RE: Haulage Truck Bottleneck at Bjorkdal Sherry35,
I, too, listened to the Mandalay Resources Q3 financial call with great interest this morning, and was in the Q&A queue to ask my question about the Q3 production at Bjorkdal, when the operator
cut me off and ended the call. To my surprise, Mr. Duffy noticed that a shareholder had not been given an opportunity to ask a question, and so, to my surprise, he called me back and I had the opportunity to find out what happened at Bjorkdal in Q3 direct from the source.
So here's the story.
- It turns out that the owner who held the contract for underground ore hauling at Bjorkdal decided to retire and gave the company 3 months notice of that decision.
- So Bjorkdal put out bids for new underground hauling services and got only 2 responses. It turns out that the winning company on that contract had old trucks.
- So therefore, management decided to buy new 40 ton trucks 2 of which entered service last month, and 3 more will join the fleet by the end of the year.
Those facts explain the "bottleneck in underground production" and explain why the gold production was abnormally low while the mining costs remained high.
In Q3, Bjorkdal got about half of its mined ore from the open pit and half was mined from underground, so 126,752 metric tons came from the open pit and supplied an estimated 4360 oz of gold to the mill. Assuming an average underground grade of 2.1 g/t. 126,752 metric tons mines a total of 8,559 oz of gold. My estimate is that only 24 percent of the underground ore mined in Q3 made it to the mill, so 30,000 tons of ore containing a little over 2000 oz of gold made it to the concentrator, while 95,000 tons of high grade underground ore containing up to 6500 oz of gold is waiting underground ready to be hauled to the surface. The remaining ore feed was sourced from the low grade ore stockpile which supplied 168,000 tons of ore grading 0.65 g/t or 3500 oz.
That fact implies a significant increase in gold production from Bjorkdal in the fourth quarter. And guess what? The mining costs for those ounces are on the books for Q3. Whether by happenstance or design, this setup is pure genius and IMHO favors a long position in this stock!