Mercator Gold said it expected to produce approximately 200,000 ounces of gold from the Surprise and Bluebird open pits at its Meekatharra Gold Project in Australia over a 21 month period from January 2008 to September 2009. The production forecast was slightly below previous guidance of 120,000 ounces annually, but still confirmed Mercator as one of London's newest mid-tier gold producers.
Mercator added that is had experienced "upward pressure" on its costs, like the rest of the mining industry. Of particular note, the cost of diesel increased 20%. As a result, Mercator confirmed that it had revised its life of mine cash costs for production to US$518 per ounce, but this could fall to US$481/ounce if production is increased from the Surprise pit, as it is located closest to the plant. The company also restated its flexibility in mixing different ores and the effect that would have on head grades gave it flexibility to adjust to a varying gold price.
As a precaution, the company also sold calls over 35,000 ounces of gold at A$906 per ounce for delivery between February and September and puts at a similar price for a further 35,000 ounces.
On the exploration front, the Euro Project, Fenian West and Paddy's Flat all continued to receive the attention of the drill bit.
Managing Director, Patrick Harford, said:
"Our Meekatharra operation is up and running. We look forward to strong production from our open cut operations and will soon start the development of our underground reserves. Exploration at the very soft oxide Euro Project continues to be promising. Further work there and on the deeper high grade zones at Paddy's Flat should strengthen the Company's resource base over the coming months."