Miner Oxiana has shaken off a somewhat surprising fall in mining volumes for copper and gold at its Sepon project in Laos in the third quarter.
The company's third quarter report provided something of an unusual occurrence for a company that has been steady in meeting objectives and forecasts.
Investors accepted its reassurances that it had taken steps to improve the situation and that production remained on track to meet forecasts for the year.
The shares were actively sought. More than 15 million changed hands as they rose 16c to $3.83 yesterday, and closed near the high for the day of $3.84.
Helping maintain investor calm was OXR's assurance that zinc and precious metal output from the Golden Grove mine in Western Australia was still on track to meet 2007. (OXR has a December 31 financial year.)
In the three months to September 30, gold production at Sepon was 22,355 ounces, down sharply from 51,242 ounces in the previous corresponding quarter.
Normally that would have been enough to stampede investors, along with the fall in the world gold price overnight Monday. But OXR has done a good job in signalling the reasons for the fall earlier in the year, especially the impact of the wet season.
"Mining volumes during the quarter were lower, as expected, with access to pits periodically impeded during the wet season months," Oxiana said.
The company said the lower mining rates were offset by using more stockpiled ore (with higher grades) and overall milling rates were higher for the quarter.
Its gold production forecast for the full year remains at 100,000 ounces.
Copper production at Sepon was also lower at 16,139 tonnes, down from 14,891 in the September quarter of last year. OXR says copper production for the full year remains in the previously stated 60,000 to 63,000 tonne-range.
In Australia gold production at Golden Grove for the third quarter was 18,671 ounces, up substantially from 7,587 ounces produced in the third quarter of last year.
Copper production fell to 2,420 tonnes from 5,182 tonnes and zinc production rose to 35,751 tonnes from 21,482 tonnes. That should have helped offset the lower returns from copper.
Production for the year remains as forecast at 140,000 to 150,000 tonnes of zinc, 12,000 to 15,000 tonnes of copper, 50,000 to 55,000 ounces of gold and 10,000 to 13,000 ounces of silver.
Oxiana said it received an average gold price in the September quarter of $US687.00 per ounce and an average copper price of $US3.50 per pound.
Oxiana also had some encouraging updates on its two major Australian projects, the expansion at Scuddles in WA and the construction of the Prominent Hill mine in South Australia and the expansion program for the operation.
But the cost of the project will rise next week when the company releases a statement to the market. It will be the third rise in cost in about three years.
Prominent Hill was originally due to cost $350 million; the latest estimate could be in a range $775 millionn to $800 million.
OXR is expected to make the statement next week on progress at the Prominent Hill which is ahead of schedule, while the expansion plans seems to have found more probable reserves to prove up.
A comprehensive review of the project's progress will be presented to Oxiana's Board before the releaqse of the statement.There was no mention of cost blowouts in yesterday's quarterly report.
"Following this a detailed update on Prominent Hill will be made to the market," OXR said in yesterday's report.
"At Prominent Hill mining was ahead of schedule. With this increased rate the Prominent Hill orebody will now be reached in October, two months ahead of schedule. Construction activity increased throughout the quarter with more than 500 people on site by the end of the period.
"During the quarter Oxiana announced plans for studies to investigate expanding and extending mine life at Prominent Hill beyond the currently defined 10 year pit."
From yesterday's report, prospects have improved noticeably for Prominent Hill to not only be expanded, but have its life extended by another 10 years, although it is early days yet.
"A 12 month exploration drilling program has focused on identifying new resources from the western end of the deposit and clearly indicates the mineralisation is more extensive than outlined in the June 2006 Resources Statement.
"Following this exploration success, two follow up drilling programs for 2007 will form the basis of studies to expand and extend the current mine life through the potential development of a concurrent underground mining operation immediately beneath the pit followed by a high tonnage caving operation at depth.
"Early work on the studies has suggested that development of the underground mine could commence as early as the last quarter of 2008 with a 1-2Mtpa underground operation producing from late 2011. This material will supplement the 8Mt/a year open pit and add to copper and gold production.
"Drilling beneath the western end of the currently planned pit has now reached depths of approximately 1200m below the surface
"This early stage drilling has identified an extensive zone of predominantly gold mineralisation, with copper, which appears to thicken with depth.
"These results have indicated the potential for a bulk caving operation which could extend mine life out to 2030.Drilling in the second half of 2007 on Program Two is designed to identify an Inferred Resource over a vertical extent of 500m and a strike length of 600m."
