The options were originally due to expire on 15 October 2012 with Macquarie still holding another 17.5 million A$0.15 options expiring 15 October 2013.
Production at PanTerra's Las Lagunas project is expected to ramp up towards steady state operations in November or December this year after the suppliers of its undersized IsaMill advised that the change to a larger 5.0m3 mill from the current 3m3 mill will be completed and operational by 24 October 2012.
The new mill is expected to allow design throughput of 100tph of plant feed to be easily achieved at the 12 micron grind size required to optimise oxidation of the refractory ore, and subsequent metal recovery.
Doré bars of about 10% gold and 90% silver that have been produced to date have evidenced minimal contaminants on refining in Switzerland which enhances the revenue stream now occurring on a regular basis.
Macquarie's decision to exercise the options is a simple one as it enables them to convert shares at $0.10 per share from PanTerra's last traded share price of A$0.145. It also demonstrates the upside Macquarie sees from holding PanTerra shares.
However, with Las Lagunas forecast to produce about 69,000 ounces of gold and 630,000 ounces of silver annually to generate free cash flow of nearly US$100 million within 18 months, Proactive Investors believes PanTerra remains considerably undervalued.
As production builds up towards this forecast, we foresee an upward "kick" in the valuation of PanTerra within the next 12 months towards $0.20-$0.30.
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