Asa delivers mixed quarter as Trojan weighs on performance

JOHANNESBURG (miningweekly.com) – London Aim-listed Asa Resources has delivered a mixed performance in the third quarter as commodity prices declined and some lingering operational difficulties persisted at its Trojan nickel mine, in Zimbabwe.

However, the company has implemented several mitigating measures to deal with the challenges and remains confident of getting back on track in forthcoming quarters.

“We continue to optimise our gold and nickel operations, focusing on short-term cost management actions, as well as accelerating our longer-term strategy. As a result, the board expects the group's performance in the fourth quarter to return to a more positive trend in line with previous quarters,” explained Asa group CEO Yat Hoi Ning on Friday.

While the Trojan mine achieved significant increases in both mining and milling output during the third quarter, production for nickel-in-concentrate fell 16% quarter-on-quarter to 1 571 t, while recoveries and head grade also decreased.

All-in sustaining cost (AISC) C3 cash costs of nickel-in-concentrate during the quarter under review increased by 27% to $6 554/t, while C1 cash costs increased 29% to $6 159/t.

“Measures to address the ongoing issue of low availability of equipment and access to massives were implemented at the end of the third quarter, so I am expecting higher grades and increased volumes of nickel-in-concentrate, which should lower AISC costs in the fourth quarter,” Asa said in a statement.

Nickel sales volumes recorded for the period under review were 18% lower quarter-on-quarter at 1 610 t.

The smelter restart project progress is currently at 78%, with much refurbishment work and installation of new equipment now concluded.

It is expected to be completed during the 2017/18 financial year.

To date, the mine has completed the dryer drum modifications and new hot air furnace installation for the concentrates handling plant, while the conveyance system refurbishment is in progress.

The crushing and screening plant’s refurbishment is completed and the mine is now awaiting delivery of drive systems ancillaries before commissioning.

In addition, major civil and structural refurbishment work have been completed and plant painting is in progress.

Trojan completed the furnace refractory rebuilding, as well as the furnace transformers refurbishment and is currently working on the installation of new feed system and the smelter control systems programming, besides others.

Further, a $5-million redeepening project to extend the life of the mine by five years and allow drilling to evaluate resources below 45/0 level is progressing well and will potentially provide higher grades in advance of the smelter restart.

While this project, which is about 15% complete, is ongoing, management is exploring ways to mitigate its impact on production.

Meanwhile, the Freda Rebecca gold mine, also in Zimbabwe, reported a 3% contraction in gold production and sales to 15 365 oz, despite a 21% increase in tonnes milled to 319 026 t during the third quarter.

The average gold price received fell from $1 341/oz in the second quarter to $1 195/oz in the third quarter, leading to a revenue drop of 14% to $18.4-million.

The operation’s AISC C3 costs declined 5% to $1 055/oz.

However, with a current gold price of over $1 200/oz and higher production, Freda's margins and sales will become more sustainable.

At the group’s Klipspringer diamond mine, in South Africa, the group reported performance over a two-month period, owing to the end of the fine diamond slime tailings retreatment operations in mid-November 2016.

Diamond sales for the two months decreased 39% to 22 105 ct, with the average realised fine diamonds sale price down 6% to $17.40/ct and the average fine diamonds production cost down 10% to $7.96/ct.

Further, the group pointed out that is was seeking opportunities to introduce a new joint venture (JV) partner to restart Klipspringer's underground mine operation. Discussions with various potential operators are ongoing.

In addition, discussions on funding and negotiations with JV partners are also under way for the development of small-scale gravity mine operation at the Zani-Kodo JV, in the Democratic Republic of Congo.

The gravity plant’s equipment has been ordered and the components are being assembled by a team at Freda Rebecca.

“This would generate sufficient income to continue drilling and reclassify more of the current resource from inferred to indicated – currently 634 335 oz of a total 2.97-million-ounce resource is indicated,” Ning said.