RE:Bjoerkdal petersburggray,
You wrote:
Plus Bjoerkdal is seeing gold head grade at mill decline while fuel costs increase a fact that is crushing profit margin.
That is not entirely true, as the economics of the mine are not dependent on fuel costs, but on the mix of open pit versus underground ore mined.
Regarding Bjorkdal, Q1 gold production was 12,716 ounces, 14,017 ounces produced in Q2, and 8,504 ounces produced in Q3 or 35,237 ounces year to date. Gold sales year to date have totaled 40,505 ounces. So, to meet the lower end of the 56,000 to 60,000 ounce guidance for 2018, Bjorkdal would have to produce and sell 16,000 ounces of gold in Q4.
So that is the first question. Could they produce 16,000 ounces in Q4? Second, what is the level of gold production that optimizes cash flow given that there are three sources of ore feed:
- Open pit ore grading at 1.2 grams/t gold and costing $2.56/t to mine;
- Low grade ore grading at 0.65 grams/t gold and costing $1.43/t to mine; and
- Higher grade ore from underground grading at 2.36 g/t and costing $26.79/t to mine?
Maximum permitted throughput is 1.3 million metric tons per year, and the mill operates at 315,000 metric tons processed per quarter.
With those ore sources and the additional constraint of 150,000 tons per quarter mined from underground, the optimum gold production level is 13,347 ounces per quarter yielding estimated after tax profit of $3.15 million USD at $1250 USD/oz gold.
Open pit mining drops to zero, and the low grade stockpile provides 165,000 tons of ore per quarter. Mining cost drops to $13.51 USD per ton of ore mined compared with $26.09 USD per ton average cost in Q2.
Could Bjorkdal produce 16,000 ounces in Q4?
The answer is yes, if the underground mining rate could be increased to 200,000 tons per quarter, and the average ore grade increased slightly to 2.4 g/t. 115,000 tons of low grade stockpille would be processed, and the average mining cost would be slightly higher at $17.53 USD/t ore mined, but
estimated after tax profit would increase to $4.7 million USD assuming $1250 USD gold.
In his presentation, Mr. Duffy stated that they had changed the mine plan to maximize cash flow, and increasing the mill feed from the low grade stockpile plus increasing ore production underground.