Austral Gold Ltd. (TSXV:AGLD, ASX:AGD) reported Q2 2017 production and financial results from its operations in Chile and Argentina. Total production
for the quarter was 11,764 Au oz and 390,234 Ag oz (16,898 AuEq), the decrease in overall production QoQ was due to delays in the commissioning of
the new agitation leach plant (Figure 1). The plant is expected to come online next quarter, which should result in higher production for the remainder
of the year. Overall, it appears the company has the potential to meet its guidance of 115k AuEq oz for CY2017; however, the processing of higher grade
ore from Amancaya is key. In our view, Austral is poised to re-rate towards similar scale peers, as it demonstrates its increased production potential.
Amancaya ore stockpiled for next quarter. During the quarter, open-pit operations commenced and pre-stripping was completed. The commissioning
of the new agitation leach plant was delayed and therefore the higher-grade ore from Amancaya could not be processed. In the meantime, ore is being
stockpiled to be processed this quarter when the new plant is expected to come online. In May, the company began exploration activities at Amancaya
which include geophysics, mapping and trenching. Production from Amancaya is a key aspect of the company’s growth plans.
Guanaco production hindered by plant delays. Guanaco produced 7,404 Au oz and 15,651 Ag oz (7,610 AuEq vs. 10,466 AuEq in Q1 2017) during
the quarter, a decrease in gold production by ~11% YoY, ~28% QoQ and an increase in silver production by ~18% YoY, ~23% QoQ. The lower production was
due to delays with commissioning the new plant, the Merrill Crowe process could not be used and the old plant was used instead. The company anticipates
the issues to be fixed this quarter. An exploration drill program is being planned for September/October 2017. The PFS for the combined operations
of Amancaya and Guanaco was completed, we expect production to exceed what has been outlined in the report and for it to be between 60-75k oz AuEq
Casposo guidance maintained; suggests meaningful operating improvements expected in H2.
During the quarter 4,360 Au oz and 374,583
Ag oz (100% basis) - 3,052 Au oz and 262,208 Ag oz (70% basis) – was produced from Casposo. During the last quarter, Austral increased its interest
in Casposo and still has the option to earn the remaining 30%. The company expects to produce 50,000 AuEq oz for the year (100% basis); however, meaningful
operating improvements are likely required in H2 2017 since only ~16,568 AuEq oz in H1 2017.
Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
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Austral Gold Ltd. - TSXV:AGLD, ASX:AGD - 1,2,7
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