Junior explorer Huldra Silver has reported assay results from the final batch of 24 drill holes as it completed an exploration program at its aptly named Treasure Mountain project in BC. These assays included one extremely high grade interval of 1.2 meters with 1,565 g/t silver, plus combined 28.15% lead, zinc, and manganese content. Within the full batch of results there were many high grade sections, commonly encountered over narrow vein widths of a meter or less. This drilling effort was intended to further define shallow resource zones that have been identified in earlier exploration work, and combined with the new data will assist the company in planning follow up work. The objective is to outline a resource that can advance through development to production.
Another junior with production aspirations is Quebec based Abcourt Mines. The company controls a portfolio of three formerly producing mine projects. Abcourt is continuing with a drill program to define new ore zones at its Abcourt-Barvue Project, and reported extremely high grade assays this week that included 1,389 g/t silver and 5.57% zinc over an interval of 4.7 meters. There is a compliant resource defined under NI43-101 reporting requirements amounting to more than 36,000 ounces of gold and 19 million ounces of silver, plus associated zinc content. This latest round of exploration work is expected to contribute to an upgrade in classification for resources of the project and perhaps demonstrate stronger economic potential for a decision to recommence mining. The project is well served by existing mining infrastructure and the company believes the project could be rapidly advanced back to production.
Linear Metals has reported assays for three drill holes completed late last year, from its Nyanza Project located in Kenya. A widespread area has been identified with enriched gold in soil levels that would suggest nearby vein systems are present. The drilling focused on a target area known as the Kamwango grid, a high grade gold prospect. Each of the drill holes encountered gold zones, highlighted by an interval of 4.8 meters bearing 10.8 g/t gold. Visible gold was reported in two of the cores. Assays are pending from two other holes that have been completed as part of the same program. Linear Metals controls a total property area in Kenya of 2000 square kilometers with numerous targets that have the potential for discovery of gold deposits.
In Mexico, junior producer Silvermex Resources provided an update on its mining operations for the fourth quarter of 2011. Silvermex operates the La Guitarra Mine, a project that has been challenging to generate recurring profits during the last few years. While the mineralization is indeed of high enough grade to suggest strong economics, the distribution of the resources in narrow veins has made it difficult for a junior miner to extract enough of this material to keep the mill running efficiently. The challenge is not unique, and most smaller underground mining companies are faced with similar issues.
For the most recent quarter, Silvermex was able to run an average of 331 tons per day through the mill, above the average rate for this project, and that increased throughput has contributed to stronger operating results. The company produced 134 thousand ounces of silver and 1000 ounces of gold during the quarter. This output represents a sharp increase over the previous quarter, and it is a step in the right direction for Silvermex as it works towards achieving recurring profits.
Meanwhile Paramount Silver continues with aggressive exploration activity at its San Miguel Project in Sonora. Step out drilling from an earlier discovery zone at the La Union deposit area has yielded some of the highest gold grade intervals as yet reported from the property. This included one section of 7.75 meters core length with 29.51 g/t gold and 19.11 g/t silver. In another hole the company reported a wider zone of alteration grading 3.7 g/t gold and 17.34 g/t silver over a 79 meter interval.
Paramount has presented a regular stream of updates and exploration news over the last couple of years and the results of this work have established an impressive gold and silver resource at each of its two core projects. Total compliant resources now amount to more than 4.7 million ounces of gold and 106 million ounces of silver. The latest news reported this week is significant in that it adds both high grade and also hints at a much larger deposit area in a previously untested zone of the property. The potential to outline a bulk tonnage deposit at La Union, suitable for lower cost open-pit extraction, is very much on the table with this latest discovery success.
Agnico-Eagle Mines reported financial results for 2011 and the headline numbers were extremely disappointing. The year that had started off with so much promise for this rapidly growing producer transitioned into a nightmare after a string of operating issues and missed targets led to a selloff that trimmed the value for the company stock by half. It appears that the company has opted to make this a bad news quarter, lumping in a series of nonrecurring losses and write downs that may clear the slate for a recovery in 2012.
Persistently high operating costs at the Meadowbank Mine have prompted management to scale down the mining plan and take a write down against the carrying value for the project due to the shorter mine life. The company also took a write down against the value of the Goldex Mine, where operations were suspended due to underground stability issues.
Offsetting some of the bad news, the company provided guidance that some production growth was planned for the Pinos Altos, La Ronde, and Kittila Mines to replace some of the lost output from Goldex. Agnico-Eagle also announced that it has increased the quarterly dividend by 25% to 20 cents per share.
Kinross Gold also faced a disappointing headline for its 2011 full year results, as write downs and charges against earnings contributed to a net loss of nearly $2.8 billion. Digging through the numbers however suggested the story was not nearly as dire since the entire loss for the year was generated by realizing a non-cash goodwill impairment charge of $2.9 billion against the value of acquisition transactions reported in prior quarters. Production costs for Kinross increased, but the operating margins were also higher. Kinross opted to follow the trend established by other producers and announced it has increased its quarterly dividend by 33% to 8 cents per share.
There was some good news on the earnings front this week however, as senior producer Goldcorp was able to report record revenues and cash flow for 2011. Net earnings for the company were also a record as it posted a $1.8 billion profit for the year. What is encouraging for investors is that even as production has climbed, the reserves and resources growth for the company have risen faster, so the future prospects for Goldcorp remain bright. Much of this strong performance is due to the low cost structure for most of the mines operated by the company, and with higher gold prices during the year the overall operating margins rose to an impressive $1402 per ounce of gold produced. In this key metric, Goldcorp has set the standard for the entire sector.
Taken in context, the financial news of this week for the mining stocks has demonstrated that even with higher gold prices the fortunes of the large mining companies are still largely driven by the ability of these companies to deal with the challenging circumstances that characterize the mining business. Growth in production comes at the risk of facing cost overruns and unpredictable operating issues that can strip off the gains in market value very quickly, even for well run companies.
Mike Kachanovsky |
