Mexico Quarterly Update

RNS Number : 7113R

Vane Minerals PLC

09 November 2011

 



VANE Minerals plc (AIM:VML)

("VANE" or the "Company")

Mexican gold & silver quarterly operations update covering the period 1 July to 30 September 2011 (the "Period")

VANE today is pleased to announce an operational update on its gold/silver operations in Mexico.

Highlights

·     1,560 tonnes of ore mined from Diablito Mine in the Period at an average cash cost of $69/tonne(T)

·     5,560 tonnes of ore mined from La Colorada Mine in the Period (part of the Company's Joint Venture ("JV") with Ruiz Brothers ("Ruiz")) at an average cash cost of $67/T

·     8,022 tonnes of ore in total processed by SDA Mill during the Period

o  2,706 tonnes of ore processed from Diablito with average grades 1.96g/T Au and 169g/T Ag at an average cash cost of $25/T milled

o  5,316 tonnes of ore processed from La Colorada with average grades 5.17g/T Au and 105g/T Ag at an average cash cost of $24/T milled

·     Grades of up to 12.6g/T Au and 258g/T Ag realised from La Colorada post-Period

·     Average recovery rate of 75.9% Au and 69.9% Ag; improving as a result of addition of second vertical cell at SDA mill

·     Peñoles smelter resumed normal operations following temporary closure in September due to overstocking

·     Total revenue of US$433,691 generated in the three months to 30 September 2011.  In addition, due to the temporary closure of the Peñoles smelter, the Company had a concentrates inventory awaiting smelting of approximately $1.0 million* as at 30 September 2011 (which has been smelted and the revenue accounted for post Period)

·     Merrill-Crowe recovery facility operational with third-party concentrate/ore being sourced

·     All gold and silver sold unhedged

·     Decision taken to close Diablito Mine during 2012

*Based on a gold price of $1,650/oz Au and $30/oz Ag

Following a switch towards utilising production from the Ruiz JV, higher grade gold-silver production has been achieved during the three months to 30 September 2011. These results demonstrate the improvement from switching feedstock solely from VANE's wholly-owned Diablito Mine to the Ruiz JV.

The Directors believe that the Company will be on track to achieve its production targets for the financial year ending 31 December 2011 in terms of tonnes of ore processed. The revenue generated from this production is conditional upon prevailing precious metal prices, on the grades of gold and silver in the ore and the relevant recovery rates achieved during milling. Whilst gold and silver prices remain considerably ahead of their levels a year ago, prior to August 2011, the grade of gold and silver realised and the actual recovery rates achieved were lower than expected.

However, during August and September actual grades of gold and silver saw steady improvement and the Company has realised average grades of 6.48g/T Au and 104g/T Ag from 2,659 tonnes of La Colorada ore milled at the SDA Mill for the month September (62% above forecast of 4g/T Au and 4% above forecast of 100g/T Ag).  Should these improvement of actual grades prove to be sustainable then the Board expects them to continue to have a positive impact on VANE's revenue for the current financial year.

Commenting today, David Newton, CEO of VANE said: "Whilst VANE is first and foremost an exploration company focused on its copper and uranium exploration programmes, it is important not to lose sight of the contribution that our Mexican gold-silver business is expected to make towards the funding of these exploration projects and, to this end, any profits that are generated from our Mexican business will be reinvested in the development of our exploration activities. To date, this financial contribution has been lower than anticipated, primarily because our Diablito Mine has produced less gold and silver than was originally expected as a result of dilution of grade. Today's announcement demonstrates that the Company's JV with Ruiz is starting to produce better quality ore to meet our goal of improving the financial contribution from Minerales VANE towards the Group's exploration and running costs."

Kristopher K. Hefton, Chief Operating Officer VANE Minerals (US) LLC, BSc Geology, who meets the criteria of a qualified person under the AIM Rules - Guidance for Mining, Oil and Gas Companies, has reviewed and approved the technical information contained within this announcement.

For further information, please contact:

VANE Minerals Plc	[phone]
David Newton Allenby Capital Brian Stockbridge/Alex Price	[phone]
Threadneedle Communications	[phone]

Laurence Read/ Beth Harris

Further detail on the agreement with the Ruiz brothers and exploration potential

The JV's initial focus is on the four concessions currently controlled by the Ruiz brothers, of which, La Colorada, is currently in production. In addition, exploration and mine planning of the additional concessions is continuing.

Within the four concessions, a number of precious metals veins and vein systems are known and have been partially developed:

· La Colorada concession (14 hectares) - includes the following workings: Salto, La Camichina,
Campo Ancho, La Colorada, and La Escondida workings located at different elevations along the same vein(s) system. These workings have opened the principal vein structure intermittently over a horizontal distance of 400 meters and a vertical distance of 130 meters;

· Maria Fernanda concession (72 hectares) - includes two separate veins, Saltito, which has
numerous shallow workings along a strike length of more than 500 meters and the largely unexplored Papayal vein;

· Jorge Luis concession (11.9 hectares) - covers the upper level workings along the La
Valenzuela vein 75 meters above La Valenzuela tunnel; and

· La Valenzuela concession (74.9 hectares) - adit provides access to the lower level as well as the upper workings along the La Valenzuela vein.

Although several ore shoots have been intersected in the Colorada concession, current production is from the Camichina drift, a 2-3 meter wide vein, which is currently projected to extend for 150 meters along strike and 70 meters in the dip direction. The Board believes that the potential of the La Colorada concession remains encouraging based on historic drill results obtained in 2006. The lowermost Salto tunnel, 50 meters below the Camichina level, will allow for easy access to newly discovered ore shoots . Mapping and sampling continues to be carried out by the JV to determine the location of all of the underground workings and the best method to access the known ore shoots to expand production. Diamond drilling will be carried out by the JV as necessary.

The Saltito vein system, which is the JV's next target for production, on the Maria Fernanda concession, exhibits numerous shallow mine workings over a 500+ meter strike length. Historic drilling (2006) has given indications of mineralization extending to depth. Mineralogy and grades are projected to be similar to the ore being produced at La Colorada. The JV will carry out mapping and sampling to determine the best method of accessing and developing the ore shoots currently indicated from shallow underground workings along with diamond drilling as necessary.

Historic mapping from the La Valenzuela vein indicates two ore shoots extending from the upper Jorge Luis drift to 40 meters below the La Valenzuela drift, a vertical difference of 115 meters in which a non-compliant NI43-101 resource of 43,000 tonnes at 6.8 g/T Au (9,400 oz. Au) and unspecified silver has been inferred. Mapping and sampling will be carried out by the JV to determine the best method of accessing and developing the ore shoots currently indicated from the underground workings along with diamond drilling as necessary.

Within the 1,500 km² area covered by the JV, numerous other precious metals vein targets exist as per the "Geological-Mining Monograph of the State of Sinaloa" published by the Consejo de Resursos Minerales, and the Board anticipates that these will be explored and evaluated during the course of the JV. The Board's intention is that the JV will develop several additional projects that will be capable of each supplying 50+ tonnes of ore per day which, the Board believes, would in turn justify the construction of an additional mill in a location more central to the mines. Concentrates from that mill would then be processed by leaching and Merrill Crowe precipitation at the SDA Mill.

 

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