cost of production

Production cash costs and silver production as per the quarterlies:

Q1 2012: $3,828k for 178,000 oz = $21.50/oz

Q2 2012: $6,036k for 170,000 oz = $35.51/oz

Q3 2012: $5,559k for 230,000 oz = $24.17/oz

Q4 2012: $5,943k for 210,000 oz = $28.30/oz

Q1 2013: $6,859k for 141,000 oz = $48.65/oz

Q2 2013: $4,690k for 123,000 oz = $38.13/oz

Or, an average over the eighteen months of $31.29/oz, with costs averaging $5,486k per qtr, or 1,827k per month for production of 58,500 oz per month.

In their 1st July 2013 presentation the company outlined the cost savings they intend to implement. These are:

Power line, saving $100k per month, plant purchase, saving $125k per month and cyanide mixing, for another $100k per month. This would reduce the monthly cost by $325k to $1,502k/mth.

In addition, the company is forecasting improvements in production of 35% for little extra cost - let's say, no cost, to get to production of 1.28M ozs. That means that the starting position, before those improvements, is 950,000 oz p.a., or 79,200 oz per month. So current, "normal" operations need to increase production from 58,500oz/mth to 79,200 oz/mth, which is also 35%.

To clarify, they need to increase production from current levels by 35%, and then have a productivity increase as a result of the extra crushing of another 35%. That first 35% jump will incur extra cash costs, increasing the monthly cash cost from $1,502k to $2,028K, or an annual amount of $24,332k, after cost savings, for 1.28m oz, which is a cash production cost of $19/oz.