Welcome Shareholders to a New Year, 2013, a year in which we expect elements to finally come together on several fronts for UC Resources Ltd. This past year, 2012, was challenging, to say the least, in the mining sector for Companies of all types. UC did not get through 2012 without facing our own challenges.
Our mill upgrade dragged longer than expected with equipment, implementation and sourcing. However the upgrade is complete and we expect to greatly surpass last year’s revenues. Part of our issue has been the remoteness of site location and ability to source and maintain both staff and equipment. The Company recently added two key personnel in Mexico, one Business Development person and we also hired a 25 year experience Mill consulting expert to help us cross the finish line for commercial production declaration.
The Company has been chasing commercial production status for some time but now have the pieces and personnel in place to accomplish this shortly. IFRS accounting rules define Commercial production as follows:
- all major capital expenditures to bring the mine to the condition necessary for it to be capable of operating in the manner intended by management have been completed;
- the completion of a reasonable period of testing of the plant and equipment;
- the ability to produce saleable product (e.g., the ability to produce precipitate / concentrate within specifications);
- the mill has reached a pre-determined percentage of design capacity;
- mineral recoveries are at or near the expected production level;
- the ability to sustain ongoing production
We have accomplished all but the assured ability to sustain production and our efforts regarding personnel we believe will put us across the finish line in relatively short order.
From some of the comments I have read online, there is a misconception that the mill has not been, or periodically has not been running. I can tell you that this has not been the case; the production mill was only intentionally put on idle over a four day period over Christmas so we could let our staff have a Christmas break. Sure there have been issues during the rainy season where power outages have forced us to idle, but these set backs have been temporary.
The power issue is being addressed directly with the Power Supplier to ensure consistency of service during the rainy season. Some changing of capacity equipment on local power lines will reduce power outages.
During the upgrade we had reduced production, but were still able to continue to produce revenue.
Because we continue to produce revenue, means we should be able to shelter the Company from the necessity of financings that would result in additional dilution. Now that the upgrade has occurred, leveraging our increasing earnings forward will allow us to afford and pay internally for our own drill program at the adjacent XORA concessions. It links drilling to the rate that is affordable to pay as we determine our mineral resource, but we will not take long to determine the time line to mine the material out and process.
This Xora concession is encouraging with a half dozen interconnected gold and silver veins, that we believe will be able to be mined and the resulting material crushed, processed and turned to cash. Drilling has recommenced this January, following the Christmas break.
The Company is also in negotiations on two separate tailings locations that we anticipate will be able to further expand our mill life at La Yesca.
The other element is that the company last year invested 1.5 Million in the Sprott Silver Fund. To date we have not had a return and have actually incurred a loss, however our attitude has not wavered and we believe that this investment in the business we are in, that being silver, will return to the Company some significant returns.
We believe that UC Resources efforts to continue to be diligent and produce revenue, is the best hedge against market forces, dilution and positions the company for right acquisitions and growth. It has not been an easy effort, but anything sustainable, worthwhile and rewarding is seldom easy. We appreciate our shareholders patience, as we have worked through this last year and will work to continue to earn your confidence as we pull elements together in 2013.