VANE Minerals operations update

02 November 2012
VANE Minerals operations update

Quarterly operations update, Q3 2012

VANE is pleased to announce expansion of its Mexican operations and a quarterly update on its operations in Mexico.


Joint Venture

  • VANE to commence development work on Joint Venture ("JV") mines other than La Colorada in Q4 2012, with the aim of bringing additional mines into production during 2013
  • Met-Sin (JV partner controlled by the Ruiz family) to construct a 100tpd (tonne per day) processing mill in La Rastra solely at its own expense, with construction expected to commence during 2013
  • Any excess production from JV mines, over and above that required to adequately feed VANE's existing SDA Mill, may be processed through the La Rastra mill, thus enabling production and JV revenues to increase
  • As a result of this expansion the pre-tax profit from the JV will be split between VANE and Met-Sin on a 50:50 basis (from the current 60:40 split) effective 1 January 2013

Quarterly Update on Mexican Operations

  • As expected, due to the processing of lower grade ore from Diablito in June and timing issues concerning revenue recognition, total revenue of US$1,385,889 was generated in Q3 (Q2 2012: US$2,772,286) (Profits from Diablito are 100% VANE as this project is outside of the JV)
  • 7,995 tonnes of ore processed during Q3 (Q2 2012: 8,105 tonnes) with average grades 5.36g/T Au and 105g/T Ag (Q2 2012: 5.70g/T Au and 127g/T Ag)
  • Average recovery rate of 76.8% Au and 76.5% Ag (Q2 2012: 80.6% Au and 77.8% Ag)
  • 979 oz. Au and 19,100 oz. Ag produced in Q3 (Q2 2012: 1,028 oz. Au and 22,147 oz. Ag) at a direct production cost of $802 per oz. Au equivalent or $14.5 per oz. Ag equivalent (Q2 2012: $763 per oz. Au equivalent or $13.9 per oz. Ag equivalent)
  • 62.6 tonnes of concentrate (Q2 2012: 63.1 tonnes) and 38.4kg of Merrill Crowe high grade precipitates held in inventory at period end
  • All gold and silver sold unhedged
  • VANE is confident that production grades and revenue for Q4 will increase and be consistent with results achieved prior to the Q3 rainy season

David Newton, CEO of VANE, commented: "The agreement with our joint venture partner provides VANE with a secure long term future in Mexico and enhances our ability to grow the joint venture business by increasing production in the medium term. The Q3 results for our gold and silver operations are satisfactory as they take into account one month's production from lower grade ore produced by our Diablito Mine resulting in operating expenses on two mines, but generating ore for stockpile to ensure against interruption in mill feed."

Revenues for Q3 were lower than in the prior period, partly due to timing issues regarding revenue recognition, as a large concentrate shipment was made at the end of Q2, and partly due to a month of processing lower grade ore produced from the Diablito Mine ahead of its planned closure. This production fed the Company's SDA Mill during the month of June and was recognised as revenue in Q3. This production facilitated the build-up of a substantial inventory of JV ore from the La Colorada Mine ahead of the rainy season, which can impact road conditions and therefore the ability of the JV to transport ore to the SDA facility on a timely basis. The Company is pleased to announce that this action has provided the SDA Mill with sufficient feedstock and ensured that there was no disruption from lack of ore during the rainy season. Mining of the higher grade ore remaining in the Diablito Mine referred to in previous updates is underway and is expected to be concluded within Q4, when the mine will close. The Diablito Mine is owed 100% by VANE so all profits arising from production belong to VANE and are not shared as per the JV agreement.

Kristopher K. Hefton, BSc Geology, Chief Operating Officer VANE Minerals plc who meets the criteria of a qualified person under the AIM Rules - Note for Mining and Oil & Gas Companies, has reviewed and approved the technical information contained within this announcement.