PERTH (miningweekly.com) – Metals miner Perilya reported that its Broken Hill operation, in New South Wales,  failed to meet expectations during the three months to March, as head grades declined.

The lower head grades were as a result of an unanticipated need to alter mining priorities and transfer a larger proportion of the mine’s development equipment onto the rehabilitation of older sections, in response to geotechnical issues.

This reduced access to planned high-grade production areas, resulting in a greater reliance on established lower-grade ore blocks to achieve production volumes.

The miner said that despite higher mining production compared with the previous quarter, metal production was lower at 27 169 t of combined zinc and lead. Silver production for the quarter was around 296 000 oz.

As a result of the lower head grade, quarterly cash costs were also above the guided range at Broken Hill, and was further exacerbated by an unplanned shutdown of the main haulage shaft for ten days during March, which resulted in mining during that period moving to the lower-grade upper-level stopes to facilitate haulage of mined material to surface, through the decline.

Perilya CEO Paul Arndt noted that in response to the adverse economic environment that developed during the quarter, the company’s management team had implemented a number of cost reduction strategies, particularly at Broken Hill, to mitigate the effects of lower metals prices.

These included a revised mining plan, a cut-back on the number of contractor positions, a review of all key supply and services agreements, and demobilising the development contractor at the Potosi mine development and transferring to lower-cost Perilya mining crews ahead of the planned transition.

“The revised operating strategy at Broken Hill has also involved the carefully considered reduction in the number of direct employees,” Arndt said.

“Unfortunately, this has resulted in 17 staff positions becoming redundant. The affected employees are being provided with their full entitlements and supported in the transition.”

Arndt noted that the change in the mining plan would see Perilya target the development of a deeper portion of the deposit, which would result in a slower, but more economically sustainable production start-up schedule, more appropriate to the current metal prices.

“This will result in a significant reduction in the monthly spend on the Potosi mine development, thus preserving cash flow in the current climate. This does result in a reduced metal production against initial guidance for 2013 in the order of 20 000 t of combined metal from Potosi,” he added.

In light of the revised mine plan, Perilya had revised its full-year production for the Broken Hill operation to a combined 125 000 t to 140 000 t of lead and zinc, from the previous estimate of between 140 000 t and 150 000 t.

Meanwhile, at the Cerro de Maimon mine, in the Dominican Republic, Perilya produced 2 573 t of copper, while gold and silver production outperformed the previous quarter by 35% and 24% respectively, with the mine producing 4 193 oz of gold and 97 930 oz of silver.

Production at the mine was in line with the yearly guidance of between 11 000 t and 12 000 t of copper, and ahead of the gold and silver guidance of between 10 000 oz and 13 000 oz of gold and between 300 000 oz and 330 000 oz of silver.