Mineral Park Mine
Mercator's objectives for 2013 are to continue to maximize cash generation through continual improvements, with a focus on increasing throughput and lowering unit costs. Specific goals are to produce 93.0 to 102.0 million pounds of copper equivalent(ii), comprised of 41.5 million to 46.5 million pounds of copper, 11.0 to 12.0 million pounds of molybdenum and 0.6 million ounces of silver, with cash costs(i) to $2.25 to $2.50 per pound of copper and $8.55 to $9.45 per pound of molybdenum.
In the first quarter of 2013, Mineral Park has taken additional maintenance downtime to re-install the Company-owned natural gas turbine, which, since reinstallation, has been exceeding expectations. As planned, the Company is currently mining through harder sections of the mineral reserves and has also recently completed the dewatering of Ithaca allowing for mining to resume in that pit. Mining in the Ithaca pit, which has softer ore, should help increase mill throughput as it will provide additional blending options for the various ore types at the mine. As a result of the increased maintenance downtime and temporarily mining through harder ore sections of the mine, the Company expects production in the first quarter of 2013 to be lower than the previous quarter. However, with increase ore blending options and ongoing optimization initiatives, the Company anticipates sequential quarterly production improvements during 2013 to achieve its production goals.
As previously disclosed, in 2012, the Company encountered lower than expected copper grades as it mined through the transition zone from the supergene enriched copper material into the primary hypogene copper mineralization, while also mining through harder than expected ore in the Turquoise pit at the mine. As such, the Company is presently in the process of revising the mineral resource model to more accurately predict transition zone copper grades and the hardness of certain zones in the ore body to help with mine planning. Once fully assessed, the Company will update Mineral Park's mineral reserve and mineral resource estimates.
As part of the cost reduction and productivity improvement initiatives in 2013, the Company has revised its capital program to $11.7 million at Mineral Park, which includes capital investments in the mill to increase throughput rates, $1.7 million for additional mining fleet to improve flexibility in the mine's ore blending options to increase throughput rates, and $6.3 million being spent on sustaining capital.
Plans at El Pilar for 2013 include continuing efforts to de-risk the Project through additional metallurgical testing, which has already commenced, and completion and receipt of the final environmental permits for constructing the power line to the Project. All permits necessary for the commencement of construction of the mine have been received.
Although extensive external and internal metallurgical studies have already been conducted for the Project, including over 100 column tests and two larger scale run-of-mine crib tests, additional metallurgical column testing has commenced to evaluate the potential to attain the same projected copper recoveries (56.9% over the Project's life-of-mine) while reducing acid consumption, by potentially as much as 20%. These column tests will be conducted by managing solution application rates and raffinate pH.
Meanwhile, the Company continues to explore various value-accretive options to finance the Project. After funding is secured, with a 15-month construction timeline, the Company has the potential for a short cycle to convert its investment into cash flows.
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