Red Back Posts Record Q1

There aren’t many mining companies that are setting new share-price highs at the moment, but Red Back Mining (RBI-T, RBIFF-O) is one of them.

The company, which recently reported record net income in the first quarter of US$25.3 million, set a new 12-month high of $11.19 days later, and traded at $9.65 per share at presstime. The stock has traded as low as $3.28 in the last year and has 229 million shares outstanding.

The gold producer holds a 90% interest in the Chirano gold mine, 100 km southwest of Kumasi, Ghana’s second-largest city, and a 100%-interest in the Tasiast gold mine, 300 km north of Mauritania’s capital, Nouakchott.

The two mines produced nearly 70,410 oz. gold in the first quarter ended March 31 at an average realized gold price of US$917 per oz. and average cash operating costs of US$389 per oz.

In February, Red Back completed a bought-deal equity financing for $165 million at a price of $7.50 per share. The net proceeds were used to fully repay its US$28-million bank credit facility and for working capital and general corporate purposes.

At the end of the first quarter, the hedge-free producer held US$135 million in cash, no debt and boasted solid operating cash flow.

All remaining capital costs for its plant expansions at Tasiast and Chirano, and at the Akwaaba Deeps underground development, are fully funded. Akwaaba Deeps is one of Chirano’s 11 deposits.

Tasiast produced 36,150 oz. gold in the three months to March 31 at a cash operating cost of US$271 per oz. Lower processing costs contributed to lower-than-expected cash costs.

At Chirano, 34,260 oz. gold were produced at a cash operating cost of US$509 per oz. The company forecasts full-year production will come in at 170,000 oz. gold at a cash operating cost of US$480 per oz.

Red Back is undertaking major plant expansions at both mines and commissioning has begun.

At Tasiast, the milling circuit will be commissioned in the second quarter. First commercial-scale recoveries from dump-leach operations are expected in the second quarter.

Red Back forecasts 2009 production at Tasiast of 230,000 oz. gold at a cash operating cost of US$320 per oz.

At Chirano, the crushing circuit has been commissioned and commissioning of the expanded plant is scheduled for the third quarter.

The Akwaaba Deeps development remains on schedule with the first sub-level cave production expected in the second quarter.

In May, Red Back also reported that it had boosted resources and reserves at both of its open-pit mines in Africa.

The Vancouver-based company added 39% more proven and probable reserves and 32% more measured and indicated resources at Tasiast. Proven and probable reserves now total 49 million tonnes grading 1.45 grams gold per tonne for a total of 2.3 million contained ounces gold. Measured and indicated resources are 97.4 million tonnes at 1.19 grams gold for 3.7 million oz.

Red Back acquired Tasiast from Lundin Mining (LUN-T, LMC-N) in August 2007.

At Chirano, Red Back estimated new inferred resources for two potential underground mineralized areas in March. At a 2- gram gold cutoff grade, the Paboase South deposit hosts 2.3 million tonnes of 3.5 gram gold for 250,000 oz. gold, while the Suraw deposit holds 1.9 million tonnes grading 4.1 grams gold for 240,000 oz.

The company says it is pursuing exploration programs to enlarge the resource and reserve base at both mines.