Co-O mine background The Co-O mine in the Philippines is an...

Co-O mine background
The Co-O mine in the Philippines is an underground operation, and it mines a series of steeply dipping, narrow, high-grade gold veins. Such mines are complex and labor-intensive to operate, requiring close attention be paid to development costs, productivity and dilution. They are also capital intensive to expand as extensive underground development must be established in advance.
Steeply dipping, narrow-veined orebodies are troublesome largely as a result of the high cost of drilling from surface. As mining operations deepen, the cost of drilling from surface becomes prohibitive, and so the resource must remain in the lower inferred and indicated resource categories until suitable underground drill access is developed, often only several months in advance of mining actually taking place. In addition, geological complexity is often not identified until quite late in the process, placing a limit not only on the accuracy of longer-term planning, but also on the process of converting resources into reserves.
As a result, the mining of such orebodies is generally an evolving process that is only bedded down after some practice and, almost invariably, some failures.
Results hit the market
In late September, Medusa announced9 a new combined inferred and indicated resource of 4.34 million tonnes at 9.9 grams per tonne (g/t) gold for 1,410,000 ounces (a reduction of over 500,000 ounces), and reserves of 1.92 million tonnes at 7.22 g/t for 450,000 ounces (a reduction of over 200,000 ounces). The reduction in resources and reserves from the 2013 figure was not only a result of depletion, but also from the change to the JORC code mentioned above. It requires that actual mining widths be used in calculations, not just a simple cut-off grade.
This reduction was well flagged and well explained by the incoming CEO, and so the market was not surprised.
The mill problems seem to have been identified and either rectified, or at least the path to rectification mapped out.
Mining and planning remain the issues to be resolved. Several mining methods are employed depending on the thickness and angle of the veins, but each has advantages and disadvantages in terms of cost and dilution. A better understanding of vein geometry and grade is required to allow more detailed planning so that the most efficient methods are employed in the correct places.
The company boasts a large land package, and recent exploration success suggests significant potential in the region; however, that may be not valued highly by the market until the company demonstrates that it can monetize the resources it has. Hitting this quarterly production target is the first of many steps.
Any predictions on the SP in the next month? Most of mine predict 0.58, was lower a few weeks ago.