Update on Azure/MooselandBroad Oaks Associates March 2004 Research Update on Azure
Written by Geoffrey S. Carter and Kristine E. Dunstan
excerpt
Page 13
Mining Economics
The initial development plan is for a maximum 20,000 ton bulk sample, 10,000 tons from each of the Mooseland and the Dufferin. The rehabilitated mill is capable of processing 220 tons per day or 6,600 tons per month. The cost of mining some of this 20,000 tons bulk sample has been included in the capital budget. It is expected and is budgeted that cash mining and milling costs will be $65 per ton. At an exchange rate of Cdn$1.00 is equivalent to US$0.78, and a head grade of 0.30 ounces per ton, and a recovery of 90%, this is about US$190 per ounce. If the head grade was higher, say 0.40 ounces per ton, then costs would be US$140 per ounce. The low cash cost per ounce is primarily achieved because of the high grade material being mined, not because mining costs are lower than industry norms for this type of operation.
At 6,600 tons per month, and gold production of 1,620 ounces, US$420 an ounce, Azure would produce/generate about $850,000 per month in revenues from processing bulk sample ore, or $2.9 million from 20,000 tons, if that much was to be mined. Monthly costs at US$190 per ounce would be $400,000. Therefore Azure would be generating approximately $450,000 cash flow per month at the minesite from processing the bulk sample.
The Company has planned a total of up to 60,000 tons of bulk sampling from each of the Mooseland and Dufferin mines. This would take about 10 months to process and generate $4.5 million in cash flow at the minesite. Assuming that the operations are continuous, that is, as soon as one bulk sample is completed, the next is started, this would occur by the end of 2004.
After this was completed, mining at 250 tons per day (milling at 220 tons per day) could commence. Cash mining costs would still be about $65 per ton, as although the stoping would be cheaper than development ore, the ore would be coming from deeper underground. It is expected that the head grade would not drop due less selective mining and therefore higher dilution, as the grade of ore mined will increase with depth. Cash production costs for 72,000 tons annually would be $4.7 million, $65 per ton, or US$190 per ounce. Revenue at a head grade of 0.30 ounces per ton and a mill recovery of 90% would be US$8.2 million (Cdn$10.5 million) at US$420 per ounce for 19,440 ounces. Revenue of $10.5 million less cash costs of $4.7 million would leave the company with a net cash flow from operations of $5.8 million.
The above is based on no further expansion of the milling capacity. After a successful exploration and bulk sampling program, it could be expected that the mill would be expanded to 440 tons per day or 154,000 tons annually. This initially would be supplied from both mines and would produce about 33,000 ounces per year and a cash flow of $10 million.
Development costs, due to the nature of this deposit (narrow veins, low tons of ore per vertical foot) will be high on a per ton basis. It is estimated that these will be $15 per ton, or US$40 per ounce, so that total costs would be about US$230, a low cash cost and total cost producer. The primary reason for this once again is the relatively high head grade. If a higher head grade was to be achieved, costs would dramatically decrease. The indicated resource grades are higher than those given in this section, therefore a higher grade is definitely possible. Once this production rate has been achieved it is suggested that a second mill be built so the productive capacity for the operations could be greater than 60,000 ounces annually.