Your Questions, Our Answers
Q:What are you doing to reduce your operating costs over the next couple of years?Back to the media page
A: Historically, we have embraced a philosophy of continuous improvement at each of our operating mines. That means we are constantly looking for ways to reduce costs by becoming more efficient in our operations; including better resource modeling and mine planning, mining methods adjusted for different orebodies or portions thereof, improved equipment maintenance (more preventive and less reactionary) and therefore availability, underground grade control to decrease dilution, streamlining the workforce where justified and better shift supervision and management.
Last year, Guanacevi was our highest cost mine and even though we dealt with its main issues by investing the capital needed to modernize and expand the pumping and ventilation systems, in January 2018 we initiated a seven month productivity optimization program working with a senior mine consulting group. Once we achieve more efficiency at this mine, we will implement similar programs where required to enhance our productivity at the El Cubo and Bolanitos mines.
This year we are working to improve our metallurgical recoveries at Bolanitos and El Cubo by installing new equipment in the plants and using different flotation chemicals. At Guanacevi, we are developing two new ore bodies, Santa Cruz Sur and Milache, which will provide new high grade sources of ore starting in 2019. Since we are developing these new ore bodies this year, our 2018 cost guidance for all in sustaining costs (AISC) of $15- $16 per oz silver net of the gold credit includes approximately $2.00 per oz for these development costs, so our AISC should decline after these orebodies are developed.
However, the biggest impact on the improvement of future costs will be the construction of new, higher quality, lower cost mines. For example, based on the PEA released on March 27, 2017, El Compas has a projected all in sustaining cost below $10 per ounce. Similarly, based on the initial pre-feasibility study released on April 3, 2017 for Terronera, this asset has a projected all in sustaining cost below $5.00 per ounce. So not only should these new mines increase our production, they should also decrease our operating costs to grow our profit margins.
Two other cost factors out of our control could also help drive operating costs down. We report our financial performance in US dollars and two thirds of our operating costs are in Mexican pesos so when the peso devalues versus the US dollar, that helps our costs. We report our costs per oz of silver produced net of the gold credit and when the gold price rises, that also helps reduce our cost per oz.