SATURDAY'S WEEKLY NEWS ROUND-UP

The news roundups, which are broken down by the sector, provide investors with an opportunity to read a summary of the most interesting news of the past five days of trading in just one story as they prepare for another busy week.

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Mining news summary: Ferrexpo, Hochschild Mining, Orosur Mining, Ortac Resources, Mariana Resources, Patagonia Gold, Anglesey Mining

January 14 2012, 11:17am
Mining news summary: Ferrexpo, Hochschild Mining, Orosur Mining, Ortac Resources, Mariana Resources, Patagonia Gold, Anglesey Mining

This week’s news in the mining sector included updates from midcaps Ferrexpo (LON:FXPO) and Hochschild Mining (LON:HOC), both of which were well received by investors.

Ferrexpo, a Ukraine-focused iron ore group, reported a 3.3 per cent increase in total pellet production in the fourth quarter of 2011 over the third quarter, and that pellet production from its own ore in 2011 continued at full capacity.

The group produced a total of 2,555,900 tonnes of pellets in the fourth quarter, up from 2,471,900 in the third quarter and 1.2 per cent less than in the fourth quarter of 2010, when it made 2,585,800 tonnes.

Total pellet production from Ferrexpo’s own ore in Q4 2011 was 2,335,700 tonnes, 0.1 per cent higher than in Q3, and up 1.9 per cent year-on-year.

Meanwhile, Hochschild Mining, which is focused on precious metals in South and Central America, announced the successful completion of feasibility studies for the Inmaculada and Crespo gold and silver projects in southern Peru.

Both projects are on track to start production in the fourth quarter of 2013.

Hochschild told investors that both studies confirm a positive return for the company at conservative price and resource assumptions.

The 60 per cent owned Inmaculada project is now set to start construction with total initial capital expenditure of US$315 million for a 3,500 tonne per day underground operation with average annual production of 12 million silver equivalent ounces and a commissioning date in the fourth quarter of 2013.

Small cap gold mining stocks also gave investors plenty to digest this week.

Starting with Orosur Mining (LON:OMI), the company told the markets that the capital and operating costs of the Pantanillo Norte project in Chile will be in the order of US$178 million, according to a Preliminary Economic Assessment of the planned gold mine.

Prepared by AMEC E&C Services, the study ascribes a net present value of US$32.2 million to the development and an internal rate of return of 17 per cent at an 8 per cent discount rate.

The payback on the project is predicted to be 45 months, while the total cash cost of mining the gold is predicted to be in the order of US$581 an ounce. Output, meanwhile, is slated to be 97,000 ounces a year.

The figures were compiled on the basis of a US$1,200 an ounce gold price.

Peer Ortac Resources (LON:OTC) told investors that a scoping study on the Šturec gold and silver deposit has confirmed it as a robust and profitable project.

Additionally it says that the project would provide excellent leverage to the gold price.

The Šturec deposit is part of the group’s flagship Kremnica project which is located in central Slovakia. It currently hosts around 1.1 million ounces of gold equivalent.

The study examined the potential mining, processing and infrastructure requirements of Šturec in detail through four separate scenarios. The project would be developed as an open pit mine.

Ortac revealed that in an ‘optimal’ scenario the project would be worth an estimated US$309 million and it would have a 36 per cent internal rate of return (IRR).

This scenario assumes annual production of 85,990 ounces gold equivalent over an eleven year mine life, with a gold price of US$1,586 an ounce and cash operating costs of US$508 per ounce. The ‘optimal’ case has an estimated capex of US$155 million and over the eleven year mine life it would provide revenues of around US$1.5 billion.

Another gold miner Mariana Resources (LON:MARL,TSE:MRY) said the results of the Phase IV drilling programme at the Las Calandrias project in Argentina indicated potential for resource expansion and new targets.

The report, which included the results from 21 of the final 28 holes drilled as part of the Phase IV programme at Las Calandrias, follows a set of drilling results released by the company in November, which showed potential for mineralisation outside the Calandria Sur deposit.

These results reported this week were mostly from the El Clavo, Nido Este, Nido Norte and La Morena targets.

El Clavo was confirmed as a prime target for bulk-tonnage and deeper high grade mineralisation, returning intersections of anomalous low grade gold including grades of up to 0.4 grammes per tonne (g/t) gold across 20 metres.

Patagonia Gold (LON:PGD)
said this week its latest drilling on the Cap-Oeste deposit in Argentina had continued to hit good grades of gold and silver.

The best of the drill holes, CO-317-D, included 37.40 metres showing 20.04 grams per tonne (g/t) gold and 206 g/t silver, with the range of the other holes in the programme between 7.7g/t and 3.4 g/t gold.

Patagonia said the drilling was concentrated on the recently discovered high grade area to the immediate north west of the main shoot. The results today were for the first 18 holes in this campaign with assay results pending on a further 22 drill-holes.

One of this week's top performers in the mining sector, Angel Mining (LON:ANGM), revealed its best gold pour from the Nalunaq mine in Greenland.

It announced that 517.8 ounces of gold doré was successfully poured at Nalunaq. This is the eighth gold pour at the mine and it is the largest to date.

It also marks another significant milestone as production continues to rise towards the target of between 1,500 and 2,000 ounces per month, Angel said.

The firm hopes to achieve this in early in 2012.

Australia–focused gold explorer GGG Resources (LON:GGG. ASX:GGB) has completed the Phase II infilling drill programme at the Bullabulling gold project near Kalgoorlie.

Assays are expected in between four to six weeks' time with resource estimation work to be completed once all the results are received, GGG said, adding that drill results so far show that 99 per cent of the drill holes intersect gold mineralisation.

Drilling will now focus on exploration at the Gibraltar resource and along strike to the south along the Bullabulling Trend, GGG added.

The phase II programme focused on infilling of the areas between the Phoenix and Bonecrusher pits and saw 425 holes drilled for a total of 74,452m.

Elsewhere in the sector, Anglesey Mining (LON:AYM) on Friday relayed the year end results of its 33 per cent owned associate Labrador Iron Mines (TSE:LIM).

The Canadian mining firm revealed that 1.2 million tonnes of iron ore was mined and trucked to the port ahead of processing and shipping, during the period ending December 31 2011.

In June LIM began producing iron ore from the James mine, which forms part of the Schefferville group of mines in northern Canada. The operation is currently considered to be in a pre-production stage comprising start-up and testing operations, it said.

Sunrise Resources (LON:SRES) has completed its first drilling programme at the Derryginagh barite project in south-west Ireland and it expects assay results to become available later this month.

The firm is targeting the production of white barite for use as industrial filler in paint and plastics.  An important first milestone at the project was the completion in May 2011 of a positive concept study, suggesting a profitable underground operation with output of at least 50,000 tonnes per year.

The recently completed drilling comprised six holes for a total of 892 metres and has been successful in extending the known barite vein system to approximately 180 metres vertically below surface.

This represents a significant depth below the old workings where the drill intercepts, based on visual inspection, have thicknesses in line with shallower historical intersections and are visually estimated to be high-grade.

In other news, Frontier Mining (LON:FML) this week unveiled a new US$29 million financing arrangement that will help support the development of the Benkala copper mine in Kazakhstan.

The firm’s subsidiary KazCopper has agreed the loan with Russia’s Sberbank. Through the arrangements it will receive a US$20 million investment loan and a US$9 million working capital credit facility.

"In spite of the worsening credit markets we have been able to significantly increase the credit available to the company and improve its terms,” said chief executive Erlan Sagadiev.

“We believe these new facilities reflect the progress achieved in construction to date; as well as in the financial and technical robustness of the Benkala project and represent an excellent start to 2012."

Horizonte Minerals (LON:HZM, TSE:HZM) has upgraded the resources estimate at its Araguaia nickel project in Brazil by over 30% to more than 100 million tonnes.

The 43-101/ JORC compliant indicated resources are now estimated at 39.3 million tonnes grading 1.39% nickel using 0.95% Ni cut-off, while inferred resources are 60.9 million tonnes averaging 1.22% Ni using 0.95% Ni cut-off.

High grades in the indicated category at a 1.20% Ni cut-off grade totalled 24.2 million tonnes averaging 1.6% Ni.

Thor Mining (LON:THR, ASX:THR) said this week that a “number of parties” are interested in signing off-take agreements for tungsten and molybdenum production from the company’s Molyhil project in Northern Territory, Australia.

In a stock exchange statement, the company revealed that these putative off-take partners have also proposed “various alternatives for financing the project”. 

“These discussions are ongoing,” it added.

The capital cost, as estimated by Proteus EPCM Engineers, is put at A$66 million and the cash costs at A$80 a tonne.

The update comes at a crucial stage for Molyhil, with a definitive feasibility study and resource extension expected at some point this quarter.


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