Andacollo ahead of schedule

Construction at the Andacollo gold mine in central Chile is proceeding ahead of schedule, according to owner Dayton Mining (TSE).

President Wayne McClay reports that construction of the process plant and other facilities is at an advanced stage with respect to the planned Sept. 15 startup date. Earthwork is largely completed, buildings are being erected and the mining equipment is already on site.

Construction of the US$54-million project started last July and is being managed by Bechtel Corp. under a fixed-price, turnkey contract. In addition to the US$54-million capital cost, further expenditures are said to be required. These include US$4 million for working capital; US$7 million for financing and interest costs; and US$7 million for the bulk of the mining fleet.

Dayton spokesman Michael Steeves says the US$7 million earmarked for the mining fleet may change if the company decides to lease the equipment rather than buy it.

Financing was arranged through a US$50-million loan with Barclays Bank and Banque Paribas, and also through a $34-million special warrant placement (one share and half a purchase warrant) at $4.50 each.

Proven and probable minable reserves are estimated at 30.7 million tons grading 0.035 oz. gold per ton, and ongoing exploration continues to expand this figure. Drill-indicated reserves have increased by 303,000 oz. from the previous estimate of 27.8 million tons grading 0.031 oz.

Gold mineralization is hosted in a series of mantos, with the minable reserve contained in four open-pit deposits and one underground deposit which will be mined using room-and-pillar methods.

The 14,000-ton-per-day process facility includes 3-stage crushing, a carbon adsorption circuit and electrowinning facilities.

Based on a recovery rate of 73%, yearly production is projected at 125,000 oz. at a cash cost of US$175 per oz. The mining of a higher-grade cap will boost production in 1996 (the first full year) to 140,000 oz. at a cash cost of about US$150 per oz.

Through the purchase of put options, Dayton has guaranteed a minimum price of US$380 per oz. for 360,000 oz. of its gold production. That covers Dayton’s projected payback period for the US$50 million loan.

Dayton has about 29.8 million shares outstanding, or about 42.6 million shares on a fully diluted basis. Dilution includes warrants related to a unit issue last year (3.8 million warrants exercisable at $5.50 to Nov. 3, 1995), options and $19.8 million in debentures convertible at $3.20 per share.