|Neves-Corvo - First Quarter March 31, 2011|
Neves-Corvo is an underground mine, 100 km north of Faro, Portugal, in the western part of the Iberian Pyrite Belt. The mine has been a significant producer of copper since 1989 and in 2006 commenced treating zinc ores. The processing of zinc-rich ores was suspended in November 2008 pending an improvement in zinc prices and the zinc facility was converted to treat copper ore. Zinc production was restarted at a limited rate in 2010 and is expected to recommence full scale zinc production at an annualized rate of 50,000 tonnes per annum by Q3 2011.
Operating earnings of $99.4 million were $72.6 million higher than for the first quarter of 2010. Higher sales volume ($25.8 million effect) and higher metal prices ($46.0 million effect) were the primary contributors to the higher earnings.
Sales for the quarter were less than production owing to shipment delays. Sales in the prior corresponding quarter were low owing to industrial action experienced at the start of 2010.
Copper metal production was in-line with annual market guidance despite lower than expected average head-grade and milling difficulties with wet weather in January. The lower average head-grade results from production delays in the remaining high-grade Corvo area which is subject to high stresses and is therefore less predictable. Tonnage losses have been compensated from other sources, including out-of-reserve material, at much lower grade, therefore lowering the average head-grade presented to the mill. Throughput restrictions at the surface crusher have now been largely eliminated with the commissioning of a second pre-screening facility.
Production guidance is maintained for the 2011 year taking into account these issues.
The mine ore production and extraction rates continued at record levels during the quarter with final improvements to the hoisting system completed during January that now have the shaft operating consistently with a 16% increase in capacity compared to the same period last year.
1 Operating earnings is a Non-IFRS measure - see page 26 of this MD&A for discussion of Non-IFRS measures.
2 Cash cost/lb of payable copper sold - see page 26 of this MD&A for discussion of Non-IFRS measures.
Cash costs are lower than the prior corresponding period, which was affected by industrial action, but were above expectations, on a per pound of copper basis, owing to mining higher tonnes to make up for the lower average head-grade ($0.20/lb effect).
Neves-Corvo Zinc Expansion Project
The zinc expansion project at Neves-Corvo, designed to produce a minimum of 50,000 tonnes per annum of zinc from existing orebodies, is advancing on schedule and on budget. The zinc pre-screen facility, designed to augment zinc crushing capacity, was commissioned in February and is operating with copper ores prior to switching over to zinc ores later in the year. Zinc production is expected to commence in Q3 2011 and reaching the full production rates by the end of 2011. The estimated cost of the project is €43 million and is approximately 90% complete.
Lombador Zinc/Copper/Lead Project
The feasibility study on the Lombador Project is now expected to complete by the end of Q2 2011.
The downward access ramp into Lombador continues and is presently at the 435 level. It is expected to reach the 300 level (approximately 900 metres below surface) by the second quarter of 2012 and this will facilitate the development of an exploration drive on the 335 level to allow underground exploration of the Lombador orebody.
1 Cash cost/lb of payable copper sold - see page 26 of this MD&A for discussion of Non-IFRS measures.