Update on the Brigus Gold Turnaround
I have just received a set of observations from geologist / analyst Joseph Hamilton with Primary Capital resulting from his recent visit to the Black Fox complex. Because Brigus is continuing with a very critical stage of its turnaround process, with the market's restored faith in the company certainly at stake, I am sure investors and interested parties will find these timely observations very valuable. I know I did.
I will be visiting the mine again for myself next month, and look forward to reporting my findings. I am hopeful that the stock will have reclaimed the $200m threshold by then so that I can write-up my observations in a published article (requiring a min. $200m mcap).
As arduous as the journey has been thus far, Brigus remains a top-ten holding of mine, and I have added to my stake on several occasions over the past couple of months.
Please enjoy the following observations from Joseph Hamilton of Primary Capital:
"Summary: A change in the diversity of mining methods and equipment has allowed the Company to have much better control over underground dilution. As underground development progresses the Company has more flexibility through a larger number of working areas (currently at 22 going to 30 in Q3) and this should soften any grade shocks from individual stopes. The open-pit continues to perform to plan. The Company should have little difficulty meeting it’s 77,000 to 85,000 oz guidance for this year. Fourth quarter should be able to demonstrate a 22,000 to 25,000 oz quarterly run-rate. Minesite cash costs will be high (probably about $850 to $900/oz) in the first quarter but should stabilize to around $700/oz by Q4 of this year. Some uncertainly exists in the cash cost forecasts until the mix of high-cost and lower-cost underground methods is known and the amount of expensed development is determined. The exploration at Contact and the 147 zones continues to demonstrate alternatives for enhancing the production profile or mine-life at Black Fox. PEAs should be available later this year."
"The underground is extracting ore from three areas: upper levels around the old workings and various stopes on the east and west ramp. Ore production increased from about 250 tpd in January and February to about 450 tpd in March and is expected to increase to about 800 tpd by July-Aug of this year. The objective is to hold the underground head grades to about 6 g/t and this should be attainable through a program of selective mining, predictive geological models and tighter underground levels. Approximately 40% to 50% of mill feed will come from underground when the underground is running at capacity, with the remainder from the open pit. Overall mill head grades should run about 3.5 to 4.0 g/t for this year, increasing to over 4 g/t in Q4 and into next year as a greater contribution from underground ore is realized. The mill is running smoothly at 2000 to 2200 tpd with a 95% recovery."
"Underground mining is using a variety of methods including shrinkage, cut and fill, resuing and ultimately some form of modified long-hole. Mining methods are tailored to the geometry of the ore zones in an effort to hold the underground head grade above 5.5 g/t. This is a huge change from Q4 last year where cut and fill with jumbos and large haul equipment was the only method being used. This resulted in massive dilution (in excess of 40%) as the ore zones meandered and the jumbos couldn't respond by turning drifts into ore. Jumbos are still being used but the introduction of jack legs has allowed better setup of cut and fill stopes and allowed dilution to be kept to a minimum. The results are apparent in the monthly production grades for Q1 of this year. There are currently 22 active mining areas, and this is expected to increase to about 30 areas by the end of June and up to 40 areas by the end of this year. This number of active areas should provide the underground mine with the flexibility that it needs to attain its production targets."
"The change in mining methods and in level spacing has resulted in higher mining and capital costs for the East Ramp Zones. The development of the West Ramp Zones into long-hole amenable stopes should allow a reduction in the capital and operating costs for these stopes. We believe that the Company should be able to attain a blended underground mining cost around the $90 to $110 per tonne range for about 40% of the mill feed. These costs will be the most variable on a month-to-month basis and depend on the type and intensity of mining methods utilized. Open pit ore should be delivered for about $40 per tonne. Mill costs are running between $11 and $13 per tonne. All-in costs per tonne treated are expected to range between $75 and $90 per tonne (includes transport to mill and mine-site G&A). If the combined head grade can be held to 4 to 4.5 g/t, Brigus should be able to attain $650/oz cash costs. Expensed development costs during the year will be variable but may be as high as $50 per ounce."
"The market will probably start coming back to this name as production levels are reported over the next few months. A larger impact may be felt when capital and operating costs numbers for the Contact and 147 zones are known, and the positive impact to operations is communicated to the market, probably in Q4 of this year."