Open Pit
A new experienced open pit mining contractor commenced contract load/haul operations in January 2013 under a four-year contract employing more efficient equipment with on-board GPS systems. Average open pit grades are expected to improve in comparison to 2012 as a result of better open pit grade control procedures for the entire 2013 year through improved pit supervision, dig and blasting patterns, and from the mining of higher grade blocks in the second half of 2013.
Underground
The planned switch from contractor to owner-operated for on-vein drifting starting in September 2013 will have a short-term negative impact on the mining rates for development ore in the last few months of 2013 but stope ore tonnes are expected to increase due to the full complement of teams of long-hole miners for the entire 2013 year.
Average underground ore grades are forecasted to improve as a result of reduced ore dilution through:
a. cable-bolting of all stopes prior to mining;b. use of narrower drift headings (to 3.5 metres) upon the transition to owner-operated ore mining in September 2013; andc. improvements to stope planning, mine sequencing and better coordination between geology and mine operations.
Underground mining costs per ore tonne are expected to remain elevated in the first three quarters of 2013 due to the utilization of the underground mining contractor during the transition to owner operated mining and the mining of higher-cost contractor cable-bolted stopes. The Company has ordered a dedicated cable-bolting machine with delivery expected in the third quarter of 2013.
Capital Expenditures
Capital expenditures for the Bjorkdal mine for 2013 are estimated to be $21.1 million consisting of:
-- underground mining equipment of $6.2 million for the changeover to self- mining of all underground ore in 2013 (this equipment will be mostly financed by a competitive Swedish bank loan as detailed below);-- capitalized underground development costs of $6.0 million for 1,496 planned metres of underground tunnels;-- capitalized open pit stripping costs of $2.1 million;-- building upgrades and extensions of $0.6 million to accommodate the new miners and to store additional equipment parts and spares;-- plant improvements of $1.9 million including the purchase of a new primary crusher. The plant is currently pilot testing a new Sandvik crusher model on loan from the manufacturer;-- tailings system improvements and capacity expansion of $1.1 million;-- capitalized underground exploration costs of $1.9 million (see "Exploration" section below), including the purchase of an underground core drill unit;-- capitalized open pit exploration costs of $0.5 million (see "Exploration" section below); and-- other capital expenditures of $0.8 million for the underground mine.
Exploration
The Company expects to continue with its on-going underground drill program by conducting 11,000 metres of diamond drilling targeting high grade areas including down plunge and along strike extensions of new veins identified from the Company's 2012 drill program.
In the open pit, the Company plans to perform 3,000 metres of diamond drilling primarily to upgrade resource categories and to assist with future mine planning.
For regional exploration of nearby targets, the Company intends to conduct a modest work program in 2013 in order to test some very prospective targets on its concession.
