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The 40-tonne Sandvick automated haul truck operates on a dedicated level 24 hours a day, stopping only for fuel and maintenance. Driverless trucks typically incur lower operating costs than driven vehicles.
The mine created more free cash flow than it did last year. Why is that? We’ve more than doubled Casa’s throughput since we acquired it in 2013, and are in the process of optimizing the mine and mill. There may be opportunities to increase throughput further, but we need to study the impact of such a move to ensure that we’re not negatively impacting recoveries. We’ve made the mine more predictable and consistent, and have improved its safety record considerably. The many innovations being introduced – particularly the autonomous haul trucks – should help reduce operating costs further.
We’ve also had a lot of exploration success here – increasing our proven and probable reserves 14% to 1.5 million ounces – and see the potential for the mine life to be substantially improved both underground and on the surface. At this point, we can see four or five open pits to come, and I wouldn’t be surprised to see additional pits over the course of the next 15-20 years.
SAN SEBASTIAN
San Sebastian, in its second full year of operations following the restart of mining, produced 3.3 million ounces of silver and 25,177 ounces of gold in 2017. The mine continued to generate significant free cash flow in 2017.
San Sebastian started transitioning from open-pit mining to underground operations early this year. The strategy at this project continues to be pay-as-you-go in that we use mining contractors and rent a third-party mill to minimize our capital investment and generate significant cash flows.
A successful exploration program in 2017 continued to identify new high-grade resources to extend the cyanide milling circuit, as well as increase the amount of polymetallic Hugh Zone-style mineralization.
The expansion from the drilling of the Hugh Zone has gone faster than expected, and we are encouraged by the results. We see this polymetallic resource as having potential to significantly extend the life of San Sebastian; this will be one area of exploration focus in 2018, including the collection of a bulk sample. In addition, we entered into a toll milling agreement in which sulphide ore will be trucked 26 miles to Excellon’s Miguel Auza flotation mill facility, in Zacatecas, for processing. It’s not only a significant step toward extending the life of
the mine, it’s also in keeping with our strategy of maximizing cash flow and minimizing capital investment by using third-party facilities. We’ll take a bulk sample in the second or third quarter; if it’s positive, we could begin mining sulphide ore next year.
San Sebastian sulphides have the potential for five years of mine life and considerable upside with the recent exploration discoveries. And, since the agreement doesn’t impact the current arrangement (oxide ore from shallower depths of the mine is being processed at the third-party-owned Velardeña mill), we hope to mine both oxides and sulphides concurrently.
When we think about San Sebastian and its potential, we’re reminded of another property just a couple hundred kilometers away owned by Fresnillo – the second largest silver producer in the world – that’s been operating for nearly 400 years. My uncle was chairman of the Fresnillo Company back in the ’70s when they discovered a tremendous ore body at depth.
I’m not suggesting that San Sebastian is another Fresnillo; just that there are a lot of similarities geologically, and we’re learning more and more every day. We’ve had an extraordinary amount of exploration success
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