Better times as UME bites a fiscal bullet

Calgary-based Uruguay Mineral Exploration (UME-V), the sole miner in the South American country whose name it bears, is meeting production targets and starting to reduce costs at the Arenal gold mine.

During the quarter ended Nov. 30, UME incurred a net loss of US$2.5 million, owing to high production costs and the decision to write off development of the Arenal pit.

But Chief Executive Officer Chris Clark says figures for December 2004 show that “operating costs have peaked and are starting to fall.” The mill head grade that month was 2.08 grams gold per tonne for a new record output of 6,539 oz.

During the quarter that ended Nov. 30, UEM produced 15,934 oz. and generated US$6.3 million in sales revenue. In total, 14,396 oz. gold were sold at an average price of US$422 per oz.

Mill feed also came from the satellite Zapucay deposit and from low-grade stockpiles.

Two years ago, UME purchased the San Gregorio mine, adjacent to Arenal, from Crystallex International (KRY-T) and extended its lifespan by using a mill that had been installed many years previously by GRD Minproc. As a result, the company was able to generate cash as it began stripping a pit on the Arenal deposit.

In early December 2004, UME raised US$6.5 million to finance its exploration and development efforts at Arenal, and in the same month, the environmental bond facility was drawn, realizing US$1.5 million held in escrow.

At UME’s annual meeting, in London, U.K., Chairman Anthony Shearer said UME had brought Arenal into production “not only cheaply, but within eighteen months, whereas such a process normally takes up to five years. As a result, some of the comfort factors that one would normally expect for this kind of operation are still being generated.”

Meanwhile, at the Mal Abrigo nickel project, in the Florida greenstone belt, UEM has identified disseminated sulphides. The principal sulphide is pyrite, with minor pyrrhotite and chalcopyrite. Regional work also identified disseminated nickel and copper sulphides in the nearby Cerro Negro complex; these are believed to be an extension of the Mal Abrigo complex.

There is a strong Australian flavour to the UME operation, given that Clark, Exploration Director Michael Schwabe, and independent director John Morris are Aussies, as are many of the company’s consultants.

UME is listed on Canada’s TSX Venture Exchange and late last year also joined London’s AIM board.

— The author is a freelance writer based in Perth, Western Australia.