Dayton and Glamis close high-cost gold operations

The low gold price has claimed two more victims: Dayton Mining (DAY-T) is shutting down the Andacollo mine in central Chile, while Reno-based Glamis Gold (GLG-N) follows suit at its Dee mine in northern Nevada.

Andacollo’s failure is attributed to a weak reserve model at the Churrumata and Natalia open pits, resulting in higher stripping ratios and fewer tons being sent to the leach pad. On top of that, leaching rates are significantly lower than expected for ore from the Natalia pit.

Dayton had hoped to increase recovery rates to planned levels by installing an internal liner. However, the plan proved unsatisfactory.

In the first half of the year, Andacollo produced 52,204 oz. at an average cash cost of US$253 per oz. — below the forecasted rate of 112,300 oz. for the year and above projected cash costs of US$243 per oz.

Dayton President William Myckatyn says there was no alternative to shutting down the operation: “We’ve been mining a low-grade deposit in an environment of record low gold prices. By stopping mining and crushing now and conserving our equipment and resources, we will be in the best position to restart operations when economic circumstances improve.”

During the shutdown, leaching will continue to produce as much as 39,000 oz. over the next 15 months. The pits will be left with ore exposed at the surface and room remaining on the pad, so that stacking can resume once conditions improve.

About 250 workers will be laid off.

Likewise, the combination of high production costs and low gold prices forced Glamis to pull the plug on its Dee mine. The company will halt underground work in November and take a US$4.3-million writedown in the third quarter.

However, the shutdown is not expected to affect ongoing exploration. Barrick Gold (ABX-T) is earning a 60% interest in the mine and is carrying out a substantial drilling program.

Company President Kevin McArthur is downplaying the closure: “Glamis is in transition, maintaining a few strong U.S. gold mines as its foundations, properly closing aging mines and constructing the next generation of new, low-cost producers. We are taking steps necessary to return the company to profitability even in the current environment of low gold prices.”

Closing Dee will result in the loss of 140,000 oz. in gold reserves, while Glamis’s total production should reach 229,000 oz. gold for the year at a cash cost of US$217 per oz.

Meanwhile, Glamis’s San Martin gold mine, in Honduras, is expected to enter production in October. Total cash costs over the life of the mine are pegged at US$150 per oz.