With mining at the Omai open-pit gold mine in Guyana slated to finish by the end of 2005,
Toward that end, the company is submitting its recently completed feasibility study and environmental impact study so that permitting can begin.
The study pegs Rosebel’s reserves at 36.9 million tonnes running 1.63 grams gold per tonne, equivalent to 1.9 million contained ounces of gold. That’s an increase of 43% over reserves reported in a December 2000 prefeasibility study. The increase is due to the addition of a crushing and grinding circuit to allow for the processing of Rosebel’s transitional and hard-rock ores. The estimate is based on an assumed, long-term gold price of US$300 per oz.
Of the reserve, 21.2 million tonnes grading 1.47 grams gold are soft rock material, 11.7 million tonnes are transitional material grading 1.81 grams gold, and the remaining 3.9 million tonnes are hard-rock material averaging 1.93 grams gold. Total measured and indicated resources stand at 68 million tonnes grading 1.5 grams gold.
The resource at Rosebel is found in six deposits — Kollhoven, Pay Caro, East Pay Caro, Mayo, Royal Hill and Rosebel. These lie within 15 km of each other. Most of the deposits remain open laterally and at depth.
The plan at Rosebel calls for initial mining of soft material at an average rate of 43,000 tonnes per day, with 1.7 million tonnes grading 0.9 gram gold destined for the stockpile for processing near the operation’s demise. For the first 18 months of operation, the mill will run through 14,000 tonnes of soft material each day. During the second year, the mill feed will see the introduction of up to 50% transitional and hard-rock material. Accordingly, the milling rate will be dropped to 12,000 tonnes per day. Over a proposed project life of eight years, the mill is expected to run through about 37 million tonnes of mined material with a projected recovery rate of 92.4%.
The processing circuit is designed to allow for an expansion to 16,000-18,000 tonnes per day, as the mining schedule includes an exploration program (beginning in 2003-2004) aimed at finding new soft rock reserves.
Rosebel is home to several untested anomalies. The company also holds the adjacent Headley’s Reef and Thunder Mountain exploration properties.
Processing will comprise a crushing and grinding circuit, followed by a conventional gravity circuit and a carbon-in-leach plant. Power will be supplied by the Afobaka hydroelectric generating station, 32 km away. Under a deal with the government of Suriname, power will run between US3 and US7 per KWh under a gold-indexed rate. Cambior is responsible for building a line from the power plant to Rosebel.
Slated for a 2004 startup, the mine will produce about 220,000 oz. annually, with average direct mining costs pegged at US$187 per oz. In all, the operation is expected to churn out 1.8 million oz. gold.
The project comes with an initial price tag of US$95 million, including US$4 million for mining and processing equipment, much of which will be transferred from Omai. Sustaining capital is pegged at US$36 million. The internal rate of return (IRR) is estimated at 12%; at gold prices of US$315 and US$325 per oz., the IRR climbs to 15% and 18%, respectively.
Reduced mining rate
The Omai operation is slated to close by the end of 2005, and the mining rate is already greatly reduced. Processing of soft rock material continues, but starting next year, it will target only hard-rock material at a further reduced rate. Much of Omai’s mining equipment is ready to be shipped to Rosebel.
Initially, the company plans to mobilize one semi-autogenous-grinding (SAG) mill and one ball mill, leaving Omai with one SAG mill and four ball mills. A cone crusher will be added at Omai to help offset the decrease in capacity. Cambior also plans to move some of Omai’s workforce over to Rosebel.
Cambior intends to foot the construction bill at Rosebel from cash on hand (about US$32 million), plus cash flow over the next 18 months. The company is also in talks aimed at boosting its existing credit facility by about US$45 million to absorb the balance of the capital cost. The plan would leave the company with about US$10 million in cash.
The financing plan does not take into account about US$47 million worth of outstanding warrants maturing through 2003, which, if fully exercised, would negate the need to dip into the credit. Jipangu, Cambior’s largest shareholder, holds US$4.1 million worth of warrants, which will be exercised in November.
Cambior assumed full ownership of the project last October, grabbing
Royalty
Production from Rosebel is subject to a 2% royalty payable to the government of Suriname, plus a price participation of 6.5% on the amount exceeding a market price of US$425 per oz. gold. Cambior must also surrender 0.25% of production to a foundation to stimulate mineral exploration in the country.
Golden Star will also receive 10% of the excess, if any, of the average quarterly market price above US$300 per oz. for production from the soft and transitional rock material, and above US$350 per oz. from the hard-rock material.
Under a 1994 agreement, state-owned Grassalco (Grasshopper Aluminum Co.) holds an option to acquire a 20% stake in Rosebel for 20% of accumulated project costs at the time of exercise, which is allowed only after an exploitation concession has been granted.
Earlier this year, the government committed itself to eliminating state-owned Grassalco’s option in return for a 5% interest in Rosebel’s operating company. The government also rescheduled net smelter payments and provided for a beneficial tax regime.
Cambior hopes to have the financing wrapped up by the end of October. At the same time, Cambior is working toward obtaining an exploitation permit, amending the the mineral agreement, and subscribing to political risk insurance.
Once permitting is completed, construction will begin. The company hopes to get started mining during the fourth quarter of 2002.
During production the mine will employ 600 people.
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