Mercedes produced 36,575 GEO in the quarter, representing an increase of 53% over the 2012 first quarter production of 23,953 GEO, which included commissioning production of 8,959 GEO. Production in the first quarter of the year consisted of 33,039 ounces of gold and 176,801 ounces of silver, compared with 22,016 ounces of gold and 96,887 ounces of silver in 2012. Cash costs per GEO were $519 per GEO, 3% lower than the cash costs in the same quarter of 2012.
All operating measures at Mercedes have shown improvement over the first quarter of 2012, notably, gold feed grade increased by 11%, silver recovery rate increased by 37% and tonnage of ore processed increased by 21% over the same quarter of 2012. These improvements also led to the lower cash costs per GEO.
Development continues at the Barrancas zone with the higher grade Lagunas Norte vein, one of the newest discoveries at the mine, which started production from flat-lying ore in the third quarter of 2012. Confirmation of the width and grades of mineralization by infill drilling at Lupita and the recent discovery of high-grade mineralization at Rey de Oro that may be amenable to underground mining methods, are expected to continue growth of the measured and indicated mineral resources that will extend mine life, maintain higher throughput and sustainable production levels.
Gold production at Jacobina was 17,366 ounces in the first quarter, compared with 30,493 ounces produced in the same quarter of 2012. Higher dilution resulting from insufficient development work, as well as lower feed grade, impacted production in the quarter.
Cash costs were $1,276 per ounce for the first quarter compared with $666 per ounce in the first quarter of 2012. Cash costs reflect the reduced production volume in the quarter but are expected to return to more normal levels of approximately $650-$750 per ounce.
The Company has initiated a plan to reduce costs rather than maximize production at Jacobina. The objective is to produce quality ounces with sustainable margins and maximize profitability at producing mines whose all-in cash costs exceed the average cost structure. The Company believes this is a prudent approach given the current reality of market conditions and metal price levels.
The Company is also taking active steps to more quickly access higher grade areas of the mining complex to improve production levels while maximizing margins and continues to focus on upgrading the current mineral resources at Canavieiras and Morro do Vento and improving overall mineral reserve grade for the mine. Development of these high-grade areas creates the opportunity for production to increase to over 140,000 ounces; the timing of which is dependent on the pace of development work in these higher grade areas.
Minera Florida, Chile
Minera Florida produced a total of 34,024 GEO in the quarter, an increase from fourth quarter 2012 production of 32,797 GEO and an increase of 38% versus production of 24,705 GEO in 2012. Production consisted of 26,651 ounces of gold and 368,634 ounces of silver, compared to 22,101 ounces of gold and 130,191 ounces of silver in the first quarter of 2012. Improvements in the mine plan have led to access to higher grade ore at the mine and improved dilution. A portion of the increase is also attributable to production from the tailings retreatment plant. Comparison of grade, ore feed to plant and recovery to the prior quarter is not meaningful as production from the tailings retreatment plant comes from lower grade ounces with reduced recovery. However, they benefit from no mining costs and credit from zinc as a by-product. In addition, there is modest sustaining capital for the tailings retreatment plant. On balance, this lead to higher production at an overall cash cost comparable to the prior period. Accessing higher grade underground ore should further improve production and cost although current zinc prices will mean that the extra ounces from the tailings retreatment plant may be produced at higher costs. The tailings retreatment plant reached full design capacity in January 2013.
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