Logic – go forward production ouncesHRG’s actual attributable production ounces in Q1’09 were as follows:
Zun-Holba – 15,490
Irokinda – 14,061
Taparko – 20,167
Berezitovy – 19,400
Total attributable to HRG in Q1’09 = 69,118 ounces
1) Zun-Holba – 15,490
This is slightly better than the 2008 production average. It looks like a good production level going forward.
2) Irokinda – 14,061
This is consistent with production in Q1’08. However, Irokinda has a small placer (seasonal) operation that operates during the summer periods. The average quarterly (attributable) production was 15,792 ounces in 2008. Given the consistency of Q1’09 results with 2008, I fully expect to a quarterly average of 15,792 (for the 2009 fiscal year), as oppose to the seasonally low number we saw in Q1.
Based on the technical reports, and the very positive exploration potential (both on the property and resources on nearby properties that can be purchased), I personally see both Zun-Holba and Irokinda as being solid contributors in the long-term future of High River – for at least another 10 to 20 years out.
3) Taparko - 20,167
I wouldn’t go into too many details on Taparko on this post, as I have already done so on a recent post.
The designed capacity was for throughput of 125 per hour. It sounds like they are back up to 100 now, and there are rumours that they could be pushing as high as 110 - 120 occasionally.
Again, to ensure they hit 125 consistently, and maybe even go way beyond that (and really exceed production ounces), I would like to see an additional mill (a cheap small one even) installed. I’m still scratching my head as to why this hasn’t been done already. If plans are in the works then why hasn’t it been communicated to minority shareholders, via news release? It is material, in my view.
Anyway, I am aware of a company that sold a used SAG mill for only $2M early last year. I believe ball mills are even cheaper. I haven’t taken a glance recently as to what type of mill might be required at Taparko (most likely a SAG mill due to the grade levels), but the downturn in the economy has allowed for all types of purchase opportunities when it comes to machinery and equipment.
It also sounds like grades are much higher than planned at Taparko, which makes up for some short-term shortfall in designed throughput levels.
Designed quarterly production level is 25,000. With 90% being attributable to HRG, it means that the 20,167 ounces in Q1’09 can increase to 22,500 or higher as Taparko continues to shape up going forward. They should really try to put in the second mill and push quarterly attributable production up to at least 28,000 ounces. This would allow for the debt to be retired even quicker.
4) Berezitovy – 19,400
Berezitovy is designed for at least 25,000 quarterly ounces. With 99% being attributable to HRG, it means that the 19,400 ounces in Q1’09 can increase to 24,750 or higher as Berezitovy continues to shape up going forward.
5) Summary of go forward production potential for HRG
Zun-Holba – 15,490
Irokinda – 15,792
Taparko – 22,500
Berezitovy – 24,750
Total potential attributable = 78,532 ounces Quarterly Average
Total potential attributable = 314,128 ounces Annualized
This is what is possible at some point down the road if everything continues to flow in the right direction. As you can see, there is wiggle room relative to the 75,000 quarterly and the 300,000 annually (used in my ranking analysis). But, there is also potential for further upsides if they choose to put in a decent size additional mill at Taparko.
Note: This profile does not necessarily represent Q2'09, but rather it represents go forward possibilities as further improvements are realized.