Bacterial oxidation process produces gold for U.S. Gold

It has taken more than two years and US$31 million, but Denver-based U.S. Gold (NASDAQ) recently poured the first gold produced from a new bacterial oxidation process developed at its Tonkin Springs gold mine near Eureka, Nev. The newly constructed mill has a design capacity of 1,500 tons per day with a designed 90% recovery rate. It is expected to produce about 50,000 oz. gold annually when up to full capacity.

U.S. Gold said the recent gold pour at Tonkin Springs was a “major milestone” in its efforts to show the technical feasibility of the bio-oxidation process. But it was noted that the mill has yet to demonstrate commercial and economic viability and this will depend on operations reaching full-scale production during the second quarter of this year.

In the bio-oxidation process, a naturally occurring bacterium, Thiobacillus ferroxidans, is used in the pretreatment step to break down the iron and sulphur compounds and release the gold for subsequent recovery by conventional cyanidation. The bacteria use the iron and sulphur from the mineral pyrite as their food source, thereby liberating the gold particles locked within the ore.

U.S. Gold said this process should provide a lower cost in processing sulphide refractory reserves with important environmental benefits over more traditional methods such as roasting. As an example, President William Reid said byproducts of bio-oxidation help neutralize residual cyanide in mill tailings.

A number of other gold mining operations in the western U.S. currently process refractory sulphide reserves by using pressure oxidation, a proven method in commercial use since the mid-1980s.

Reid told The Northern Miner that the company’s decision to develop its own bio-oxidation technology was based on the view that it would prove to be a less expensive alternative than pressure oxidation, particularly for the treatment of lower-grade refractory sulphide deposits. These deposits are expected to become more important to gold mining companies as the more easily treatable oxidized reserves decline.

But because of startup delays and cost overruns, U.S. Gold’s pioneering venture into bio-oxidation has left the company financially weakened.

A net loss of US$11.57 million or 24 cents per share was reported on revenues of US$15.95 million for 1989, compared with a net income of US$1.62 million on revenues of US$9.77 million for 1988. A large contributor to this was a writeoff of US$7.7 million from the Tonkin Springs project.

U.S. Gold is looking to improve its financial position through the sale of assets, joint venturing of properties, equity financing and restructuring of existing debt. Late last year the company sold its minor interest in the Dee gold mine in Nevada to two partners, and it recently sold off its 40% interest in the Hayden Hill gold project in California to partner Amax.

Last year U.S. Gold produced 33,528 oz. gold, compared with 20,008 oz. gold in 1988. This year gold production will be from Tonkin Springs and from the White Pine open pit, heap leach gold mine, west of Ely, Nev. The company also expects to resume heap leach operations that were suspended at Tonkin Springs when plant construction began in 1988.