Part 2:
Punitaqui/Cinabrio Mine, Chile (TMR, 100%)
The expansion of the Punitaqui/Cinabrio mine in Chile to 3000tpd (1mtpa) is well advanced, with the relocation of three second hand ball mills from Spain achieved last quarter. The new three-stage crusher, installed at a cost of $US2 million, is capable of crushing up to 4000t of ore a day.
In the June quarter the company produced around 1400t of Cu and 40koz of silver, with production rates continuing to increase. Based on achievement of 3000tpd by early next year, we estimate total production of 11.6kt of Cu, generating revenues above US$70 million, and potential EBITDA in excess of US$40 million. This is based on an average copper price of US$3.20/lb for 2008.
The feasibility study for the oxide project is underway, with results anticipated soon, and construction underway in 2008. Capital cost will be low, with initial production of 200ktpa increasing to 400ktpa over two years.
Lichvaz Gold Project, Armenia (TMR, 86%)
TMR recently announced a maiden JORC resource for the Lichvaz mine of 3mt@7.0g/tAu, 31.5g/tAg and 0.5%Cu for just under 0.7moz gold. This superseded the earlier (non-JORC) estimate of around 9mt@3.75g/t, 24.5g/tAg and 0.3%Cu.
The company is in the process of finalising a US$60 million debt raising to fund construction, with first gold pour at the new facilities due early in 2009 at an initial rate of 100kozpa. Approximately 500kozpa of silver will be produced, taking the total to 110kozpa on a gold equivalent basis. Total capital cost, including contingencies and working capital is estimated at US$60 million.
The company believes that ultimately, depending on resources established and particularly a large, lower grade bulk stockwork resource, an operation producing up to 200kozpa may be feasible at the site.
The company purchased the 800ktpa Rishton Mill in Queensland , and will be relocating the refurbished components to Armenia in 2008. The site currently has a gravity circuit installed and is producing a small amount of gold (6kozpa).
The mine has experienced a significant amount of development over its life, with substantial declines and adits already in place. Since ownership of the asset by Iberian (IBR), the infrastructure has been upgraded (left). There is good access at the site, with sealed roads, power and plenty of water.
Due to the favourable operating environment in Armenia , operating costs are forecast by the Company to be below US$300/oz.
A 20,000m RC drilling program is due to commence at the mine in coming months, and we anticipate significant upgrades to the resource base over the next 18 months leading up to full scale production at the site.
Monetmor/Portalegre Gold, Portugal (TMR, 86%)
TMR, through it’s majority owned subsidiary Iberian Resources hold almost 1,400km² of tenements in Portugal , including almost 1moz of gold at the Montemor and Portalegre deposits. Additional projects held by the company include Caviera base metals and Regua tungsten.
The company is moving towards feasibility with the Montemor project, following scoping studies indicating a production rate of 60kozpa at a cost below US$350/oz. The current resource base consists of shallow shear-hosted deposits, with potential for extensions to known resources along strike and at depth. The initial JORC inferred resource at Montemor has previously been established at 6mt@2.2g/tAu for 0.61moz. Over 50,000m of drilling has previously been undertaken at the deposit.
During the feasibility phase, the plan is continued drilling and completion of baseline environmental studies leading to completion of an Environmental Impact Statement (EIS).
An initial resource of 7.4mt@1.37g/t Au (327koz) has been delineated at Portalegre, approximately 100km to the north-east of Montemor. The company considers the shallow oxide ore to represent an excellent opportunity to establish a heap leach operation, also at a production rate of around 60kozpa.
We anticipate development of both Portuguese projects is a few years away, with the exact timeline yet to be determined.
Initially, the Company plans to establish a resource inventory of 2moz, which will aid in deciding the most appropriate development strategy for the projects.
Provided activities are progressed promptly, first gold production could be achieved by mid to late 2010, based on a simple cyanide heap-leach style processing plant to produce around 60kozpa. A second operation at a similar rate may start twelve months later.
Board and Management
The board of directors have significant experience in developing gold and base metals projects. Executive Chairman Hugh Callaghan is a former Rio Tinto Limited (RIO) executive, partly responsible for developing Riversdale Mining into a $600 million company, and share price appreciation well over 1000%. Previous experience also includes working at the Escondida mine in Chile .
MD, Mike Fischer is a seasoned mine manager, joining TMR from CBH Resources Limited (CBH), where he was EGM operations.
TMR have executives on the ground in Chile and Armenia , actively overseeing the exploration and expansion plans, including Steve Playford, mine manager at Cinabrio.
Conclusion
In summary, we have been impressed by the progress made by management to date in the short time since the acquisition of Iberian resources. The team appears to have a genuine commitment to growing the business at a manageable pace, and the next eighteen months will be a critical period of transformation of the company from small-scale producer, to diversified miner.
A total of five mining projects have potential to be in production within three years, which represents an ambitious target, however one that the company believes is achievable.
We believe the growing production base, excellent potential for further substantial increases to the global resource inventory and potential production/earnings profile going forward should continue to see the company attract a high level of interest and support in 2008.