Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Two producing projects and a long term plan for growth • 866.493.9646

Dr Thomas L. Robyn
Head Of Exploration

With two polymetallic, advanced-stage development projects in production, Dia Bras (TSXV: DIB) has a faithful following of investors. The company is net cash-flow positive and predicts increased throughput and lower costs for the next three years. Part of the success lies in a brand new mill on its Bolivar Project in Chihuahua, Mexico, where permitting is easy and the people are mine friendly. Another key ingredient is a top notch management team, including Dr Thomas Robyn, who spoke with Resource Intelligence about making growth happen at Dia Bras.

Resource Intelligence: Dr Robyn, Dia Bras is cash flow positive on its producing Cu-Zn-Ag-Au Bolivar project and at the breakeven point at its producing Cusi project. How quickly is production growing?

Dr Thomas Robyn: We should see production more than triple by the end of 2011. We are processing roughly 300 tonnes per day (tpd) from Bolivar and another 2,000 tonnes per month from Cusi. The production from Bolivar is respectable today, but that will jump up to around 1,000 tpd near the end of 2011 when we have our new Piedras Verdes mill in full operation.

At Bolivar, we started a pilot mine since we had high metal prices and high grades for copper and zinc plus a mill we acquired 275 kilometers from the mine. The combination of high metal prices and high grades meant we could ship rock to the satellite mill temporarily and still generate good operating cash.

In early 2010, we obtained financing for the Piedras Verdes mill. The mill is designed for 1,000 tpd, however, we’ll start at 500 tpd in the middle of the year and ramp up quickly to 1,000 tpd. Our target is to increase capacity to 2,100 tpd within two years.


Pouring silver dore at the Malpaso Mill

RI: Do you have all capital requirements in place for the new mill?

DR: Yes. The capital cost for the Piedras Verdes mill was budgeted at $12.3 million. We raised that in early 2010 through an equity rights offering. We also had some warrants exercised in January, so we now have $22 million in treasury.

RI: What is the purpose of your present drilling campaign at Bolivar?

DR: We are drilling down dip from the deposit, where I think there is a lot more mineralization to be found. Presently, we have 6.2 million tonnes inferred, 857,000 tonnes indicated and 331,100 tonnes measured, with good copper grades, zinc, gold and silver. Drilling will move some of the inferred tonnage into higher categories.

RI: What is the size of Bolivar’s mineralized footprint?

DR: The mineralization is hosted in a meta-sedimentary sequence of marble and skarn. It is exposed at surface for about 7 kilometers. You only see the edge of this because the rocks are exposed in a cliff and dip under cover. From the drilling we’ve done, we’ve found mineralization several hundred meters down dip.

RI: What infrastructure is already in place and what kind of permits do you require, if any?

DR: In terms of direct infrastructure, there’s a main power line that we extended to the mine and mill sites. We’re building a reservoir to have water storage for the mill. There is an existing road that goes from the mine to the mill, which was recently upgraded by Goldcorp. We also have all permits in place, which were readily obtained because of the support of the local and state government.

Since 2005, we’ve milled over 500,000 tonnes of rock from Bolivar, which has allowed us to determine the right commercial parameters, which is invaluable information for us.

RI: By how much does Dia Bras plan to grow cash flow in the next 3 to 5 years?

DR: We are forecasting sales in 2011 of $35.7 million, $51.4 million in 2012, and in 2013 $89 million. For 2011 and 2012 we are forecasting lower cash flows because we will be putting a lot of cash back into exploration and mine development. In 2013, when that is all behind us we are projecting a net cash flow of $23 million.

RI: You’re forecasting cash costs to drop substantially at both Bolivar and Cusi. Why is that?

DR: Once the new mill comes on line in 2011, we forecast that the cash costs of operation will be $55.54 a tonne, a substantial drop from current costs. From 2012 on, cash costs for the mine are forecast to be $46.75 a tonne.

Cusi is an advanced stage silver-gold-lead exploration project where we mill 2,000 tonnes per month. At current silver prices the operation’s revenues cover its own costs for mining, mine development, transportation of rock to our mill, and milling. Cusi’s 2009 operating cash costs were high because we milled very few tonnes and we were doing a lot of development. We estimate that in 2011, cash costs will drop to $66.65 and that from 2012 on we’ll have cash costs of $60.65 per tonne.

RI: In the next 3 to 5 years what steps are you taking to grow resources and grow investor value?

DR: For investor-value, the new mill at Bolivar will improve throughput and dramatically lower cash costs. We’ll also improve throughput at Cusi. In addition, we have some very attractive exploration projects. Another way we expect to add value to the company is with potential acquisitions that we are investigating.

Investor Highlights:

  • New mill to increase production to 1,000 tpd at Bolivar by Q4 2011
  • Piedras Verdes mill is on time and under budget
  • Cash costs at both mines to be halved in the next three years
  • Company is net cash flow positive
  • Ongoing exploration of multiple targets, including drilling
Disclosure: No Positions