International Minerals Reports Low Cash Costs at Pallancata Silver Mine, Peruadmin
International Minerals Corporation reports Total Cash Costs of US$5.89 per ounce of silver produced, net of gold by-product credits (US$3.30 per ounce for Direct Site Costs) at the Pallancata Mine for the fiscal fourth quarter ended June 30, 2008 (see Table below for details). The Pallancata Mine, located in southern Peru, is jointly owned by IMZ (40% interest) and Hochschild Mining plc (“Hochschild,” 60% interest). Hochschild is the mine operator.
Stephen Kay, President and Chief Executive Officer of IMZ said, “The Pallancata Mine, as well as being a low-cost producer, is currently one of the top-two primary silver mines in Peru in terms of silver reserves. With the planned ramp-up of underground production at Pallancata to 2,000 tonnes per day, scheduled to be completed by calendar year-end 2008, it is likely that Pallancata will become one of the top-10 largest primary silver producing mines in the world in 2009. This is quite an achievement considering that production only commenced a year ago. Hochschild are to be complimented on their aggressive development of the Pallancata Mine.”
The Company has realized net earnings from the Pallancata Mine for the fiscal year ended June 30, 2008 of approximately US$4.2 million. Because of the use of cash flow for the ongoing aggressive capital expansion program at Pallancata, to date there have been no cash dividends distributed to the joint venture partners. Cash dividends are expected to commence, however, in the first half of calendar year 2009.
Initial construction of the mining operation at Pallancata was funded 100% by Hochschild, with IMZ carried for its 40% interest. However, IMZ’s 40% share of replacement capital costs, exploration costs and the costs of expansion of mine production above 1,000 tonnes per day (“tpd”) is required to be funded by IMZ, with such funding expected to be covered by IMZ’s 40% share of the mine’s ongoing cash flow.
Total Cash Costs at the Pallancata Mine, using the Gold Institute’s definition, include: mine operating costs, toll processing costs, mine general and administrative costs, Hochschild’s management fee, concentrate transportation and smelting costs, taxes and the Peruvian government royalty (currently 1% of gross revenue for Pallancata).
As Hochschild was responsible for funding all start-up capital expenditures and expansion capital up to the 1,000 tpd mining rate, IMZ currently has no depreciation expense related to the Pallancata Mine.
The Gold Institute calculation of Total Cash Costs is a non-Canadian GAAP financial measure, which IMZ management believes is useful in measuring operational performance. Total Cash Costs as defined by the Gold Institute do not include depreciation or mine reclamation costs.