Some notes on the complexity of the challenges we still face as the company grows:
While I am quite enthusiastically pounding the table about the future prospects for ECU, I should also point out some of the challenges that remain to be overcome, which will have the potential to limit the efficiency of our operations and growth.
The biggest problem from my point of view is the growing pains that will go with the increase in capacity. For example, there is a one lane road that snakes across the valley between the recovery plant and the mine. There are currently three large dump trucks in the fleet that haul the ore to the plant. One can see a truck coming and have time to pull over and wait for it to pass before continuing along in the opposite direction. If we increase capacity to 1000 tons, we will have 3 times the truck traffic on that road. And to 1500 tpd we would have 5 times as much truck traffic. This will further hasten the degredation of the road itself (which is no I-95 to begin with) and also add to the expense of maintenance. Improving the road to a larger capacity will be a must, and it will be expensive.
Staffing is also going to be a problem. There are many experienced mining professionals in Mexico. In fact, since the big coal mine disaster in Chihuahua this year where many lost their lives, there is likely some migration of miners coming to the safer operations like Velardena. Only one fatality has occurred at our mine, and that was an 80 year old security guard that expired due to a weak heart, which was regretable, but not a result of a safety hazzard. The problem is, where will these people live? The town of Velardena is like many rural towns in Central Mexico, deeply improverished. Homes are in disrepair, municipal services are nonexistant, and dogs, chickens and cows roam the streets. A bus owned by ECU is used to transport the existing local workforce to the mines. To attract the best miners, ECU will have to build housing and support staff.
And the town itself will be subject to duress from an increase in mining activity. The mill is located just outside the town, and a rapid increase in activity there will be a disruption. Having a large group of people suddenly earning a higher standard of living sounds like a good problem to have, but it will also bring its share of problems for the locals who have been quite content to live a marginal existence. No doubt the increase truck traffic will also piss off the people who do not directly stand to benefit from the mine.
Water will be a growing problem as the operations grow. It is already a very arid part of the country, and the current operations are straining the water capacity. Tripling the size of the operation, and increasing the intensity of drilling and the recovery plant will consume much larger quantities of water, and increase the competition for the limited water available.
There there is the environment to consider. Discharge of waste runnoff from the tailings pond will have to be considered. I asked the plant manager about arsenic, and he says the tailings are stable and not an issue. However, any polution at all that may escape will become a very serious issue, and expensive. Management will have to be very dilligent to keep that geanie in the bottle.
The problem of arsenic contamination is a real issue with the concentrates that are produced. Some smelters will not take the ECU concentrate because the arsenic levels are too high. It can be treated and neutralized, but it will add a layer of cost. Not all of the deposits in our mine have arsenic mixed in. The skarn is completely free of arsenic for example, and others have such low levels that they are not a problem to process. But it is one more metalurgical hassle that must be dealt with.
The recovery percentages from the operation have improved dramatically since my last visit. However, we are still averaging abysmally low gold recovery efficiency. A gold pyrite circuit is set to commence operations soon, and has been proven in the lab to increase recovery to about 50% efficiency, but I suspect there will be the usual learning curve to get that running properly. Silver is improved to 82%, which is excellent, and lead and zinc are about 75% which is adequate.
The mine itself is served by one main shaft to access the lower levels. All ore produced must be hoisted to the surface in that shaft, in a bucket with a capacity of about 3 tons per trip. So assuming we get 1000 tpd in production, that means about 330 trips per day up the shaft. The same shaft is used to lower equipment and personnel into the mine. There are limits to the operational efficiency of one shaft, and as the workings go deeper the time spent to get one load of ore to the surface will increase. A new shaft will require an extra layer of expense. And any maintenance issues with the shaft will immediately impact on operations. Because the surface stockpiles are being consumed by higher operating efficiencies at the mill, the potential for an interuption in production will have severe ramifications on the bottom line.
There are 3 shifts working 24 hours a day at the mine, 6 days a week. Again, to increase production means more stopes in operation, more drilling and blasting, and more crews working underground. It could become a logistical headache that will require a very good management team to keep in order.
The underground movement of material is accomplished by large, heavy scoop trams that navigate through the workings only slightly larger than the vehicles themselves. When a tram goes by, people and equipment have to stop working and get the hell out of the way. Similarly, two rail shuttles work to get the ore from the top of the shaft to the outside of the mine where it is crushed and loaded onto trucks. Each train has 3 hoppers capable of 3 tons each. So 1000 tpd will require more than 100 trips by these trains, and again, when they are coming down the narrow tunnel, you stop what you are doing and get right the hell out of the way.
So add up all of the above, and you can get some idea of the magnitude of challenges facing ECU. They are not insurmountable, but they will be expensive to address, and any small failures will be expensive and time consuming to make right. Getting all the ore lined up to run a much larger operation is nice, and I have complete confidence in Michel as he has been the guy to get the mine running under difficult circumstances since day one. But I also think it is appropriate that everyone fully understands how challenging the operating environment will continue to be as we grow.
cheers!
COACH247 |
