Marynell,
Alamo Dorado is really unique.
<is the low recovery rate in their metallurgy>
Although the average recovery appears to be in the 70% range, the recovery rates on the high grades will be much higher.
From August 27 NR:
"Further metallurgical test work is underway at Metcon Research Inc., which has shown improved recoveries for the Phase 1 Pit material where two column leach tests have been continued over 379 days and have averaged just over 80% recovery for silver and 87 % for gold. "
<..combined with the low grade of the deposit>
The average grade is indeed low. But the distribution of the ore causes the existence of this higher grade starter pit that will be mined in phase 1 & 2.
The deposit has a core high grade component of 15 millions tons with a grade of 157 g/t. That is 75 millions ounces in 15 M tons, a value of $22 per ton based on current metal price. With the cost of mining and processing in the below $4/ton category, you can see that there is a lot of room allowing for possible error. Of course, not all this high grade will be mined in the phase 1 pit. But a good chunk will.
The ore distribution is directly responsible for the rapid production rate.
Based on the pre-feasibility numbers:
Year 1: 17 millions ounces
Year 2: 17 millions ounces
Year 3: 8.5 millions ounces
Year 4: 8.5 millions ounces
Year 5: 8.5 millions ounces
Subsequent years: 5-6 millions ounces
That is why the operating costs are at $1.50/oz in year 1 and 2, near $3 in year 3-5 and between $4-$5 in subsequent years.
Payback is expected to be achieved within 12-18 months.
Since a dollar now is worth a lot more than a dollar earned in 6 years from now, BAY's Alamo Dorado project has a very high rate of return thanks to its early cash flows model.
Now, the new silver price will certainly have an impact on the mining schedule. As stated in August 27 NR:
"In light of the higher recoveries in the starter (Phase 1 Pit) area, coupled with the recent decline in silver price, MINTEC Inc. will be developing an updated mine plan and schedule. This new resource/reserve study will be used for the final feasibility study. AMEC Simons will review the MINTEC results for use in the feasibility study upon completion of the mine plan."
We will have to see what this new ming plan is. But I am guessing that it will allow for adjustments to be made in case the price of silver move back up.
BAY is continuing with the feasibility study process and is also progressing on all other fronts including: surface land acquisition, permitting, financing, US regulations for 20F and listing...
If all goes fine we will have a very profitable mine in 2003-2004. |
