Armed with a positive feasibility study,
The study by Agra Simons found that an expansion to 15,000 tonnes from the current 2,400 tonnes per day is “technically feasible and economically viable.”
Pending financing and permitting, construction is to begin in March 2000, with a new, 5.5-million-tonne-per-year concentrator plant commissioned in the second quarter of 2001. The existing plant will continue to operate during the expansion phase.
Following the expansion, the operation is expected to churn out 248,900 oz. palladium, 24,200 oz. platinum and 19,100 oz. gold annually in a bulk concentrate. The mine will also produce smaller amounts of copper, nickel and cobalt. The stripping ratio over the mine’s 11-year life is pegged at 2.3-to-1 waste-to-ore.
Lac des les is Canada’s only primary platinum group metals (PGM) mine, and the world’s largest open-pit palladium producer. Despite strong palladium prices, now in record territory of US$450 per oz. the mine is still struggling to make money. Indeed, profits have remained elusive since production began in late 1993, in part because of onerous hedging programs that have since expired.
North American Palladium posted a $8.6-million loss for the first nine months of last year, down from a $15.1-million loss in the corresponding period in 1998. However, the mine did provide positive cash of $3 million for the 1999 period, compared with a negative cash position of $8 million a year earlier.
The feasibility study, which examined a larger throughput but lower-grade operation, projects that cash costs of palladium production will fall to US$131 per oz. (net of other metal credits, excluding royalties) with the help of new primary and ancillary mining equipment. The proposed circuit in the new mill, while essentially the same as the existing plant, will have finer grinding and a longer flotation retention time in order to boosts recoveries to 80.7% from the current 75.5 per cent.
The study followed a drilling program that significantly expanded the geological resource at Lac des les. This program led to a minable proven and probable resource of 74.2 million tonnes grading 1.64 grams palladium, 0.18 gram platinum and 0.14 gram gold per tonne plus 0.07% copper and 0.06% nickel, based on a cutoff grade of 0.92 gram palladium-equivalent.
An additional resource of 23.5 million tonnes grading 1.46 grams palladium, 0.18 gram platinum and 0.11 gram gold, plus 0.05% each of copper and nickel, has been estimated outside the proposed pit shell.
The deposit is hosted mainly by the Roby zone, which is open at depth and, apparently, to the southeast. In mid-January, a $3-million drilling program will test the southeastern extension of the deposit and additional targets close to the pit.
Agra expects that the expansion capital, estimated at US$126.5 million, will be repaid within 2.5 years of the new mill’s being commissioned. In addition to the new mill, this estimate includes the costs of new mining equipment, preproduction stripping, an expanded tailings facility and new site infrastructure.
The after-tax rate-of-return is expected to be 27%, and the net present value of the after-tax cash flow is pegged at US$100 million. These figures were arrived at using a palladium price of US$350 per oz. for the period 2000-2002 and US$320 per oz. thereafter.
North American Palladium intends to debt-finance the expansion and is currently in talks with several lenders. Kaiser-Francis Oil of Tulsa, Okla., is the company’s largest shareholder.
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