The decision follows prefeasibility work that outlined a probable reserve of 5 million tonnes grading 5.9 grams palladium, 0.35 gram platinum and 0.29 gram gold per tonne, plus 0.06% copper and 0.07% nickel.
The reserve is contained in a 350-metre-long, sub-vertical zone directly below the mine’s existing pit. The 12-metre-thick zone has an average grade of 6.1 grams palladium per tonne.
Another 156,000 tonnes running 6.3 grams palladium, 0.38 gram platinum, 0.23 gram gold, 0.05% copper and 0.09% nickel are classified as indicated resources. Inferred resources are set at 7.2 million tonnes averaging 5.5 grams palladium, 0.33 gram platinum, 0.3 gram gold, 0.08% copper, and 0.13% nickel.
The estimates are based on 47,000 metres of infill drilling in 2002 and employ a cutoff grade of 3.5 grams palladium and a palladium price of US$325 per oz.
NAP’s prefeasibility study considered a mechanized, 2,000-tonne-per-day mine, with longhole stoping employed as an extraction method. Reserves would be accessible via a portal in the pit. Cumulative cash flow is projected at $37.4 million at a palladium price of US$325 per oz.. The estimates for capital and operating costs are $37.3 million and US$250 per oz., respectively.
Over the next six months, the company will continue with metallurgical tests and economic modeling aimed at bringing the project to the feasibility level.
Meanwhile, open-pit reserves at Lac des les have been halved after a recalculation based on a long-term palladium price of US$325 per oz.
Under the new plan, proven and probable reserves total 39 million tonnes running 1.9 grams palladium, 0.2 gram platinum and 0.15 gram gold per tonne, plus 0.06% copper and 0.08% nickel. The new estimate employs a cutoff grade of 1.1 grams palladium.
At the end of 2002, NAP reported proven and probable reserves of 88.7 million tonnes grading 1.5 grams palladium, 0.2 gram platinum, 0.12 gram gold, 0.06% copper and 0.05% nickel, all based on a cutoff grade of 0.7 gram palladium and a long-term palladium price of US$400 per oz.
Total measured and indicated resources have shrunk to 13.7 million tonnes averaging 1.7 grams palladium, 0.2 gram platinum, 0.14 gram gold, 0.07% copper and 0.08% nickel (versus end-of-2002 estimates of 65.9 million tonnes running 1.6 grams palladium, 0.2 gram platinum, and 0.1 gram gold at the end of 2002). Inferred resources are estimated at 110,000 tonnes grading 1.5 grams palladium, 0.2 gram platinum, 0.1 gram gold, 0.06% copper and 0.07% nickel.
NAP says its forward sales contracts guarantee a minimum price of US$325 per oz. on each ounce produced through to the end of June 2005. The contracts are capped on the upside at US$550 per oz. on 50% of production.
NAP’s CEO, Andr Douchane, says the revision of open-pit reserves to the lower end of its price range is in keeping with national policy 43-101 and reflects the current market price for palladium, which has been sitting below US$200 per oz. since late March. He does not expect palladium prices to improve much until late 2004 or early 2005, when huge inventories start to decline and automakers begin looking for more palladium.
During the three months ended June 30, the 15,000-tonne-per-day Lac des les operation produced 59,069 oz. palladium, compared with 62,168 oz. in the corresponding period of 2002. Daily mill throughput fell 1,267 tonnes, to 12,692 tonnes; the average headgrade climbed by 4% to 2.1 grams; and palladium recovery rates were little-changed at 76.6% (T.N.M., July 21-27/03).
Total cash costs (net of byproduct credits) climbed by US$33 per oz., to US$256 per oz., reflecting a stronger Canadian dollar, and an unscheduled 6-day shutdown to repair a motor bearing in the semi-autogenous-grinding mill pushed unit costs higher.
Income in the second quarter totalled $10.4 million (or 20 per fully diluted share) on revenue of $44.6 million, compared with year-earlier earnings of $7.5 million (15 a share) on revenue of $41.7 million. The recent quarter included a $2.3-million writedown on the damaged primary crusher, which, after providing all of the quarter’s coarse ore mill feed, was replaced by a new gyratory crusher.
For the first half of 2003, earnings amounted to $18.5 million (37 per share) on revenue of $89.8 million, compared with earnings of $13.8 million (27 per share) on revenue of $86.3 million a year earlier.
Cash from operations climbed by $6.1 million, to $20.8 million, in the second quarter, and by $17.5 million, to $31.2 million, in the first six months.
At the end of June, the company had $7.4 million in cash and equivalents, and $80.4 million in long-term debt (down $19.2 million from the beginning of the quarter).
On the exploration front, two holes sunk in the mine area have extended the Offset High Grade zone by 180 metres to the south. One hole returned 9 metres running 19.7 grams palladium at a depth of 625 metres, while a second, previously drilled hole cut 9.4 metres of 4.1 grams some 130 metres below the first intersection.
Be the first to comment on "NAP sizes up Lac des les underground (September 01, 2003)"