Production and Sales
For the year ended December 31, 2012, the Company received proceeds of $28.4 million from the sale of 16,470 ounces of processed gold and 33,703 ounces of processed silver derived from intermittent operations at its processing plant in Zaruma while continuing testing and making improvements to the facility. In addition, the company received insurance proceeds of approximately $2.2 million relating to approximately 1,300 ounces of gold and 4,000 ounces of silver that was stolen from the Zaruma plant during an armed robbery on July 23, 2012.
The decrease in production for the year ended December 31, 2012 as compared to the year ended December 31, 2011 was the result of the disruption to mining operations while the Company was dewatering the lower levels of the main mine "Cabo de Hornos" (see further discussion below).
The most significant improvement made to the processing plant during the year was the installation and commissioning of the gravity concentration circuit. The gravity concentration circuit, which includes the Falcon concentrator and a large high intensity leaching circuit, increases the efficiency and recovery and allows the Company to process dore from concentrate on site rather than having to ship concentrate to a third party to be processed. The benefit of this circuit is expected to become increasingly important as the "Cabo de Hornos" mine gains access to higher grade material for mining (see discussion below).
The Company is developing three separate mines, of which one mine, Cabo de Hornos, currently supplies the majority of material to the plant for processing. A significant proportion of material processed to date has been excavated during mine development and is not part of the Company's estimated mineral resource set out in its Technical Reports, as dated August 21, 2006 and available for viewing at www.sedar.com, for the Zaruma Gold Project.
During the second quarter of 2012, as the declines at "Cabo de Hornos" progressed to further depths to access the higher grade resource material, it became necessary to dewater the lower levels of the Company's mine as well as the adjacent area. The primary cause of the accumulation in the water is believed to be the existence of the old abandoned mine workings in close proximity at the level. The water had accumulated in the old abandoned workings over several decades and was entering the Company's declines, which in turn made the lower levels of the Cabo de Hornos mine inaccessible. This disruption to mining operations resulted in a decrease in the tonnage and grade the Company was able to mine during the second half of 2012.
The Company has recently successfully dewatered the declines at "Cabo de Hornos" to the current level and has been able to recommence the decline development in this area. The Company expects to be required to continue dewatering as the decline progress downwards, however the volume of water is expected to be less as the Company moves beneath the abandoned mine workings.
The advance of the declines in the current year has allowed the Company to start accessing and mining higher grade areas contained in the Company's mineral resource estimate, particularly the Matalanga vein. Recently this has resulted in an increase in the average grade of the material mined and delivered to the plant compared to the second half of last year. The Company expects to gain access to additional higher grade veins, contained in the mineral resource estimate, as the declines continue to be developed during the current year, which is expected to result in increased mine production. This out`look is based on current operations, mine plans and exploration results, which are subject to change and as such cannot be assured (see "Critical Risk Factors" of the Company's Management's, Discussion and Analysis, dated March 27, 2013, which is available at www.sedar.com).
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