Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Dundee Precious Metals’ (TSX: DPM) latest reserve update for its Chelopech gold-copper mine in Bulgaria has increased reserves by 10% and the mine life by two years, to 2029.
Total proven and probable reserves are now 18.6 million tonnes grading 2.89 g/t gold, 7.73 g/t silver and 0.84% copper, for 1.7 million oz. gold, 4.6 million oz. silver and 344.4 million lb. copper.
While reserves increased by 10% in terms of tonnage, measured and indicated resources rose by 22% in tonnage to 17.4 million tonnes at 2.63 g/t gold, 8.71 g/t silver and 0.82% copper for 1.5 million oz. gold, 4.9 million oz. silver and 315 million lb. copper.
Dundee expects production this year of 156,000-176,000 oz. gold in concentrate and 34 to 39 million lb. copper in concentrate at an all-in sustaining cost of $685-755 per oz. Last year, the mine produced 179,000 oz. gold and 36 million lb. copper.
Rather than using a single cutoff grade, the estimates use a net smelter return (NSR) methodology to determine the profitability of each stope in the mine plan. Reserves are based on an NSR cutoff value of $1,400 per oz. for gold, $17.50 per oz. for silver and $2.75 per lb. for copper, plus a profit margin of $10 per tonne.
Only 20-25% of the reserves increase was due to the conversion of resources through drilling. The bulk of the increase came from a strategic mine plan optimization process that Dundee completed in the third quarter. The process involved an analysis of multiple mine schedules at various cutoff values, focused on optimizing net present value and life of mine.
Dundee completed 45,000 metres of in-mine resource drilling completed last year, and added two new orebodies into the resource inventory. About 44,000 metres of in-mine drilling and 38,000 metres of brownfield exploration drilling are planned for 2021 at Chelopech, located 70 km from the national capital of Sofia.
Dundee also operates the Ada Tepe open pit gold mine in Bulgaria, which reached commercial production in 2019, and the Tsumeb copper concentrate smelter in Namibia.
It recently released a positive prefeasibility study for its Timok open pit gold project in Serbia, where it will be moving ahead with a feasibility.
(This article first appeared in the Canadian Mining Journal)
