Elgin Mining Provides Strong Fourth Quarter Cash Costs and Positive 2014 Outlook
Date : 03/03/2014 @ 10:14PM
Source : Marketwired
Stock : Elgin Mining (ELG)
Quote : 0.28 0.06 (27.27%) @ 3:59PM
Elgin Mining Provides Strong Fourth Quarter Cash Costs and Positive 2014 Outlook
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Elgin Mining Provides Strong Fourth Quarter Cash Costs and Positive 2014 Outlook
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Mar 3, 2014) - Elgin Mining Inc. ("Elgin Mining" or the "Company") (TSX:ELG)(TSX:ELG.WT) released today its gold production and operating outlook for 2014. The Company expects to see a significant year-over-year improvement in the operating and cost performance of its Björkdal mine with gold production consistent with the previous year. At current gold prices above US$1,300 per ounce, the Company expects AISC* to be below $1100/oz boosting its cash and working capital, and reducing its current modest long-term debt, in 2014.
2014 Gold Production and Cost Guidance
2014 Forecast 2013 Actual(1) Q4-2013 Actual(1)
Gold production (ounces) 44,000 - 49,000 46,946 13,818
Cash cost per ounce produced (USD/ounce) $ 890 - $975 $ 1,095 $ 870
Plant throughput (tonnes) 1,300,000 1,261,368 314,975
Open pit 483,200 515,225 153,121
Underground 649,700 699,880 155,485
Stockpile 167,100 46,263 6,369
Plant head grade (Au grams per tonne) 1.21 - 1.33 1.32 1.55
Plant recovery rate (%) 87.7 % 87.7 % 88.0 %
Capital expenditures at Björkdal (USD) $ 7.9 million $ 14.1 million $ 2.1 million
Corporate general & admin costs(2) (USD) $ 1.9 million $ 4.0 million $ 1.0 million
Debt principal and interest payments (USD)(3) $ 1.6 million $ 1.0 million $ 0.4 million
SEK per USD exchange rate 6.50 6.51 6.51
CAD per USD exchange rate 1.10 1.03 1.05
Figures are unaudited and subject to final year-end adjustments.
Costs shown exclude non-cash stock-based compensation.
Cash amounts only as non-cash accretion of loan set-up charges are excluded.
* "All-in Sustaining Costs" as shown follow the published definition provided by the World Gold Council in June 2013 except for the exclusion of: (a) non-cash share-based remuneration and (b) accretion expense on the Björkdal mine's provision for closure and reclamation which is not significant.
Patrick Downey, the Company's President and Chief Executive Officer stated, "We had a very strong Q4-2014 at the Björkdal mine where the transition to owner-operated mining underground went much better than anticipated. Our costs per tonne mined decreased significantly and we also increased our mine head grade by better ore sequencing. Furthermore, we successfully completed the drill and blast changes in the open pit which led to better costs and more consistent grades from the pit. I am also pleased to state that we continue to see these improvements in the early part of 2014. For 2014, we remain steadfastly focused on executing the operational improvements that commenced in the last quarter of 2013. We expect the initiatives undertaken at the Björkdal mine in 2013 to gain further traction in 2014, allowing the Björkdal mine to continuously move down the industry cost curve. However, we are being reasonably conservative in our guidance for 2014 in terms of mill head grade and, should the mill feed grade continue at current levels, we should see better costs and production than current guidance. Furthermore, with the higher productivity we are seeing in the underground operations, we are planning to expand the Björkdal operations in both the underground and the plant. With this modest expansion, we expect production to ramp up to between 55,000 to 60,000 gold ounces per annum."
2014 Gold Production
Gold production is estimated to be in the range of 44,000 to 49,000 ounces for 2014. Plant throughput is expected to reach 1,300,000 tonnes with plant head grade between 1.21 to 1.33 grams per tonne ("gpt") from a mix of open pit (37%), underground (50%) and stockpile ore (13%).
In the open pit ("OP"), the Company expects to realize better grades in 2014 from the mining of higher grade benches and from the continuation of its stringent grade control practices. OP grades were negatively impacted in the first 8 months of 2013 by an unsuccessful drill and blast pattern change. This was rectified in Q3 which had a positive impact on grades and costs in Q4-2013. Based on the lower gold price environment in late Q4, the Company revised its open pit mine plan in order to mine less open pit tonnes. However, the Company has continued to see better grades from the open pit ore to date in 2014 and if gold price remains at or above US$1,300 per ounce, the Company may not reduce open pit tonnages below 2013 levels, and this adjustment would further boost 2014 guidance.
In the underground ("UG"), the Company transitioned from contractor to owner-operated mining starting in early Q4-2013. As stated, the transition has exceeded early expectations and has allowed the mine to improve its UG mine planning, pace of UG development, and grade control practices. To date this has resulted in lower costs per tonne and better mill feed grades. The ramp-up to owner-mining is still on-going with additional hiring of skilled UG miners and mechanics, and the cross-training of newly-hired and existing UG operators, all of which is expected to be completed in H1-2014. The Company anticipates that UG productivity and equipment utilization could exceed that forecasted in the latter half of 2014.
In the plant, the Company is planning for an expansion to increase its maximum annual plant throughput from 1.3 million tonnes to 1.5 million tonnes. Site management is currently working with local consultants in preparing the expansion application for submission before the end of Q2-2014. A response from the Swedish mining authorities on the expansion request is expected by the end of 2014. Based on its preliminary analysis, the Company does not expect the capital investment required to increase the plant's nameplate capacity to 1.5 million tonnes annually to be significant, allowing for a short pay-back and commissioning period.
The Company has not included the above-mentioned upside potential for its OP, UG and plant in its 2014 guidance.
Operating Costs
Cash cost per ounce for 2014 is expected to be between US$890 to US$975 per ounce, a significant improvement from the cash cost reported for 2013. Lower per ounce cash cost in 2014 will be achieved through a combination of lower per tonne mining costs in the OP and UG, and from potentially better OP and UG grades.
In the OP, mining cost per ore tonne will be lower in 2014 due to a decrease in the strip ratio in the 2014 OP mine plan and cost savings associated with returning to the previous drill and blast patterns. In addition, the higher predicted OP grades should lead to an improved per ounce cash cost.
In the UG, the transition to owner-operated mining commencing in Q4-2013 has led to savings in unit mining costs. As the ramp-up continues into 2014, the Company expects to realize a further reduction in unit mining costs from greater manpower productivity and equipment utilization. In addition, the Company is forecasting a smaller number of on-vein development metres in 2014 as the mine is no longer obliged to provide a minimum number of payable metres to the UG contractor. For 2014, the Company is budgeting for a greater proportion of stope tonnes, which are cheaper to mine, in its UG ore feed. Specifically, the planned 2014 UG ore feed is estimated to consist of 51% development tonnes (2013 - 59%) and 49% stope tonnes (2013 - 41%) due to fewer on-vein development metres and the mining of more stope tonnes. Beyond the operating costs included in the Company's per ounce cash cost calculation, the Company is not subject to any royalties or mining taxes on its gold sales, and enjoys a low corporate income tax rate of 22% on its net income earned in Sweden with no withholding taxes on any future repatriation of funds.
Capital Budget
Capital expenditures at the Björkdal mine are budgeted at US$7.9 million for 2014 and consist of:
Area of Operations 2014 Budgeted Expenditures Capital Spending
Underground US$5.4 million UG capital development (US$3.5 million); UG capitalized diamond drilling (5,000 metres) and in-fill drilling (3,000 metres) programs (US$1.0 million) and other UG sustaining capex (US$0.9 million)
Open Pit US$1.6 million Capitalized OP waste pushback and till removal (US$1.6 million)
Processing US$0.8 million Tailings (US$0.7 million) and concentrator (US$0.1 million)
Administration US$0.1 million Miscellaneous
Total US$7.9 million
No other capital expenditures are budgeted for in 2014.
Regional Exploration
The Company expects to incur a small amount of regional exploration costs in drill testing prospective brownfield targets near its Björkdal mine.
General and Administration
The Company is budgeting corporate general and administration costs (cash component) of US$1.9 million for 2014, a reduction of over 50% from costs incurred in the previous year, as the Company remains focussed on eliminating non-essential expenditures. The substantial cost decrease from the prior year is primarily the result of staff reductions and non-recurring severance charges undertaken in 2013 in response to the drop in the price of gold and the placement of the Lupin gold project back into care and maintenance.
Liquidity
Despite lower gold prices in Q4-2013, and certain non-recurring severance expenses, the Company was able to add to its cash position, ending the year with CAD 13.3 million (unaudited), an increase of CAD 0.3 million from its September 30, 2013 cash balance of CAD 13.0 million.
Elgin Mining Inc.
Elgin Mining is a Canadian based company focused on production at the Björkdal gold mine in Sweden. In addition, Elgin Mining's portfolio includes the Lupin and Ulu gold projects located in Nunavut, Canada.
For further information, please visit the Company's web site at www.elginmining.com.
