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PanTerra Gold Set For Positive Operating Cash Flows In September From Las Lagunas Production

PanTerra Gold (ASX: PGI) has advised that ramp up of production at its Las Lagunas project in the Dominican Republic is progressively improving with proceeds from refining expected to result in a positive operating cash flow this month.

Doré bars of approximately 10% gold and 90% silver have been produced to date.

These have had minimal contaminants on refining in Switzerland which enhances the revenue stream now occurring on a regular basis.

Revised forecasts will not be produced until production and operating costs have stabilised, though previously budgeted operating costs appear to be reasonably accurate.

However, throughput of the Albion/CIL process plant will be restricted until December 2012 when the Albion technology provider is scheduled to increase the size of its installed IsaMill ultrafine grinding unit.

The 3.0m3 mill will be replaced by a 5.0m3 mill at the supplier's cost, to avoid the recently identified prospect of excessive wear to the liner of the smaller unit under full load.

Thereafter, design throughput of 100tph of plant feed should be easily achieved at the 12 micron grind size required to optimise oxidation of the refractory ore, and subsequent metal recovery.

Irrespective of the IsaMill issue, gold production is expected to increase from approximately 2,000oz in September to 4,000oz in December 2012 after which monthly production should stabilise at around 5,500oz, based on head grades and previous pilot plant test work. Silver production should be approximately nine times gold weights.

Three days of production were lost in early September due to the effect of tropical storm Isaac which passed over the Dominican Republic.

Brian Johnson, Executive Chairman of PanTerra Gold, said that he was disappointed the ramp up had been slower than anticipated as a result of mechanical equipment issues.

Mr Johnson also said the actual operation of the Albion oxidation circuit has proven to be fairly difficult but was improving with training and the appointment of additional expatriate management.

With ramp up issues resolved, the Company should produce an operating surplus for the balance of 2012, and strong cash flows in 2013.

Analysis

Production is forecast to increase to 4,000oz in December 2012 and steady state production at around 5,500oz per month in 2013.

PanTerra Gold expects to extract 69,000 oz Au and 630,000 oz Ag per year from the tailings for 6.5 years at a current operating cost estimated to be approximately US$337 per oz Au equivalent. The project is being carried out under a profit sharing arrangement with the Dominican Government.

The current valuation of around $96.1 million for PanTerra does not adequately reflect the growing production profile nor capture PGI's share of earnings from the project in 2013/14.