that the new mine plan will be completed by late March.
Financing is expected to be completed by then , with the same Bolivian bank from which they got the short-term loan in early 2008.
In other words, mine construction should begin in early spring and mining should begin 12 months later.
In reading the technical report , several points jumped out.
The first is that the gold equivalent estimates of mineral resources used the following parameters.. copper price US$1.00/lb, gold price, US$400/oz, silver price US$6.00/oz, copper recovery 82%, gold recovery
79% and silver recovery 80%.
Gold is now nearly $1000 per oz while silver is over $13 per oz.
That means that there is substantially more economic ore at current prices of $970 POG than at $400 POG.
This can be used to extend the mine life well beyond 8 years, or more ore could be mined per year.
This is just another example of how very conservative management is.
The second observation is that the report that mill economics could be improved by the following recommendations:
• Additional potential markets for the flotation concentrates should be identified and
smelter schedules received. The current study is based on shipment of the copper
bulk concentrate overland to Antofagasta, then marketing to Chinese smelters. The
overall cost for shipping alone is US$350 per tonne on about 130,000 tonnes of
concentrate. Finding a closer smelter might save US$200 per tonne, resulting in a
US$26 million addition to before tax cash inflow.
• Preliminary tabling tests show that the copper bulk flotation concentrates can be
upgraded from 20% Cu to 35% Cu by removal of gangue and lead minerals. The
resulting increase in cashflows could be in the range of US$15 - 25 million.
In other words, between $40 to $50 million could be added to cash flows when the final mining plan is released in late March.
In addition , the report points out that there could be significant gains from the preliminary smelter terms that Orvana has obtained from Glencore.
Once again, the Glencore name crops up in Orvana's operations.
I also learned that negotiations continue on the two open acquisition offers.
My interpretation is that the UMZ mine will be near identical in economics to that of the LMZ , but for double the mine life.
That is, the UMZ open pit should produce 80,000 oz of gold equivalent per year at cash costs less than $200 per oz which would produce annual cash flows in the $50 million range .
Judging from 2008 financials , $40 million per year of this would end up adding to the cash position.