TORONTO (miningweekly.com) – ASX- and TSX-listed Troy Resources on Monday reported lower second-quarter output, mainly owing to its Casposo mine, in Argentina, mining a low-grade zone at the Kamila openpit.

Troy said a delay in ore production from the underground mine at Casposo meant that the openpit continued to be the main source of ore for mill feed. Despite completing significantly more waste stripping than planned over the last nine months, the June quarter saw a significant drop in grades in the openpit, as the only ore exposures were in the lower-grade B and Aztec veins.

The higher-grade Inca vein would be available in late August, when the current cutback would be complete. At that time, waste removal volumes were expected to drop with a corresponding saving in mining costs.

The company reported total gold output of 21 212 oz for the quarter ended June 30, down 28% on the 29 520 oz it produced in the same period a year earlier. Gold-equivalent output was down 17.8% year-on-year to 27 808 oz.

Troy physically delivered and sold 14 120 oz of gold at an average price of $1 394/oz from the Casposo operation. The average cash cost was $663/oz net of silver credits at $22/oz (270 227 oz silver), which gave a cash margin before government taxes and royalties of $731/oz of gold.

Underground development continued to improve with 685 m of tunnelling completed during the quarter, compared with 615 m in the March quarter.

The processing plant performance also improved during the period, setting a new record of 123 173 t of ore treated, a 13% increase over the March quarter, the previous record. A second-hand ball mill from Australia was installed and put into operation during May. The new mill was expected to improve metallurgical recoveries and to lower maintenance costs.

Gold sales from the Andorinhas mine, in Brazil, totalled 8 399 oz at an average price of $1 353/oz. The average cash cost was $948/oz, which gave it a cash margin before government taxes and royalties of $405/oz. Underground development capital expenditures at the mine totalled about $338/oz produced.

The Andorinhas operation mined some 38 924 t from underground at a grade of 5.21 g/t gold. This was supplemented by Lagoa Seca low-grade ore and other mined stockpiles.

During the quarter, a record 61 369 t of ore were processed with an average head grade of 4.26 g/t gold. Owing to the lower grades, gold recovery dropped to 89.03%.

Troy said the main melechete orebody was becoming increasingly thin and complex at depth. To adjust to the changing conditions, the mine was currently in transition from using mainly mechanised cut-and-fill mining, to hand-held shrinkage stoping.

Despite this being expected to lead to an improvement in overall grade, the mine plan assumed that the high-grade, opencut Coruja north-east deposit would be mined.

Troy said a new permit was required to mine this deposit and, without a timely grant of the new permit, Troy would not be able to mine the Coruja north-east deposit, which would lead to an earlier closure of the mine. The company said it was exploring options for the granting of the required permit.

Meanwhile, as part of the friendly $200-million all-script takeover of Azimuth Resources, Troy loaned the company A$10-million to undertake an infill-drilling programme of a high-grade zone at the Smarts deposit, in Guyana.

Troy said it would proceed with the compulsory acquisition of the remaining shares in Azimuth Resources, after its shareholding in the gold miner rose to 93.97% early this month.

Troy announced its off-market share-trade takeover of Azimuth at the end of March, offering one share for every 5.695 Azimuth shares held.

Since taking control, the exploration team at Azimuth had been given approval to plan for continued drilling during the September quarter, which would be aimed at increasing the amount of material to be converted from inferred to indicated resources by the end of the year.

Capital and development expenditure during the quarter totalled A$20-million. At June 30, the company had A$25.9-million cash in the bank.