Progress at the Snow Lake mine has been encouraging with the recent completion of the Snow Lake Feasibility Study. The study projects 80,000 ounces of annual gold production over a five year operating period. The study includes a revised estimate of Mineral Resources which have increased significantly during the year. Total resources in all categories have passed the million ounce mark. Proven and Probable gold reserves within Resources and supporting the production estimates now total an estimated 451,900 ounces gold (see news release, November 3, 2010, for details regarding the mineral reserve estimates). Our prime issue during recent months has been inconsistent gold grades being mined at our Lac Herbin gold mine. Operating costs are being closely monitored, and as the third quarter progressed certain expenses were reduced or eliminated to preserve cash. We are diligently and continuously assessing all factors to improve the grades and performance at Lac Herbin.
During the three months ended September 30, 2010 the following occurred at Alexis Minerals:
The acquisition of Garson Gold has allowed Alexis to more than double its estimated gold resources. The recently completed Feasibility Study for Snow Lake added newly estimated Proven and Probable Reserves of 451,900 ounces of gold and estimated the potential for 80,000 ounces of gold production annually for at least five years at an estimated total cash cost of $640 per oz gold.
Our first gold mine, Lac Herbin, has continued to produce gold since late 2008; however there have been challenges in recent months with lower than expected gold grades being mined. Accordingly, the 2010 outlook for gold production from Lac Herbin is revised to be 24,000 ounces of gold as it is expected the shortage of ounces during the first three quarters cannot be recouped. New development that started in Q2-2010 resulted in lower grades of gold and it was expected that additional definition drilling into Q3- 2010 would identify areas of higher grade ore to mine. Where development has been undertaken in Q3, the narrow vein structure of the deposit has continued to deliver less than the target grade of gold. Therefore development was reduced to minimize the impact of the resultant lower than expected revenue stream. The net effect has been an increase in the cash cost (see non-GAAP measures) of sales to $1,283/oz Au.
A bulk sample program at our second gold project at Lac Pelletier was completed earlier in the year. A production commitment notice was issued to Thundermin Resources Ltd. with the Company thereby exercising its option to acquire the property. The Company is in discussion with Thundermin regarding the transfer of full title and ownership of the property to the Company.
The recovery rate from our wholly owned Aurbel Gold mill has been relatively consistent at an average of 91.6%, compared to the target recovery rate of 94%.
Management remains encouraged as exploration continues with many prospective targets. Our drilling program in Snow Lake has discovered significant gold mineralization in a potential, on-strike extension to the Snow Lake Mine. This may represent the discovery of a major new ore zone and characterizes the potential remaining on the property and in proximity to our Snow Lake Gold Mill, currently the only gold mill in the region. As well, two new high-grade gold zones were discovered containing mineralization that is similar in character to that of the Main and the No.3 Zones yet is of significantly higher grade.
Our expectations are high for further significant discovery from focused exploration through 2010 in the immediate vicinity of the Aurbel Gold Mill. Exploration and compilation in this area is already providing indications of untested extensions to the Herbin Mine to the north and northwest, of new zones between the Ferderber and Herbin mines and at greater depth potential at the Herbin and Dumont mines.
Alexis continued with the planned 2010 exploration campaign for over 80,000 metres of drilling, devoting approximately $6 million to the Snow Lake Mine property and $4 million to the Abitibi Mining Camp. This has been funded through the flow through financings completed in 2009.
Non GAAP Measures
The Company has included certain Non-GAAP performance measures, namely cash costs per gold ounce sold and working capital, throughout this document. In the gold mining industry, these are common non- GAAP performance measures but do not have any standardized meaning. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, we and certain investors use this information to evaluate the Company's performance and ability to generate cash, profits and meet financial commitments. These Non GAAP measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Working Capital
Quality Control
The technical and scientific content of this press release has been reviewed by Keith Boyle, P.Eng., Chief Operating Officer, Alexis Minerals and Qualified Person as defined under NI 43-101 guidelines.
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ALEXIS MINERALS CORPORATION