Uruguay Mineral Exploration Inc (''UME'') Announces Results for the Quarter Ended August 31, 2007
TSX - Toronto Stock Exchange · Silver · Antimony · Zinc · Tin · Arsenic · Manganese · Lead · Gold · Copper · Tungsten · Cadmium
MONTEVIDEO, URUGUAY, October 11 /CNW/ - Uruguay Mineral Exploration Inc. (TSX VENTURE:UME) (LSE:UGY):
Summary of Results
-- Gold production was 18,488 ounces for the first quarter compared to 19,175 ounces in the corresponding quarter of the prior financial year. While production was approximately 2,500 ounces less than anticipated for the quarter, the full year production forecast of 95,000 ounces is maintained.
-- Cash costs were $US 425 per ounce for the quarter compared to $US 332 for the corresponding quarter of the prior financial year. This was in line with our expectations as a result of the lower production.
-- Net profit after tax for the first quarter was $US 1.2 million or $US 0.025 basic earnings per share, compared to a net profit after tax of $US 2.6 million or $US 0.054 basic earnings per share for the first quarter of the 2006 financial year.
-- Cash flow from operations before non-cash working capital movements was $US 4,111 million for the first quarter. Cash as at 31st August was $US 11.6 million.
-- The average realized gold price for the first quarter was $US 661 per ounce.
-- The interim dividend of C$ 3.5 cents per share, announced with the results for the annual fiscal year on 14th August 2007, will be paid to shareholders on 26th October 2007.
3 Months to August 2007 August 2006 Operating Review Gold produced Ounces 18,488 19,175 Average cash cost US$/oz 425 332 Average price received US$/oz 661 568
Financial Review Revenue US$ '000s 13,253 12,177 Net income for the period US$ '000s 1,224 2,567 Cash flow from operations(x) US$ '000s 4,111 3,503 Basic earnings per share US$ 0.025 0.054 Cash at the end of the period US$ '000s 11,631 8,545 Total debt at the end of period US$ '000s 2,331 3,385 (x) before non-cash working capital movements
David Fowler, Chief Executive commented: "Despite lower than anticipated production results for the first quarter, we remain on target to produce 95,000 ounces in the current financial year. With the diversion of the Arroyo Corrales completed and the work areas in the Arenal pit expanding, we are confident that target production levels will be achieved. Cash costs for the quarter were in line with expectations, given the lower production volumes achieved.
"Field work continues to produce good exploration results within the Isla Crystalina, Dom Feliciano and Florida belts, and we have defined drill targets at Papagayo, Argentinita North, Tito Lopez, Veta Rodrigo, Nueva Helvecia, Presidente Terra and Bragado. Drilling at a number of projects has however been delayed due to permitting issues. These are being resolved and steps are being taken to increase drilling rates to more aggressively convert good initial field results into drill intercepts and ultimately resources. The second phase of 7,000 meters of diamond drilling at Lascano is scheduled to start in December using a contractor rig and to be completed within six months.
"At the shareholders meeting on 11th October I will expand on the exploration work and put it into the context of what we are looking to achieve from each area of activity. The presentation that I will be making will be on the website from the morning of 11th October 2007."
Review of the Quarter ended 31 August 2007
Production
Production for the quarter was 18,488 ounces compared to 21,000 ounces forecast on 2nd August 2007. This shortfall was due to lower grades than anticipated for ore mined in the first benches beneath the Arroyo Corrales. More tonnes were encountered at lower grade with more overall ounces mined from the area than estimated. Higher grade ore was fed to the plant as presented with lower grade material stockpiled for future periods.
The first benches beneath the Arroyo Corrales were classified as Indicated Resources as they could not be fully drilled due to access restrictions. This result has no implications on the remainder of the Arenal resource estimates and production for September was in line with forecasts with more than 8,000 ounces produced for the month.
In July 2007 the channel to divert the Arroyo Corrales was completed and water started flowing. Flood protection dykes were completed during September and environmental reclamation commenced. Now that the Arenal pit has been expanded, ore stocks are being built to increase flexibility in achieving production targets.
UME expects to achieve its stated production target of 95,000 ounces with consistent production for each of the remaining quarters of 2008.
Financial Performance
Operating costs for the quarter were $ 425 per ounce. While high on a per ounce basis due to lower production levels, operating costs were in line with expectations and the company maintains its full year forecast of $US 345 per ounce.
Effective 1st June 2007, UME has adopted new standards based on the Changes in Canadian Accounting Recommendations with respect to stripping charges. The impact of applying such recommendations was to decrease the operating costs used as the basis for the Company's cash cost calculation relative to the operating costs under the previous method by $136. Had the previous method of calculating operating costs been used, the cash costs per ounce would have been $432. This change is further explained in the Management Discussion and Analysis for the quarter.
Additional details explaining the evolution of operational cost increases over the past two years is provided in the Annual General Meeting presentation which is available for download from the Company's website from 11th October 2007.
Gold Exploration
Priority for exploration drilling for the quarter was given to near mine targets at San Gregorio. Infill drilling was completed for Veta A and Sur to allow resource modelling and mine planning of these deposits. This material will be used to blend with Arenal ore over the next two years to maximize throughput. Step out drilling 400 meters along strike to the southwest of Veta Sur intersected a weakly mineralized structure. Subsequent to the end of the quarter, drilling at San Antonio, a further 500 meters along strike to the southwest, reported a drill intercept of 1 meter at 157 g/t at 24 meters and an additional 5 meters at 8 g/t starting at 25 meters (not true thickness).
A number of targets in the footwall and northwest of San Gregorio were tested in an attempt to expand resources in these areas and allow mine plans to be finalised. Lower grade intercepts encountered in the footwall will be followed up.
During the quarter a deep drill program was designed to test for mineralization at San Gregorio and Arenal to a depth of 500 meters. The program commenced in September with the results expected to be reported in the coming quarter.
Drilling and trenching at a number of projects in the Zapuchay district including Papagayo, Nueva Helvecia, Veta Rodrigo, and Presidente Terra have been delayed pending the grant of exploration permits. These permits are expected to be received during the second quarter. Further to the east of the Isla Crystalina belt at Vichadero, an anomalous target, 1.5 km long with rock chip samples above 5 g/t, has been identified.
Regional exploration is progressing well with the source of geochemical anomalies being identified and tested in both the Dom Feliciano and Florida belts. At Texas (in the Dom Feliciano belt) new quartz veins have been identified with anomalous grades in rock chip samples. Soil and geophysics programs are planned for these projects in the coming quarters to identify drill targets for later in the financial year. Good progress has also been made in the Florida belt. At Cruzera the final four diamond drill holes in the initial drill campaign were completed during the quarter. The results of this program confirm mineralization over a strike length of 800 meters to a depth of 100 meters. Further strike extensions to mineralization are now being targeted through soil sampling and encouraging results are being received for similar vein systems 20 km further to the south at Casupa, where veins are being mapped and sampled with rock chip samples to 200 grams per tonne. Drilling is planned for this district for the second half of the financial year.
External evaluations have been completed on the performance of UME's own exploration drilling fleet and plans have been established to increase utilization and improve drilling efficiency over the remainder of the year.
Non-Gold Assets
Lascano
At Lascano a fifth and final drill hole for the 2007 campaign, targeting a near surface gravity anomaly, was completed during the quarter. The rocks encountered were predominantly intrusive in nature and composed of gabbro and dolerite to granite (granophyre). Though no alteration or mineralization was observed, the hole is providing us with very valuable information about the composition of the rocks and the intrusion.
As a result of the 2007 drill campaign, the Lascano geophysical anomaly has been interpreted to be created by gabbro to granitic (granophyre) intrusive rocks underlying a package of magnetic basalt and felsic volcanic rocks. Down drop of the volcanic rocks outside the feature to the north has caused an edge effect, which has highlighted the magnetic character of the magnetic flood basalts. It is theorized at this stage that alteration and mineralization, with similarities to iron oxide copper gold and porphyry copper systems, observed in drill hole 2 are directly or indirectly caused by the intrusive bodies.
A 7,000 to 10,000 meter drill campaign, to be performed by contractors, is planned to commence during November and to be completed by the end of the financial year. The program will offset drill the anomalous mineralization encountered in hole 2. The program will consist of four to five drill holes to a depth of about 1,100 metres in and around hole 2 and an additional four to five drill holes in a similar geophysical settings in other parts of the anomaly.
Diamonds and Base metals
Negotiations have progressed with a number of parties on diamonds and base metals properties. As a result of these discussions, work on these projects was scaled back. Drilling of kimberlite targets on the diamond project is delayed pending the grant of exploration permits.
An external review of UME's nickel properties including Mal Abrigo, Paso de Lugo, Carpentaria and Yatay, has been undertaken by GeoDiscovery, an external specialized nickel consultant. This review has confirmed the potential of these properties for nickel discovery. It has also identified key additional work required to progress the projects to a point of attracting potential partners. The Group plans to complete this work during the course of the financial year.
During the quarter UME submitted an expression of interest to the Uruguayan government for its tender of Uranium rights. UME's participation will be on the basis of a minority partner providing data, including geochemical and geophysical information, equipment resources and administrative support.
Exploration Report for the Quarter ended 31 August 2007
This report provides details of exploration activities during the quarter ended 31 August 2007.
Highlights
-- In fill drilling on Veta Sur has been completed and mine planning has commenced. The first step out drilling 400 meters along strike of known mineralization has encountered the structure and anomalous mineralization. Drilling commenced on the San Antonio prospect, a further 500 meters to the south also encountered mineralization with assays pending.
-- Drill programs have been developed to test the down dip extensions of San Gregorio and Arenal. An initial program of eight holes to approximately 300 meter depth commenced in September.
-- At Vichadero rock chip sampling has identified an anomalous gold zone of 1.5 km in length. Soil sampling is planned for the coming quarter to identify drill targets for the second half of the year.
-- Drill programs have been developed for anomalous zones between Zapachay and Argentinita and at Papagayo, Titlo Lopez and Lavadero in the Zapuchay district. These programs will commence when exploration permits are received.
-- At Bragado trenching has shown significant copper mineralization with values of greater than 1%. Drilling commenced in September to define the extent of mineralization.
-- A strongly anomalous vein system 800 meters long has been defined at Casupa with gold values of up to 207 g/t. Geophysics and soil sampling will be performed at both Casupa and Cruzera during the current quarter with a drill program expected to be completed early in 2008.
-- At Lascano the fifth and final drill hole in the current campaign targeting a near surface gravity anomaly was completed during the quarter. The rocks encountered were predominantly intrusive. A 7,000 to 10,000 meter drill campaign, to be performed by contractors, is planned to commence before the end of the calendar year and be completed by the end of the financial year.
-- UME's nickel properties including Mal Abrigo, Paso de Lugo, Carpentaria and Yatay have been reviewed by GeoDiscovery, an external specialized nickel consultant. This review has confirmed that a number of these properties have good exploration potential for nickel and associated elements.
-- Seven projects are drill ready and awaiting the granting of permits by Uruguay's ministry of mines to proceed. This has delayed the commencement of a number of projects but is expected to progress in the current quarter. A program to improve exploration drill productivity and utilization has commenced. It is expected that this process will significantly increase meters drilled over the remainder of the year.
Isla Cristalina Belt - Minas Del Corrales District (Arenal and San Gregorio)
Drilling during the quarter focused on near-mine targets with the majority of the meters applied to definition drilling of Vetas A and Sur. Exploration drilling was also completed in the foot wall of the San Gregorio structure and along the northwest extension chasing anomalous intercepts which, if successful, will reduce the strip ratio for underlying resources at San Gregorio. Results to date have returned weakly mineralized intercepts and are as follows:
San Gregorio footwall Prospect Hole Number From Intercept San Gregorio SGRC003 9 2m @ 2.00g/t San Gregorio SGRC003 19 1m @ 1.10g/t San Gregorio SGRC003 38 6m @ 0.60g/t San Gregorio SGRC005 28 5m @ 0.40g/t San Gregorio SGRC005 129 1m @ 0.80g/t
An additional round of drilling is planned in the footwall to target higher grade material.
The organization of the database combining geochemistry, geophysics and their relationship to the regional geology has identified and or rediscovered a number of anomalies. Targets include the extension to the San Gregorio mineralization and the San Antonio prospect.
The down dip extensions to the main mineralized ore bodies of San Gregorio, Arenal and Santa Teresa represent important exploration targets. It is clear from the historic drilling and resource models that the models are drill hole constrained and mineralization remains open at depth. The first drill hole in a campaign to target this deeper mineralization commenced in September. It is clear that these ore bodies pinch and swell along strike and down dip. It is expected that additional resources will be added at depth.
Drilling continued in Veta A and Sur to further define the deposits. It is believed that additional resources will be added to the model which was presented at the end of August 2007. An in-house resource and reserve model is being updated for both vein deposits. This will be used in mine planning and production in the next 24 months. Mineralization is known to continue under the tailings dam and San Gregorio waste dumps respectively to the southwest. Significant results from the Vetas are presented below for the first quarter. Veta A and Sur results are from a 25 x 25 meter definition drill program.
Prospect Hole Number From Intercept Veta A VARC-088 38 5m @ 2.87g/t Veta A VARC-089 46 5m @ 1.74g/t
(intercepts are composites using 0.5 g/t cut)
Results used in August 2007 resource model.
Prospect Hole Number From Intercept Veta Sur VSRC-049 76 2m @ 1.08g/t Veta Sur VSRC-049 80 4m @ 4.97g/t Veta Sur VSRC-057 87 3m @ 3.15g/t Veta Sur VSRC-059 71 4m @ 10.28g/t Veta Sur VSRC-059 78 1m @ 5.30g/t Veta Sur VSRC-061 112 6m @ 2.76g/t Veta Sur VSRC-064 111 3m @ 1.81g/t Veta Sur VSRC-066 117 5m @ 2.15g/t Veta Sur VSRC-067 117 5m @ 2.29g/t Veta Sur VSRC-076 69 5m @ 1.43g/t Veta Sur VSRC-077 58 2m @ 2.50 g/t Veta Sur VSRC-078 51 1m @ 17.10g/t Veta Sur VSRC-079 21 9m @ 4.90g/t Veta Sur VSRC-080 35 5m @ 7.42g/t Veta Sur VSRC-083 35 3m @ 2.26g/t Veta Sur VSRC-087 94 4m @ 2.72g/t Veta Sur VSRC-094 41 1m @ 5.33g/t Veta Sur VSRC-095 74 2m @ 2.28g/t Veta Sur VSRC-096 76 2m @ 2.06g/t Veta Sur VSRC-096 79 5m @ 2.62g/t Veta Sur VSRC-098 27 3m @ 1.27g/t Veta Sur VSRC-100 74 3m @ 1.87g/t Veta Sur VSRC-102 60 1m @ 3.43g/t Veta Sur VSRC-102 67 1m @ 20.30g/t Veta Sur VSRC-102 76 3m @ 1.67g/t Veta Sur VSRC-104 82 6m @ 3.10g/t Veta Sur VSRC-105 55 2m @ 6.96g/t Veta Sur VSRC-106 77 4m @ 4.16g/t Veta Sur VSRC-107 88 2m @ 2.15g/t Veta Sur VSRC-108 81 8m @ 1.88g/t Veta Sur VSRC-109 50 1m @ 20.5g/t Veta Sur VSRC-112 71 8m @ 3.9g/t Veta Sur VSRC-113 54 1m @ 8.2g/t Veta Sur VSRC-113 56 1m @ 3.3g/t Veta Sur VSRC-113 71 3m @ 3.3g/t Veta Sur VSRC-114 40 2m @ 1.1g/t Veta Sur VSRC-114 74 5m @ 1.5g/t Veta Sur VSRC-117 85 6m @ 2.0g/t Veta Sur VSRC-118 49 3m @ 2.8g/t Veta Sur VSRC-119 70 7m @ 1.4g/t Veta Sur VSRC-121 49 3m @ 1.3g/t Veta Sur VSRC-121 60 4m @ 2.6g/t Veta Sur VSRC-122 27 1m @ 6.6g/t Veta Sur VSRC-123 26 2m @2.7g/t
(Intercepts are composites using 0.5 g/t cut)
Results through drill hole VSRC-073 used in the August 2007 resource model
Drilling has commenced on the extension of the Veta Sur deposit southwest of the San Gregorio dump and in the area of Cross Hill and San Antonio prospects some 400 meters and 900 meters south of the last defined mineralization respectively. Results for these areas are pending, though the structure was cut just south of the dump with weak to moderate mineralization. Anomalous mineralized intercepts are expected from the San Antonio prospect. No significant intercepts are expected at Cross Hill. Exploration drilling will continue in San Antonio and along the extension of Veta Sur next quarter.
Isla Cristalina Belt - Argentinita/Zapucay District
Resource and reserve estimates were completed on the Argentinita deposit and presented in the full year results. Drilling for metallurgical samples has been completed during the quarter. Drilling is planned between the Zapucay and Argentinita deposits as well as at Lavadero, Papagayo and Tito Lopez prospects. All of these prospects are within 6 kilometers of one another.
Mapping and sampling at Papagayo over the last 6 months has defined over a kilometer of anomalous gold mineralization greater than 0.5 g/t Au in rock chip hosted in a low angle shear zone. A number of trace elements are associated with gold mineralization including Ag, Pb and Mo, with path finder elements As, Bi, Hg, Sb, and Tl. A soil sampling survey has further defined the zone of mineralization using these trace elements.
An exploration drill program has been designed for the greater district which includes Papagayo, Tito Lopez, and Laurales and will commence when exploration permits are received. This is expected to be during the second quarter.
Isla Cristalina Belt - West
Generative exploration has taken place over the western most portion of the Isla Cristalina belt. Stream sediment sampling has been taken in areas previously lacking first pass sampling. Results from this program are pending.
Hand trench sampling, mapping and a reconnaissance IP survey have been completed over the Veta Rodrigo target. Trench sampling has indicated that anomalous values are associated with the vein though somewhat less anomalous than the original surface outcrop samples. Exploration permits have been received and a negotiation with land owners is underway for access to the vein. Drilling will commence once access is granted.