Orinoco Gold (ASX: OGX, Share Price: $0.064, Market Cap: $32m) is demonstrating encouraging progress with respect to remedial work aimed at recommencing gold operations at its Cascavel mine in Brazil, with a number of important milestones – comprising the declaration of a maiden JORC-compliant Resource at Sertão, process plant enhancements and record monthly mine development.
Orinoco Gold has advised achieving record monthly mine development during the month of June, with a total advance of 130 metres achieved compared with 106.4 metres for the month of May. The company is also implementing significant process plant improvements, as well as construction of an on-site laboratory.
Market Significance
Orinoco’s share price has recovered by more than 20% since our most recent coverage on 18th June and it closed up more than 30% in today’s trade on the back of today’s release. This reflects growing market confidence in the company’s ability to rectify the operational hiccups at Cascavel that negatively impacted production and revenues. The recent announcement of a maiden Mineral Resource estimate for Sertão was a major milestone and Orinoco is continuing to build on this momentum. Cascavel potential is underlined by AngloGold Ashanti’s involvement as a major shareholder and strategic project partner.
Cascavel Operations Update – Recovery Continues
In our recent coverage we’ve addressed the active steps Orinoco is taking to rectify the problematic commissioning issues that caused the company to halt production not long after operations began during H2 2016. A full technical review was initiated, with a view to a full restart of production.
Orinoco has also raised further cash, introduced AngloGold Ashanti as a major shareholder and project partner, boosted its project interest from 70% to 100% and initiated a major board shake-up.
Announcement Detail – Record Monthly Mine Development
June mine development was a total of 130 metres – a big increase on May’s advance of 106.4 metres – and a record for Cascavel. Development was prioritised towards the addition of new access ramps to allow for the deployment of the Toro bogger into the mine.
July development is expected to be slightly below the June advance due to a combination of the focus shifting away from mine access development required for the Toro bogger to the extension of the Inclined Shaft and Central Decline and a lower number of available headings.
Picture 1: Graphic of the refurbished Toro bogger
Technical Significance
Mine development is one of the factors in project recommencement, particularly as it relates to enabling underground access for the Toro bogger. The importance of this is that it should substantially reduce bogging times – essentially meaning that more underground gold ore can be removed within a shorter space of time – thus improving mining efficiency. Orinoco aims to introduce a second underground bogger and is currently looking to source one.
Other Essential Development Work
Orinoco is currently assessing recommendations from the metallurgical review prepared by the company’s metallurgical consultant, as it aims to finalise the optimal process plant configuration, with the possibility of extra grinding capacity.
Construction is also underway on the on-site assay laboratory. The importance of the purpose-built on-site laboratory has been previously discussed, with it providing much more rapid assay turn-around times. This will greatly enhance the efficiency of mining once operations recommence, as it will provide a much better understanding of gold ore grades. The lab is on track for commissioning during August 2017.
Summary
Orinoco has unfortunately had to deal with some rather significant commissioning issues, but encouragingly it has implemented a meticulous program to deal with the key problem areas. Primarily, these relate to providing enough high-quality ore to the plant, with the plant then being able to deal with the nuggety nature of the ore.
The mineralisation appears to be similar in style to that at Anglo’s Crixas mine (2.3Moz @ 7.76g/t Au) and Yamarna’s Pilar Mine (1.4Moz @ 4.1g/t Au), along with numerous other examples within the five parallel greenstone belts hosted within the region.
Important progress is being made towards production recommencement, along with measures to ensure reliable production is maintained. This involves a complete metallurgical review, potential process plant changes, underground mining enhancements and on-site assaying of ore samples.
At the same time the company has made important non-mine improvements. It’s raised significant new company funding, introduced gold sector heavyweight, AngloGold Ashanti, as a major shareholder and project partner, boosted its project interest from 70% to 100% and implemented major board changes.
Just as importantly in our view, Orinoco has maintained open and honest dialogue with the market, clearly communicating its problems and strategy of rectification.
