.gif)
The Vatukoula Gold Mine needs $6-8 million in capital expenditure to allow it to remove the current production bottlenecks and achieve its production target, according to a company operational update for the period December 1, 2008 to February 28, 2009.
The report said directors of the company had had several preliminary offers in relation to the financing of this program and were now assessing which would deliver the best value to shareholders.
Subject to the investment into the mine, the management believed it would be able to achieve a pro-rata rate of 110,000 ounces of gold during the first half of 2010, said the report, released last week.
The company said the rate of production should lower its cash costs per ounce (assuming an oil price of $US 60 per barrel) by between $500-$550 per ounce.
Some of the highlights during the period included:
- decreased ore mined, to 47,571 tonnes from 67,100 tonnes in the previous quarter;
- decreased gold produced, to 7,470 ounces from 10,521 ounces in the previous quarter;
- increased average gold price achieved at US$884 per ounce from US$792 per ounce in the previous quarter;
- decreased fuel costs and the removal of government levy reduced the cost of power from $0.38 per kilowatt/hour in September 2008 to $ 0.21 per kWh in February this year; and
- negotiations concluded with the interim Government to remove 25 per cent from gross proceeds tax and fuel levy.
“The Vatukoula gold mine has historically operated on diesel generated power, which can represent between 35 per cent and 40 per cent, dependant on usage and oil price, of cash costs,” the report said.
Although the company’s cash costs per kWh dropped from $0.38 per kWh last September to $0.21 per kWh in February this year, the management was seeking alternate means to reduce this cost.
“In particular, the company is currently in discussions with several parties in relation to the provision of power from bio-fuel alternatives available in Fiji. Management believes that if the company switches to this alternate power source, the mine’s cost would drop to $0.10 per kWh, which in turn will result in lower operating costs per ounce,” the management said.
The report revealed that underground production for the period decreased to 47,113 tonnes with an average mine grade of 7.37 grams of gold per tonne.
“The decrease in underground mining has been predominantly affected by the availability and or utilisation rates of the underground haulage equipment, which has limited the amount of ore we are able to transport to the mill,” the report said.
The report highlighted the recent flooding resulting in substantial water ingress to the mine, and combined with the company’s limited availability of power and a limited pumping capacity, two days production was lost.
“The Vatukoula Treatment Plant is now operating satisfactorily with gold recoveries at 87 per cent, which is consistent with historic gold recoveries at Vatukoula.”
The report also revealed that the company had reached an agreement with the Ministry of Finance and National Planning in relation to the grant of key concessions and exemptions to the company’s fully-owned Vatukoula Gold Mines Ltd.
“The ministry has agreed to remove a 25 per cent levy on gross gold proceeds and cease the withholding of value added tax refunds effective immediately. In addition to the above concessions, the ministry has granted an exemption from fiscal and value added tax payable on fuel used in power generation at the mine.
“The company is still in discussions with the Fijian government and the exemptions stipulated in the 10 August Deed are still being negotiated,” it reported.
Vatukoula Mines has 750 local full time employees, expected to increase to 800 at full production.
Company chief executive officer David Paxton said difficulties with equipment availability had been a major concern and had resulted in lower utilisation rates.
“We still firmly believe in the future of the Vatukoula Gold Mines and are making every effort to return Vatukoula to operating profitability,” Paxton said in the report.
