My take on the newsThe big problem I see with the report is they raised doubt there will not be any precious metals recovery from the UMZ mine tailings of the LPF process using the CIL plant. I believe there was a 40 percentage point gain in precious metals recovery by completing this process.
If they are unable to complete the CIL perhaps they can precipitate the metal out however if these attempts fail this would makes the UMZ a high cost marginal operation. Bill Williams guided cash costs at a little over $2/lb of Cu at (Oct) recoveries (and hoping for $1) after byproduct credits which is a far cry from my original expectation of zero cash costs after byproducts.
(Assuming the worst) production at the UMZ I think could make 12 million lbs of copper per annum (using the higher grades of copper) at the current production rate of 1400tpd however, if recoveries are determined to be maximized I expect them to raise the throughput to 2000 tpd. The question now remains is how these potential impacts affect mine life.
I believe they made the gold collar to because it was cheaper than to make a copper collar. They need to guarantee the UMZ to keep producing because they would have a copper delivery shortfall on the EVBC hedge of 6.6 million lbs at $3.29 and still to recover the capex costs they made at the mine.
At the current production rate the netback is somewhere between 15-20 million at $3.50 copper before taxes at the UMZ a far cry from expectations of 50 million + netback
I am not concerned about he EVBC operation however, I think they will do a mine plan at a 1.5g/ton cutoff not 2.9g/ton as per the feasibility study. This will negatively impact peak production by 10%, raise cash costs to around $600/oz but increase mine life to 14 years on their current ore inventory. They need to do everything in their power to preserve profitable production in Spain because the UMZ operation remains a disaster and now really a liability given the potential low contribution and political risk.