Plant delays trip Jaguar

Jaguar Mining (JAG-T) has halved to 25,000 oz. its 2005 gold production estimate, dogged by delays in access to two processing plants in Brazil. The company also expects total cash costs to climb by around 21% to US$329 per oz.

At Sabara, the company still awaits the final construction permit for a proposed 1,500-tonne-day oxide plant. Jaguar chief executive David Titcomb says the delay is at the local level, and that the licence is expected shortly.

Meanwhile, with environmental permit in hand, deforestation of the mine and plant sites is wrapping up. The technical team and equipment are all in place, and Titcomb is confident the plant will be completed by the end of the fourth quarter rather than in the third quarter as originally planned.

In the end, the delay is expected to result in some 10,700 fewer ounces of gold being produced in 2005.

Once its up and running, the new Sabara plant is expected to lower cash operating costs by around US$50 per oz. at the project’s A, B and C zones.

Additionally, a delay in shipping sulphide ore from the Catita mine to AngloGold Ashanti‘s (AU-N) Queiroz plant is expected to shave another 15,000 oz. from Jaguar’s 2005 production figure.

Ore from Catita will not be processed until the first quarter of 2006, as Anglo needs to run through some 100,000-to-150,000 tonnes of ore stockpiled at the plant from another of its projects. Jaguar’s ore was to have been processed beginning in August or September.

Titcomb doesn’t expect the situation to ongoing, as Anglo’s mine plan concerns refractory ore located at depth. Such ore would be processed in the plant’s other circuit and thus not compete with Jaguar’s feed.

Mine development and ore stockpiling continues at Catita.

Looking ahead, Jaguar doesn’t expect either delay to impact on gold production in 2006, which is pegged at 75,000 oz.; production for 2007 is forecast at 150,000 oz.

Jaguar ended the recent second quarter with net loss of US$1.4 million (or US5 a share), compared with a year-ago net loss of US$1.36 million (or US7 a share). The loss for the first six months comes to US$3.4 million (US11 a share), up from the US$2.3 million lost a year earlier.

The company poured 6,839 oz. of gold at a cash cost of US$366 apiece during the second quarter. Cash costs rose thanks to lower recoveries and a stronger Brazilian real against the greenback. Recoveries are expected to improve to around 77% during the third quarter as higher-grade ore from the new Catita and Pilar zones are blended with transitional ores.

Second-quarter gold sales totalled 2,997 oz. at an average price of US$424 per oz. The clearance process in Brazil delayed the sale of another 1,600 oz. until July; revenue of US$693,000 will be reported in the third quarter. The rest of the reported ounces remain in the processing circuit.

First-half production was ahead of budget at 12,157 oz. at US$342 per oz.; cash cost were also higher than budgeted (US$327 per oz.) owing to the strengthening the Brazilian real.

At quarter’s end, the company had US$18.8 million in cash and US$23.4 million worth of working capital.

On a brighter note, Jaguar expects its Turmalina gold project in Minas Gerais state to begin producing in the third quarter of 2006.

A recently completed feasibility study there envisages mining at a rate of 360,000 tonnes per year to annually produce 60,500 oz. of gold at a total cash cost of US$176 per oz.; total production costs, including capex, are US$234 per oz. The project has an initial lifespan of 5.5 years.

Turmalina is centred on proven and probable reserves totalling 1.9 million tonnes grading 6 grams gold per tonne, for around 370,000 contained ounces of gold.

Titcomb says that while the project still requires final licensing, it is well along the permitting path, as a former producer. He expects construction to begin around the end of the third quarter, with production ramping up in the second quarter of 2006.

"This project has exceeded our expectations, and will clearly be the foundation to spring us to the mid-tier production level of 200,000 oz," Titcomb told analysts during a recent conference call.

The company is looking to arrange US$12 million-US$15 million worth of debt financing to fund the US$19.2-million project.

The company is already about halfway through a ten-hole in-fill drilling program aimed at extending the mine-life by upgrading around 200,000 oz. of measured and indicated resources to reserves.