370,000 = my mid-term production target ounces (atQ2’09 actual poured ounces = 72,188 (attributable to HRG)
Q2’09 actual refined ounces = 70,157 (attributable to HRG)
It doesn’t matter which one gets booked as production ounces. The only one I care about is poured ounces. Poured ounces have been mined, have been processed and they have been poured – those are all the key stages in the process. That’s all I care about. I don’t care if some of those ounces gets refined and sold in Q3 instead of Q2, as I know they will be sold (at a solid gold price) in the near future.
As a side note, both the 72,188 and the 70,157 exceed Q1’09 (attributable to HRG) production of 69,118 ounces.
72,188 ounces on an annualized bases is 288,754 ounces
It means that Q2’s run rate production ounces have already reached 96% of previous management’s conservative target (attributable to HRG) of 300,000 ounces.
This 96% achievement was realized even though Taparko’s average rate per operating hour was only 94 tonnes. The designed capacity is 125 tonnes. As such, the rate was 75% of designed capacity. What does that tell me? It tells me that we have a tremendous opportunity to increase production once we ramp up average rate closer to the designed capacity.
Also, this 96% achievement was realized even with Berezitovy’s mill utilization rate being only 80% or perhaps below (May 19’09 NR). What does that tell me? It tells me that we have a tremendous opportunity to increase production once we increase mill utilization.
1) Conservative target production (based on comments by previous management):
*Zun-Holda and Irokinda – 122,000 ounces
*Berezitovy – 93,000
*Taparko – 85,000
Total Conservative Target (attributable to HRG) = 300,000 ounces
2) Stretch target production (based on comments by previous management):
*Zun-Holda and Irokinda – 122,000 ounces
*Berezitovy – 121,700
*Taparko – 90,000
Total Stretch Target (attributable to HRG) = 333,700 ounces
From High River’s May 15, 2006 news release:
“The revised mine plan at the Berezitovy Project anticipates average annual gold production to
exceed 120,000 ounces”
It appears as if that capability still exist, given that Berezitovy’s ounces poured (attributable to HRG) in Q2’09 has already reached 23,783. This represents a run rate of 95,131 ounces (attributable to HRG). This was done with mill utilization of 80% or less. Once mill utilization has been cranked up to 100%, it certain appears that the possibilities exist to achieve 120,000 ounces.
3) Target production with Taparko Expansion Project (based on comments by previous management):
*Zun-Holda and Irokinda – 122,000 ounces
*Berezitovy – 121,700
*Taparko – 126,000
Total Target with Taparko Expansion Project (attributable to HRG) = 369,770 ounces
The plan has been to expand Taparko’s production capabilities by 40,000 ounces (36,000 attributable to HRG) through operating cash flow – to 140,000 ounces for Taparko. Naturally, that has been put on hold due to the mechanical problems over the past couple of years.
Right now the focus is to pay down debt. However, once the most pressing debt payments are made (and cash show is freed up), the Taparko Expansion program will be initiated. With the gold price in the US$900 range, excellent cash flows will be generated towards this program. If the company deems this initiative as the top priority at that stage, then cash flow from all 300,000 company ounces can flow to initiative in order to expedite the expansion efforts. The Taparko Expansion Project represents an extremely low hanging fruit.