At Fazenda Brasileiro, the two new mineralization zones CLX2 and Lagoa do Gato, both discovered in 2009, are identified as having significant potential for high-grade sources of ore for the mill. Both infill and extension drilling confirm the continuity of mineralization in both areas. In 2011, the Company continues to develop the high-grade reserves at CLX2, and improve mine fleet costs using road trucks and focus on continuing to extend Fazenda Brasileiro's mine life and lower costs. Improvement is expected and largely dependent on how quickly development of CLX2 can be advanced.
El Penon, Chile
El Penon had record quarterly production of 115,798 GEO during the first quarter of 2011. Production for the quarter consisted of 73,568 ounces of gold and 2.1 million ounces of silver, compared with 108,437 GEO, which consisted of 60,977 ounces of gold and 2.6 million ounces of silver produced in the first quarter of 2010. This represents a 7% quarter-over-quarter increase in 2011 versus 2010 production on a GEO basis.
Higher gold production was mainly due to improved gold grades and recovery rates compared with the same quarter of 2010. Higher gold grade areas including Al Este and Bonanza contributed to the increase in gold production. Since conversion to owner-mining, operational dilution has decreased and feed grade has improved. This, combined with increased capacity and the mining of higher grade veins including North Block area and Bonanza, has led to increased production. The decrease in silver production was primarily the result of mining lower planned silver grade areas, which was offset by improvements in gold.
GEO production at El Penon for 2011 is expected to be in line with guidance.
Cash costs were
$397 per GEO in the quarter ended
March 31, 2011, compared with
$384 per GEO in the first quarter in 2010. The appreciation of the Chilean Peso was the main contributing factor to the increased cash costs. The average currency exchange rate of the Chilean Peso versus the United States Dollar went up by 9% from the first quarter of 2010.
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