Dominion seem to have orchestrated a subtle change of plans with respect to Challenger production rates.
Right from the time of their decision to go u/ground, mgmt have continually emphasised their commitment to extending mine life, even to imparting the impression (to me at least) that they were happy to restrict u/g production as a means to that end, while they worked away at finding more ore.
As a result of feasibility & initial u/ground planning done during the 2nd half 2003, an annual production rate of 50 000 oz gold was set, by mining ore at a rate of about 170 000 tpa. It was then apparent that the mill would be running hungry and that the deficiency would need to be filled from other sources. But at least life of mine was being preserved.
However, recently we have seen plant throughput rates ramped up to an annualized 370 000t of ore, which incidently marginally exceeds the processing capacity. All this means that contrary to previous intentions, the M1 stopes are now being mined at a rate sufficient to keep the plant ticking over at capacity and this, combined with high grades, expansive mineralisation & recoveries in the order of 94%, has produced record results.
If this rate of ore extraction from the M1 is maintained, we will see the recently upgraded reserves extinguished in just 3 years, a fact which mgmt are obviously well aware. I believe that mgmt have "let go" of their strategic plan for Challenger to focus on the short term need to pay out the ANZ debt facility and to meet Aug.'06 hedging commitments, forced on them by the underperformance of the mine during u/g development and ramp up to full production during the 1st half of this year.
It might be that they are now confident of being able to delineate substantially more ore within the shoot system and to quickly convert existing resouces to mineable reserves.
Cheers ... WJ
DOM Price at posting:
0.0¢ Sentiment: None Disclosure: Held
