 |  | |  | |  | |  | |  | |  | |  | |
| | | | | | | | | | | | | | |
|
|
Operations
Ghana
Mauritania
| |
Operations UpdateHighlights for the Second Quarter include:
Chirano Gold Mine -- Ghana (Red Back 90%) The project is within the Bibiani gold belt along strike to the south of the Bibiani gold mine. There are eleven deposits that currently comprise the Chirano project: Akwaaba, Suraw, Akoti South, Akoti North, Akoti Extended, Paboase, Tano, Obra South, Obra, Sariehu and Mamnao. Gold mineralisation continues at depth below the current open pit designs at many of the deposits currently included in the mine plan. Drilling at Akwaaba in 2007 established a high grade underground resource which is now being developed as an underground operation. Underground reserves at Akwaaba Deeps have now recently been determined to be 1.04 million oz based on the sub-level caving mining method. The development of Akwaaba Deeps is well underway, with work on the decline having commenced as planned in the second quarter. First ore from Akwaaba Deeps is expected to be delivered to the mill in the fourth quarter of 2008. In addition, open pit reserves have reached 1.38 million oz. Chirano's 2008 gold production is currently estimated at approximately 130,000 oz, increasing to 250,000 oz by 2010. In order to support the new Akwaaba Deeps underground development, the Company is expanding the Chirano processing facility to a nominal throughput of 3.5 mtpa. In addition to increasing capacity, the expansion also addresses the rock hardness issue identified in 2007. The new crushing facility will reduce ore to 80% passing 12.5mm, optimizing milling efficiencies with the addition of a third mill and the conversion of the SAG mill to a ball mill. Commissioning of the expanded plant is expected in the first quarter of 2009. Exploration drilling at depth along the Chirano shear zone has recently resulted in the discovery of Paboase South Deeps, a new, high grade structure below the Paboase South open pit (June 10, 2008 news release). This discovery, together with early positive results under other surface deposits, confirms the potential for Chirano to host other high grade deposits at depth. Revenue per oz has increased significantly compared to the same period in 2007 because:
Chirano's cash operating costs per oz for the three and six months ended June 30, 2008 are $431 and $420 compared to $375 and $386 for the same periods in 2007. The increase is largely due to higher material and fuel costs and the mining of lower grade ore. Cash costs for the second half of the year will continue to be under pressure as higher electricity charges have come into effect in Ghana (June 27, 2008 news release). As a result, on an annual basis, Red Back expects Chirano's 2008 cash operating costs per ounce to average approximately $450 per oz, compared to an initial forecast of just under $400. Tasiast Gold Mine -- Mauritania (Red Back 100%) The Tasiast deposit is the first mine within an extensive, largely under-explored gold system. This system is a 70 kilometres long by 15 kilometres wide north-south trending Archaen age, Aoueouat greenstone belt, which is geologically similar to other Archaen greenstone belts in the world that host major gold deposits. The Tasiast property covers a 60 kilometre strike length of the Aoueouat greenstone belt, virtually encompassing an entire mining district in the country. The deposit is open along strike and at depth. Gold mineralization discovered to date occurs in two parallel trends: the Piment Zone, which is continuous over a 4.5 kilometer strike length, and the West Branch, which has been defined by soil sampling, trenching and drilling over a one kilometer strike length. The Piment zone hosts the bulk of the current resources at Tasiast and all of the reserves, with five open pits defined over the strike of the mineralisation. Current drilling at Piment is designed to add and convert further resources and to test the potential of the newly defined Piment Footwall Zone. Drilling at the West Branch Prospect, 2 km south of the Tasiast plant site, is designed to expand and convert the current resource at that deposit. Tasiast reached name plate plant production very late in December 2007 with the installation of a new primary crusher. Commercial production was achieved at the beginning of 2008 as determined by management based on quantitative and qualitative measures. Tasiast is expected to produce approximately 125,000 oz of gold in 2008, its first year of operation, an increase of 13% compared to original projections. During the second quarter, Tasiast terminated its third party mining contract and negotiated the acquisition of the related mining fleet for a price of approximately $18 million. The Company expects to realize sizeable mining cost savings over the mine life by taking control of mining operations. In addition, the termination of the contract removes the Company's only significant foreign exchange exposure to Euros. Gold production is sold at spot prices. Cash operating costs per oz at Tasiast for the three and six months ended June 30, 2008 were $437 and $417. Diesel costs increased 37% during the second quarter as the Mauritanian government, which regulates the country's oil price, made adjustments in light of market conditions. Notwithstanding higher material and fuel costs, Red Back anticipates that costs will decrease over the second half of 2008 to average approximately $400 per oz for the year. Cost reductions from the decision to go to owner-mining operations should be realized starting in the third quarter. In addition, the recent installation of a power generation plant that utilizes cheaper heavy fuel oil should be fully functional by the end of the third quarter, upon completion of manufacturer's modifications to meet original equipment specifications. Red Back is proceeding with expanding the Tasiast processing facility to increase production to approximately 2.5 mtpa. Commissioning of this facility is expected in the first quarter of 2009. Upon completion of the expansion, Tasiast is expected to produce in excess of 200,000 oz of gold per annum. The Tasiast resource contains significant quantities of lower grade material. Ongoing test leaching work indicates that conventional "dump" or "heap" leaching may be commercially viable. Two pilot dump leach pads have been constructed at site using lower grade material and preliminary results indicate that the oxide material leaches rapidly. Continued positive results from ongoing test work may result in a heap/dump leaching processing operation with a positive overall economic impact in the form of increased reserves, annual production growth and lower cash operating costs. |
| Home Corporate Operations Investors News QwikReport Contact |  |
| |