Extorre updates Cerro Moro study

Vancouver – Extorre Gold Mines (XG-T) has released an updated economic assessment for its fast-evolving Cerro Moro gold-silver project in Argentina that factors in higher throughputs, metal prices and capital costs.

The study, however, does not factor in the recently-discovered Zoe target, nor new discoveries on the Martina, Carla and Esperanza veins. With a resource update on the new discoveries expected in the fall, and the company expecting the next PEA to add a minimum 50% to the mining and processing rates, the just-released study looks to only be relevant for the next few months.

Still, the study has incorporated a resource update from April that covered the Escondida, Loma Escondida and Gabriela zones, and a 33% higher peak throughput of 1,000 tonnes per day compared with the October 2010 PEA.

The combined open-pit and underground mine is now expected to produce 495,000 oz. gold and 26.6 million oz. silver over the 8-year mine life, an addition of about 59,000 oz. gold and 5.2 million oz. silver.

Along with throughput and production increases, capital costs have gone up about 60% compared with the last study. Total initial capital costs are now estimated at US$209 million, including US$26 million in recoverable VAT, compared with US$131 million for the last study, including US$21 million in VAT charges. The company reports that increased capital costs stem in part from the scaling up of the throughput, switching to a conventional tailings facility, incorporating US$33 million in indirect capital costs, and general cost escalations in the area and industry.

Financially, the project has a pre-tax undiscounted cash flow of US$581 million compared with US$291 million in the previous study. The pre-tax internal rate of return is estimated at 89.3% compared with 57.6% in the 2010 study. The one-year payback period is about 9 months faster than in the last study.

The financials were boosted in part by the company incorporating US$1,320 per oz. gold and US$26 per oz. silver, compared with US$950 per oz. gold and US$16 per oz. silver in the previous study.

The company recently secured environmental approval for a 750-tonne-per-day project, but will have to prepare an addendum to the environmental impact assessment to factor in the increased scope of the project. Extorre plans to incorporate the Zoe, Martina, Carla and Esperanza-Nini veins in the updated application, which it expects to secure approval of in considerably less time than the original.

Extorre’s share price dropped 86¢ or 7% to $11.70 on what was a brutal day for the markets. The company has a 52-week share price range between $2.81 and $14.84.