JOHANNESBURG (miningweekly.com) – Ontario junior Lake Shore Gold on Wednesday said it would curb capital expenditure (capex) by between $5-million and $10-million to save money as the cost of its mill expansion increased.
Lake Shore warned that the Bell Creek mill expansion would potentially exceed the previous estimate of $61-million by between 10% and 25% as costs for materials and contract labour rose.
The company would spend about $56-million on the project during this year, with the remaining costs for the expansion to be incurred in 2013.
But despite the capex decrease, Gold Shore said it remained on course to produce about 85 000 oz to 100 000 oz of gold for the year. This wmobile crushers price in south africaould be achieved on the back of realising the planned ramp-up of its flagship Timmins West mine.
Cost savings in underground development and deferral of noncritical capital programmes would allow Gold Shore to lower spending at Timmins West.
The mine would produce 130 000 oz of gold in 2013, which is equal to an average mill throughput of about 2 300 t/d. Production would increase to 16aggregate mobile crusher plant0 000 oz, or close to 3 000 t/d in 2014.
Lake Shore would also align the timing for the Ball Creek mill expansion more closely with the expected increase in mine production and reduce its exploration spend.
As a result, the mill would now incrementally expand the processing capacity at the mill to 2 500 t/d during the fourth quarter, aiming at achieving its planned 3 000 t/d capacity in 2013.
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“In reviewing our 2012 business plans, we have identified a number of opportunities to reduce expenditures by realising cost efficiencies and deferring work that is not essential in the near term. The changes we are making will allow us to reduce capital expenditures this year, while still achieving our key production targets,” CEO Tony Makuch said in a statement.
He added that the company was in “good shape”, having exceeded its target in the first quarter. Lake Shore expects to produce about 20 000 oz to 25 000 oz of gold in the second quarter, trending near the upper level of the quarter’s guidance.
Further, the surface exploration programme for the year is being reduced to $10-million from the previous estimate of $15-million, while in-mine drilling, previously estimated at $12-million, is to be maintained with the focus on underground infill and definition drilling.
Makuch added that through the company’s expenditure review, it is working to ensure that shareholder capital is invested as efficiently and effectively as possible.
“Looking at our mill expansion, we are going to manage our costs by taking advantage of the flexibility we have in terms of when additional milling capacity is required. If we focus solely on achieving the 130 000 oz of production from Timmins West mine in 2013, we could run the mill at 2 500 t/d well into the second half of next year,” he said.
As at June 12, the company had cash and cash equivalents of about $40-million, with an additional $10-million in its gold-bullion inventory.
The company is currently completing an agreement with Sprott Resource Lending Partnership for a credit facility of up to $70-million, including a $35-million gold loan and a $35-million standby line of credit. Closing of the credit facility is expected by the end of the week.