Tuesday, February 2, 2010

DD data on operating costs

From the Jan`09 independent DD report:

``Operating costs have been estimated using a combination of recent actual costs for mining and processing and G&A and current quotes for key supplies and consumables and estimates of labour wages. Mining costs were prepared for each of the mining methods and at varies production rates. Period costs were based on multiplying the detailed production schedule generated by Century for 3 years and the life of mine by the variable costs attributed to each mining method (e.g. conventional and mechanised flat mining, LHOS and ore development). Labour costs were scheduled separately by year as a fixed cost.``

``The operating cost in year 1 (2009) is US$ 101.3/t milled for a milling rate of 700 tpd and reduces to US$ 91.99/t milled in year 2 (2010) when mill production averages 950 tpd. From 2012 when steady state production rates of approximately 2,000 tpd are forecast, costs are typically estimated to range between US$ 54 to 58/t milled. Overall average cash cost are estimated to be US$ 60/t milled or US$ 421 per ounce. Based on a review of detailed costs and benchmarking data PRL considers that overall costs are acceptable and are expected to be achieved during steady state operations. The overall costs have an accuracy of +/- 15%.``

The company hasn`t issued any recent documents with details of its 2010 mining plan. As such, it`s not possible for us to be 100% clear on the near-term sources of ore feed or the timing of inclusion into the production process. However, based primarily on the Jan`09 DD report (assuming it`s still similar to today`s mine plan assumptions) the ore sources and ore feed timings appear to be as follows:

1)Lamaque 2 - starting month 1 of production – although narrow thickness in the flats, P&P grade appears to be 5.72 g/t (there will also likely be some bonus lower grade ore mined along the way)

2)Bedard Dyke/Sigma West – 15,000 tonne bulk mining beginning at (or shortly after) production start up period, then ramping up to higher levels (likely depending on pace of development) – based on drill results so far, grades appear to be greater than 5.0 g/t

3) North Wall – will likely be developed in Q4`10 and mined into production near the beginning of 2011 – the Jan`09 DD report has the North Wall P&P reserve grade at 4.99 g/t (253,000 ounces)

As a result, there appears to be a decent chance of the 2010 Lamaque grade being strong, perhaps even 5.0 g/t or above. It may partly depend on how much bonus lower grade ore they pick up along the way. It sounds like there may be some extra lower grade/bonus ore (not counted in reserves) that can be economically mined (along the way) via the Lamaque 2 decline. This extra ore could help us to ramp up quicker, but may reduce the overall average grade.

At a high level, the company is targeting to reach a run rate of 500 - 800 t/d in May or June of this year (per the current Corporate Presentation) if start up progresses well.

In addition to not knowing 100% what the current (detailed) mining plan looks like, it`s impossible to know what the current cost profiles look like. However, here are the calculations for various early ramped up scenarios based on the data posted above (for scenarios 2a to 2d, I rounded the t/d up to 1,000 instead of using 950, thus I lowered the $92 t/d cost to $90 in order to partly reflect the higher feed rate):

1a)At the 700 t/d milled level, assuming 4.75 g/t grade:

Production ounces in 1 month = 3,079

Annualized run rate production ounces under these assumptions = 36,948

Recovery rate = 96%

Cost per tonne = US $102

31.1 grams per ounce / 4.75 grams per tonne = 6.55 ore tonnes required to produce each ounce

(6.55 * 3,079 ounces produced) / .96 recovery = 20,999 ore tonnes milled

20,999 * $102 = $2,141,931

$2,141,931 / 3,079 ounces = US $696 cash cost per oz


1b)At the 700 t/d milled level, assuming 5.00 g/t grade:

Production ounces in 1 month = 3,241

Annualized run rate production ounces under these assumptions = 38,892

Recovery rate = 96%

Cost per tonne = US $102

Cash cost per oz = US $661


1c)At the 700 t/d milled level, assuming 5.25 g/t grade:

Production ounces in 1 month = 3,403

Annualized run rate production ounces under these assumptions = 40,836

Recovery rate = 96%

Cost per tonne = US $102

Cash cost per oz = US $629


1d)At the 700 t/d milled level, assuming 5.50 g/t grade:

Production ounces in 1 month = 3,565

Annualized run rate production ounces under these assumptions = 42,780

Recovery rate = 96%

Cost per tonne = US $102

Cash cost per oz = US $601


2a)At the 1,000 t/d milled level, assuming 4.75 g/t grade:

Production ounces in 1 month = 4,398

Annualized run rate production ounces under these assumptions =52,776

Recovery rate = 96%

Cost per tonne = US $90

Cash cost per oz = US $614


2b)At the 1,000 t/d milled level, assuming 5.00 g/t grade:

Production ounces in 1 month = 4,630

Annualized run rate production ounces under these assumptions =55,560

Recovery rate = 96%

Cost per tonne = US $90

Cash cost per oz = US $583


2c)At the 1,000 t/d milled level, assuming 5.25 g/t grade:

Production ounces in 1 month = 4,861

Annualized run rate production ounces under these assumptions =58,332

Recovery rate = 96%

Cost per tonne = US $90

Cash cost per oz = US $555


2d)At the 1,000 t/d milled level, assuming 5.50 g/t grade:

Production ounces in 1 month = 5,093

Annualized run rate production ounces under these assumptions =61,116

Recovery rate = 96%

Cost per tonne = US $90

Cash cost per oz = US $530

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