Rio Alto gets more production out of La Arena than expected

Rio Alto Mining’s (RIO-T, RIO-N) continues to build itself into a miner to be reckoned with on the back of its La Arena gold mine in Peru.

Just a little over a week after reporting earnings of just over $100 million for last year, the company reports that the mine poured 36,355 ounces of gold during the first three months of this year.

The results were bolstered by more tonnage making it on to the leach pad than originally expected. More ore meant an additional 1,739 oz. of gold. But that wasn’t the end of the good news. The average grade was also higher than the company had budgeted for, and Rio Alto says that contributed an additional 665 oz. of gold.

In all 2.3 million tonnes were place on the leach pad with grades averaging 0.51 grams per tonne, while Rio Alto had been expecting to leach 2.2 million tonnes with an average grade of 0.50 grams per tonne.

The production levels beat CIBC analyst Matthew Gibson’s estimate of 33,800 oz. for the quarter.

“We expect production to increase significantly in the second quarter as mining activities return to the higher-grade Calaorco Pit,” Gibson wrote in his research note. “In the near term, we continue to see a revised mine plan for both the oxides and sulphides, as well as an updated resource estimate as catalysts for the stock.”

CIBC has Rio Alto rated as a sector outperform with a price target of $8.00 per share.

In Toronto on Apr. 9 the company’s shares were up 5% or 23¢ to $4.63 on 490,000 shares traded.

La Arena sits in north-central Peru, roughly 18-km east of Barrick Gold’s (ABX-T, ABX-N) Lagunas Norte gold mine.

The mine has oxide measured and indicated resources of 100 million tonnes grading 0.46 grams gold and inferred oxide resources of 10.4 million tonnes grading 0.27 grams gold. Sulphide indicated resources come in at 313 million tonnes grading 0.29% copper and 0.24 grams gold with additional inferred resources of 320 million tonnes grading 0.3% copper and 0.2 gram gold.

In total the project has measured and indicated resources of 3.9 million oz. of gold an 2 billion lbs of copper and inferred resources totaling 2.2 million oz. of gold and 2.1 billion lbs. of copper.

The company expects to have a feasibility study completed on the sulphide resources sometime this year.

Gold was first poured at the mine in May of 2011, and last years’ output — its first in commercial production — came in at 2101,113 oz. of gold at cash costs of US$532 per oz. That production helped to generate net income of $100.4 million or $0.58 per share and cash flows from operating activities of $97.6 million.

Rio Alto expects to produce between 190,000 and 210,000 oz. of gold this year at cash costs of between US$675 and US$725 per oz.

The company began the year with US$62 million in cash.