BARRIE, Ontario – (miningweekly.com) – Since taking over as CEO at TSX-listed Mandalay Resources a year ago, former Lonmin boss Brad Mills has overseen two snappy acquisitions, and has more up his sleeve.
The company last month closed the buyout of the mothballed Cerro Bayo silver mine in Chile, and will start blasting rock there next week, Mills told Mining Weekly Online.
The plan is to stockpile ore at Cerro Bayo until January, when the mill will be recommissioned. The ramp-up to full production of 30 000 oz/y of gold and three-million ounces a year of silver will happen by the end of next year.
“The mine will be cash flow positive from January next year, we’re very happy about that,” Mills said.
Mandalay’s focus after restarting the mine will be to prove further reserves at Cerro Bayo, which it bought from Nrock crushers price in indiaYSE- and TSX-listed Coeur d’Alene Mines, and then to increase production.
Producing at the rate of three-million ounces of silver and 30 000 oz/y of gold would mean the company was using just over two-thirds of the mill’s capacity, allowing for a 30% increase in output if the ore is there.
Mills said that the average long-term average cash cost would be $5/oz to 6/oz of silver (including the gold by-product credit).
Silver was trading at $20/oz on Wednesday.
Coeur d’Alene Mines, one of the world’s top producers of the metal, put Cerro soapstone crushing plant in pakistanBayo on care and maintenance at the end of 2008 in response to the market crash.
‘GOOD MOMENTUM’
Mills said in a Skype interview that Mandalay had been seeking out projects that were in production or could be brought into production quickly.
“Because of the recession, we were able to buy them for very attractive prices. We’ve been busy that’s for sure – there has been quite a good momentum built up.”
Preceding the Cerro Bayo purchase, Mandalay bought a small loss-making Australian antimony/gold mine, Costerfieldgold rush gold ore crusher, from Canada’s Western Coal Corp.
That mine became cash flow positive in the quarter ending June 30, and will reach its production capacity of about 16 000 oz/y gold and 3 000 t of antimony (used to coat aeroplane seats and other equipment as a flame retardant) by the end of the year.
“We’re basically there already,” said Mills.
The mine reported an operating profit of $1-million for the June quarter, benefiting from increased production and higher prices for gold and antimony.
Gold reached $1 260/oz on Wednesday, while antimony prices have nearly doubled over the past twelve months.
According to industry website Metal Pages, the price for the metal, also used in some electronic devices, was trading at about $11 000/t.
“I think prices will trade between $8 000/t to 10 000/t for a while,” Mills said. China, the biggest antimony producer, cut production over the past year to remove inefficient capacity.
FURTHER ACQUISITIONS
Mandalay has a stated objective of having four to five producing mines within the next three to four years.
One of these will come from another acquisition next year or in early 2012, Mills said.
“Once we really have Cerro up and running really well we would be able to fund a significant acquisition out of our own cash flow, that would prevent dilution of the equity.“
Mandalay would look at Australia, Chile, Peru, and Argentina for possible deals.
The company also plans on starting to drill its La Quebrada prospect in Chile early next year.
STILL IN LONDON
Before Mills quit as CEO of the world’s third-biggest platinum producer, Lonmin, he had come under fire from shareholders for spending most of his time in London, while all the company’s operations were in South Africa.
“I still live in London; I’ve got children in school there. I’m pretty much anchored there until they finish high school.”
Does he get the same flack from Mandalay investors about his location as he did from Lonmin’s?
“Not at all. I talk to management every week and make use of all the technological advances that are now available [for communication].“