The major South African gold producer mothballed the project in April owing to depressed palladium prices, increased capital costs and a strengthening euro. At the time, Gold Fields also said there was insufficient smelter appetite for the proposed mine’s output.
Late last year, a review of the latest resource model of the Suhanko deposit saw estimated head grades slip below 1.9 grams per tonne combined platinum, palladium and gold, from original estimates exceeding 2 grams.
The study also boosted the project’s capital cost to more than US$500 million from previous estimates of US$300 million. Gold Fields attributes some US$120 million worth of the capital increase to pricing increases and significant euro appreciation, with another US$70 million associated with design and scope changes.
Gold Fields consolidated ownership of the Arctic Platinum Project in 2003 by buying Finnish-based
NAP can pick up a 60% interest in the project by completing a US$7.5 million re-scoping study and exploration program, followed by a US$5 million feasibility study by the end of June of 2008. Thereafter, NAP would have to fork over US$45 million worth of shares on a positive production decision. The price per share will be based on the weighted average trading price on the American Stock Exchange for 11 trading days, beginning on Oct. 11.
Also under the deal, Gold Fields will retain a back-in right to reacquire a 10% interest by returning 20% of the NAP shares issued to it. NAP would remain operator of the joint venture.
The new scoping study will primarily aim to define a minable resource of 5 million oz. of combined platinum, palladium and gold at grades exceeding 3 grams per tonne. The study will also consider various mine design and processing options. Gold Fields had originally envisaged the project as a 10-million-tonne-per-year open pit with an on-site concentrator exploiting the Konttijarvi and Ahmavaara deposits.
Exploration work will focus on the SK and SJ Reefs with the goal of establishing a new geological model to support a combined mine plan. The company will also explore elsewhere along the Archean-Proterozoic contact.
The scoping and feasibility studies are slated to begin in early 2006.
The companies said in a prepared statement that the project’s location and geology are “quite similar” to that of North American Palladium’s Lac des les mine, near Thunder Bay, Ont., thus allowing NAP to use its operating and development experience in the design and construction of a mine.
At the end of June 2004 (Gold Fields’ financial year-end), resources in all classes at APP totalled 168.3 million tonnes containing 1.76 grams palladium, 0.45 gram platinum, 0.12 gram gold plus 0.19% copper and 0.09% nickel. The resource includes 118.9 million tonnes of potentially open-pit resources which comprise the Suhanko project, where grades average 1.47 grams palladium, 0.35 gram platinum, 0.15 gram gold plus 0.23% copper and 0.09% nickel. Suhanko comprises the Konttijarvi and Ahmavaara and Ahmavaara East deposits, which are part of the Portimo layered mafic intrusive complex.
The project centres on a 125-km-long regional crustal contact dividing Early Proterozoic volcanic and sedimentary rocks of the Svecofennide greenstone belt from Archean rocks that include gneisses, granites and older greenstone belts. A series of layered, mafic-ultramafic intrusions are localized along this major geological feature. Platinum group metal mineralization occurs near the base of the layered mafic intrusions.
Back at Lac des les, milling problems earlier in the year combined with metallurgical issues to halve third quarter palladium production to 39,532 oz. The mill ran through about 1.3 million tonnes of ore averaging 1.47 grams palladium per tonne, and managed an average recovery rate of just 62.9%. A year earlier, the mill squeezed 79,174 oz. of palladium out of 1.3 million tonnes running 2.53 grams, for a recovery rate of 74.8%.
NAP says the mill throughput and availability issues encountered during the first half of the year have been resolved, with the mill averaging close to its design capacity during September.
Looking ahead, NAP expects to produce around 56,000 oz. of palladium during the fourth quarter as head grades are projected to exceed 1.75 grams and recovery rates are expected to improve.
Meanwhile, underground development at Lac des les has advanced, with the ramp now down 1,036 metres to the 5180 stope level. Commercial production from underground is slated for the first quarter of 2006.
At full steam, NAP plans to source 2,000 tonnes of ore per day from the underground mine; average head grades are estimated at 6.62 grams. The ore will be combined with 13,500 tonnes of ore mined daily from the open pit to produce a mill feed running around 2.4 grams per tonne.
At the end of 2004, underground probable reserves totalled 3.5 million tonnes running 6.62 grams palladium, 0.4 gram platinum, 0.34 gram gold plus 0.07% copper and 0.08% nickel. Another 600,000 tonnes of indicated resource grades 7 grams palladium, 0.39 gram platinum, 0.29 gram gold plus 0.06% copper and 0.07% nickel. Some 5.4 million tonnes of inferred material averages 6.1 grams palladium, 0.34 gram platinum, 0.33 gram gold plus 0.07% copper and 0.12% nickel. The estimates employ a cutoff grade of 4.5 grams palladium and a long-term palladium price of US$275 per oz.
The underground mine will require 80 additional employees, bringing the operation’s total workforce to 380.
In the boardroom, NAP’s vice-president and chief financial officer George Faught retired after six years of service to pursue other business opportunities. Company treasurer Douglas Bache and senior controller Michael Thompson will assume Faught’s responsibilities until a replacement is found.
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