B2Gold gets Orosi mine ready for production; deals with strike at Limon

Production should start by the end of the month at B2Gold‘s (BTO-T) Orosi gold mine in Nicaragua and that means there will be a major increase in gold production for the company next year.

B2Gold expects to produce 120,000 to 130,000 oz. gold overall next year with 84,000 oz. gold coming from Orosi and about 43,000 oz. gold from its Limon mine, also in Nicaragua.

Production is actually at a standstill at Limon right now because of an illegal strike. Most mine workers there are members of one of three unions. About 46% belong to the union that initiated the strike.

The other two unions have indicated their workers are ready to go back to work. Nicaragua’s ministry of labour declared on Oct. 29 that the strike was illegal, which gives B2Gold the right to fire the anyone who refuses to go back to work.

The reason behind that is the company just signed a collective bargaining agreement with all three unions in July that gave workers a pay increase up to 17% and other benefits. B2Gold did not report what the union’s grievances were.

The company says it doesn’t want to go ahead with firing people just yet. It’s working towards making an agreement with the unions instead that will get them back to work immediately and ensure that in the future the unions abide by the terms of the collective agreement.

The Limon mine has been in operation as an underground and open pit mine since 1941 and has a long history of labour disputes. B2Gold bought a 95% interest in the mine in March 2009 after a merger with Central Sun Mining.

Limon, a 1,000 tonne per day operation, has a 3.5-year mine life and is projected to have average cash costs of US$550 per oz.

Cash costs at the Orosi mine are expected to be about US$490 to US$500 per oz. gold.

Orosi, which has seven-year mine life, will start off operating at 3,500 tonnes per day averaging 1.81 grams gold per tonne with the intention of ramping up to 5,500 tonnes per day once a second ball mill is installed in the second quarter of 2010.

Total capital costs for Orosi ran about $7 million, or 13%, over budget at US$62 million. Heavier than usual rains in the summer added to the cost of excavating the tailings dam; surface rights issues forced the company to reroute the tailings dam; and changes to the mill, including adding the second ball mill, all contributed to the higher costs.

Orosi originally opened as an open pit heap leach mine in 1996. In 2007, an evaluation revealed that gold recoveries could be improved drastically, from 40% to over 90% by using a conventional milling operation.
B2Gold shares were up almost 11% today to 83¢ apiece on a trading volume of 4.8 million shares.