Saturday Read: Orefinders Resources will start to process its Mirado stockpiles within the next few days

Orefinders Resources (ORX.V) expects to be on the verge of generating in excess of C$2M  in net cash flow as the company is now in the process of trucking the crushed stockpiled ore from the Mirado project to the Westwood mill, owned and operated by IAMgold (IMG.TO, IAG).

As the company expected, the crushing stage took approximately 3 weeks and has now concluded and transportation to the Westwood mill complex started September 26th. We think Orefinders will have trucked the entire 25,000 tonnes of rock (which is the minimum amount contractually agreed upon) to Westwood by the end of this month, where  the ore will be milled (which will take an additional 10-15 days as the capacity of the plant is just 2,000 tonnes per day. Orefinders expects to start processing the ore as soon as it has 15,000 tonnes available at the mill).

The exact details of the toll milling agreement obviously have not been made public, but as the inferred resource estimate contained 2,939 ounces of gold (and as Orefinders will have to add more ore to meet its 25,000 tonnes minimum – the company recently provided an update, confirming it has crushed 26,000 tonnes of ore), we would expect the company to produce at least 2,600-2,700 ounces of gold which would result in a total revenue of C$4.3M (using the mid-point of our own production estimates, and a gold price of C$1650/oz). We would consider a gold production of in excess of 3,000 ounces to be a huge success.

The main cost will very likely be associated with the milling phase, as excavating an existing stockpile and crushing the ore with a mobile crusher won’t be too expensive (on a per-tonne basis). The net revenue of this Phase One program will then entirely be used to fund the Phase Two development, which could allow Orefinders to process more ore from the existing open pit at Mirador to reduce its need to tap the equity markets for additional funding as it will undoubtedly want to increase its exploration efforts at Mirado. The best place to find a new mine is in the shadow of an old mine, and Orefinders’ Mirador project contains two past-producing mines.

The author has no position in Orefinders Resources. Please read the disclaimer