(MENAFN - ProactiveInvestors - N.America) Lachlan Star (ASX: LSA) has been added to Industrial Alliance Securities' Resource Stock Watch List due to the company's strong year ahead at its CMD Gold Mine.
According to the Montreal-based investment bank, Lachlan Star is tipped to deliver increased production and lower costs during 2013.
The following is a copy of the report.
SIGNALS POINT TO STRONG 2013 AT THE CMD GOLD MINE
- Gold production guidance for 2013 remains unchanged at 70,000oz to 80,000oz per annum. The current run rate based on the December 2012 quarter implies an annual production of roughly 55,000oz.
Production at CMD will continue to be led by the Tres Perlas pit. Management believes that, for 2013, it will represent 50% of gold mined.
- Operations at CMD will continue to focus on the Tres Perlas ore body. Mining activity has recommenced at the Chisperos pit following relocation of an obstructing power line. However, only 35% of the 2013 gold production will be mined from Chisperos.
The other ore bodies, namely the Toro pit, will be wound down during this quarter. Both Chisperos and Toro have elevated gold grades (over 1g/t), but both face high strip ratios and represent marginal operations. Tres Perlas LOM strip ratio is expected to remain at 1:1.
- With record gold stacking (10%) and ore mined and stacked (20% and 26%, respectively) during the December quarter, we look forward to increasing gold production in the following quarters.
It is important to remember that the recovery lag from the leach pads is typically three to five months; gold mined and stacked now is only poured in the following two quarters.
- LSA continues to demonstrate its ability to reduce mining (-13%) and processing costs (-4%), however, C1 cash costs have risen (11%).
This discrepancy results from temporary lower grades from the Tres Perlas pit (14% decrease in head grade) and there is no inherent problems with mining operations.
We expect average gold grades to edge up as the Tres Perlas ore grade stabilizes and higher grade ore from the Chisperos pit is added. Owner mine fleet began operating in early January. Cost-benefit from the fleet should become evident in the following quarters.
- The ROM leach pad is still under construction. Interestingly, total ore to be ROM leached decreased due to higher grades of ROM ore, which are directed to the mill instead.
It is unknown if this positive scenario will continue. LSA also completed expansions of its leach pads, which now has a two year capacity.
With multiple catalysts expected for 2013, LSA's management should be able to deliver increased gold production and lower cost.
