Arian Silver (LON:AGQ, CVE:AGQ) told investors that it has uncovered a series of alleged thefts at the San Jose custom milling plant, which it believes contributed to a short-fall in silver recoveries in the previous quarter.
Last week the group revealed a small operating loss for the San Jose mining and milling operation for the three month period. Arian said it had carried out several operational improvements but silver recoveries were still lower than anticipated.
A subsequent investigation revealed a theft of around eight tonnes of silver-bearing concentrate, Arian said.
The group also claim that the Mexican authorities have indicated that this was not an isolated incident and other thefts occurred during the same quarter.
According to Arian the alleged theft was organised by an individual who was employed by the plant operator and the individual has been replaced. It also stressed that security at the mill is the sole responsibility of the contracted mill operator, and so are any liability issues.
"Whilst the discovery of the theft of this concentrate is disappointing news, it does highlight one of the contributing factors to the lower than expected recoveries of silver concentrate during the first quarter reporting period,” chief executive Jim Williams said.
He added: “Now that we have identified and halted this specific security breach and implemented a number of plant improvements we anticipate that our mill recoveries will improve."
Analysts at City firm Xcap Securities reckon that while insurance should cover any eventual losses, much of the stolen concentrate is likely to be recovered.
“It's not often that theft can be greeted as good news. But bizarrely in this case it can. This is because it helps explain the disappointing silver recoveries reported in the first quarter,” Xcap said.
The broker added: “The picture's starting to become clearer. This is obviously embarrassing for Arian but at least it was its own suspicions that led it to install CCTV, and this in turn helped identify the theft.”