Problems plague Century’s Lamaque mine (March 21, 2011)

A failed cone crusher was the latest of several setbacks over the past year at Century Mining‘s (CMM-V) Lamaque underground gold mine in Val d’Or, Que. The loss of the crusher shut down the Lamaque mill for nine days in February, and along with ongoing financial constraints, will “slow the ramp-up process and further extend the period during which the company expects to operate on a cash-negative basis,” the company reports. 

Century was able to replace the cone crusher in early March, but says the shut-down had a more severe impact on the Lamaque mill throughput than it originally anticipated. February throughput was reduced to 788 tonnes per day from 944 tonnes per day in January, which had an “adverse impact upon the company’s cash flow and its available finances,” according to a recent press release.

Prior to the failure of the cone crusher, Century had been working on several projects related to bringing Lamaque to commercial production. It has now put these on hold in order to meet debt repayment obligations and ongoing operational costs. The projects included the refurbishment of a third ball mill, underground dewatering, reconfiguration of a conveyor system and the development of the North Wall ore area. The company expects to delay mining in the North Wall area until May at the earliest.

Century has not yet reduced its most recent Lamaque production guidance for 2011, estimated to be around 70,000 to 75,000 gold oz., but it might after completing a full review. (In 2010, before running into other problems, it forecast 2011 production of 80,000 to 90,000 gold oz.)

The company poured its first gold from the past-producing mine in April 2010, and produced a total of 3,942 oz. in the second quarter, 4,457 oz. in the third quarter and 6,018 oz. in the fourth quarter, for a total of 14,419 oz. in 2010. Though Lamaque production shows a slow and steady upward trend, gold output was still far below earlier forecasts of up to 45,000 oz. for 2010, and even below lower estimates given as late as mid-November 2010, of up to 20,000 oz. 

Then, the company had blamed lower-than-expected production on “delayed permitting of the Bedard dyke, late delivery of underground mine equipment and late hiring of key senior operations management personnel.” It also said mine grades were lower than planned as ore production was predominately from mining areas not included in the ore resource due to earlier development constraints.

Century has deferred reporting cash operating costs at Lamaque until the mine reaches commercial production, according to the company’s most recent financial statements dated Sept. 30, 2010. Compounding the problems, Century has to deliver about 8,000 gold oz. in 2011 at much lower prices than the spot market as part of a US$33-million forward gold purchase agreement with Deutsche Bank signed in late 2009. (In 2010, it was selling the gold to Deutsche Bank for $561 per oz.)

How much working capital Century now has is unclear. As of Sept. 30, it had positive working capital of $4.3 million. Since then, it has raised at least $8 million in private placements.