Vane Minerals (LON:VML) revealed changes to its Mexican partnership and announced what it said were satisfactory production figures from the Diablito mine.
 
The company has struck a deal with its existing joint venture partner Met-Sin which will see development work start on certain mines to bring them into production next year.
 
“The agreement with our joint venture partner provides VANE with a secure long term future in Mexico and enhances our ability to grow the joint venture business by increasing production in the medium term,” said chief executive David Newton.
 
It is planned that next year Met-Sin will build and pay for a 100 tonne per day processing mill at the La Rasta mine.
 
Any excess production from the JV mines, which is not fed into Vane’s existing mill, will be processed through La Rasta.
 
Meanwhile, Vane reported that revenues were markedly down at the company’s wholly-owned Diablito mine, which will shortly close, with US$1.385 million generated in the third quarter versus US$2.7 million in the same period of last year.
 
This was expected and was due to lower gold grades in June and timing issues related to revenue recognition, Vane said.
 
The mine processed 7,995 tonnes of ore in the quarter, with average grades of 5.36 grams per tonne (g/t) gold and 10 g/t silver, and recoveries of 76.8% for gold and 76.5% for silver.
 
A total of 979 ounces of gold and 19,100 ounces of silver were produced at a direct production cost of US$802 an ounce.
 
Vane said it was confident that production grades and revenues will increase in the fourth quarter and will be consistent with results achieved prior to the third quarter.
 
“The 3 results for our gold and silver operations are satisfactory as they take into account one month’s production from lower grade ore produced by our Diablito Mine resulting in operating expenses on two mines, but generating ore for stockpile to ensure against interruption in mill feed,” Newton said.
 
“Revenues for Q3 were lower than in the prior period, partly due to timing issues regarding revenue recognition, as a large concentrate shipment was made at the end of Q2, and partly due to a month of processing lower grade ore produced from the Diablito Mine ahead of its planned closure.”
 
Newton adds that mining of higher grade ore remaining in the Diablito Mine is underway and is expected to be concluded within the fourth quarter, when the mine will close.
 
Broker Northland rates the shares a ‘buy’ and targets a price of 1.5p for the stock (current price: 0.9p).
 
Analyst Dr Ryan Long highlighted that the deal with Met-Sin secures the long-term future of the Mexican operation and would allow production to grow in the medium-term.
 
“During Q412 we expect the completion of the high grade ore extraction from the Diablito Mine followed by its closure,” he said.
 
“Revenue for the quarter was in line with our expectations and the higher operating costs associated with the creation of the stockpile was also anticipated.”