Roca Mines Inc. (ROK: TSX-V) has released its financial results for the third quarter of 2008, including production and sales from the MAX Molybdenum mine located in British Columbia, Canada. All dollar amounts are stated in Canadian dollars unless otherwise indicated.
Overview and highlights:
- Revenues of $6.3 million since declaring commercial production as of April 12, 2008;
- The average price for molybdenum sales in the quarter was US$32.82 per pound;
- The Company reported its first operating profit of $1.5 million or 2 cents per share;
- The Company reported cash flows from operations of $2.2 million or 3 cents per share;
- Molybdenum production during the quarter was 345,571 pounds compared with 261,462 pounds for the three months ended Feb 29, 2008; and,
- Molybdenum cash costs for the quarter were approximately $7.75 per pound of molybdenum.
MAX Molybdenum Mine - Production Results and Concentrate Sales
During the quarter, the Company produced and sold 345,571 pounds of molybdenum contained in concentrates. The value of the molybdenum in concentrates sold equaled $11.3 million based on an average molybdenum price received of US$32.82 per pound. Revenues of $6.3 million for the quarter resulted from sales which occurred after the commencement of commercial production on April 12, 2008. Concentrate inventory at May 31, 2008, was 24,729 pounds of molybdenum contained. The Company sells its concentrates to a UK-based buyer with sales revenues based on prevailing molybdenum oxide prices.
The Company announced on April 12, 2008 that it had achieved commercial production at its MAX Molybdenum Mine located in British Columbia, Canada. The MAX Mine was constructed over an 18-month fast-tracked timeframe, with a capital cost for the Phase I mine of approximately C$50 million. The mine became British Columbia's first new metal mine in a decade and the newest primary molybdenum mine in Canada.
Production during the Phase I commissioning process was facilitated utilizing stockpiled development material to run mill tests and optimize circuits. During the quarter, Phase II development of a second access adit, engineering for a third ball mill and other expansion activities were carried out. Also during the quarter, the delivery and processing of ore directly from mine stopes to the mill commenced. After review of operations it is clear that the number of tonnes mined was greater than planned and resulting head grades from those stopes was lower than anticipated due to mine dilution. Mine dilution occurs as a result of mixing higher grade material with lower grade rock and can occur for a number of reasons. Lack of previous exposure in the high-grade zone and inexperience with geological controls on mineralization in general are believed to have caused the lower overall head grades to the mill.
Opportunities to run continuous milling operations were also hampered due to availability and unscheduled maintenance of on-site generator sets. These primary power sources impacted production capacity and the number of pounds of concentrate produced for the quarter.
At various times and for sustained periods, the mine and mill have operated well and achieved their targeted production rates. Grade control and power generation issues at the site, which have recently been resolved, have had a prolonged impact and effect into the months of June and July 2008. The resulting down time, reduced production capacity and lesser grades than planned, occurring in each month of the quarter have caused targeted production rates to be missed.
Since the end of the third quarter grade control has improved with the implementation of a grade control program. The redesign of longhole blasting in stopes and overall improvements in stope layout and procedures makes the mining operation much less susceptible to mine dilution. However, some of these improvements were not realized until after the reporting period and their beneficial effects may not be delivered until August 2008. -- www.cnxmarketlink.com
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