Brewery Creek shines

The Brewery Creek gold mine in the Yukon has been performing better than its owner, Viceroy Resource (VOY-T), expected.

The open-pit, heap-leach mine produced 79,396 oz. in 1998 at a total cash cost (including royalties) of US$187 per oz., compared with a predicted 77,500 oz. at US$200 per oz.

The mine reached commercial production in May 1997 and, for the remainder of that year, produced 72,387 oz., of which 66,545 oz. were produced at a cash operating cost of US$184 per oz.

For 1998, Viceroy’s share of gold production from both of its mines — Brewery Creek, and Castle Mountain in California — totalled 146,248 oz. at a cash operating cost of US$244 per oz., compared with 158,348 oz. at the same cost in 1997.

In the fourth quarter of 1998, the company produced 42,587 oz. at a cash cost of US$211 per oz., versus 49,430 oz. at US$232 in the year-ago period.

As a result of the better-than-expected operating performance at Brewery Creek, Viceroy accelerated its depreciation expense by US$47 per oz., to US$167 per oz. That raised total production costs at Brewery Creek to US$361 per oz. and offset the additional revenue generated.

Of the total 6.7 million tonnes of material mined by Viceroy in 1998, about 2.6 million tonnes of ore were delivered to the pads.

At last report, reserves stood at 13.3 million tonnes grading 1.44 grams gold per tonne, equivalent to 613,000 contained ounces. Viceroy says that while the expansion of oxide reserves remains the principle focus of development at the mine, the company is also attempting to devise a metallurgical process for treating the underlying sulphide mineralization, which is refractory.

Production from Viceroy’s 75%-owned Castle Mountain open-pit mine in California totalled 89,136 oz., of which 66,852 oz. are attributed to Viceroy. The total cash cost was US$326 per oz., with the total production cost pegged at US$384 per oz. By comparision, the mine produced 122,403 oz. in 1997, of which 91,803 oz. went to Viceroy’s account at a cash cost of US$288 per oz.

Castle Mountain had been forecast to produce 82,570 oz. at a cash cost of US$371 per oz. in 1998. The decrease in production was a consequence of processing lower-grade ore.

The improvements in cash costs over 1998 predictions are attributed to improved productivity, reduced material and supply costs, and deferral of the cost of waste stripping that is in excess of the life-of-mine average of 1.8-to-1.

MK Gold (MKAU-Q) holds the remaining 25% interest in Castle Mountain, which is primarily a heap-leach operation. In the past, some of the higher-grade ore was processed in a 45-tonne-per-hour mill and gravity circuit, but that operation was suspended in early 1998 owing to a lack of feed. The milling requirements for between 1999 and 2001 are being assessed.

For the 12 months of 1998, a total of 15.5 million tonnes of material was mined at Castle Mountain, and 3.5 million tonnes of ore were delivered to the leach pad.

Minable reserves at the end of 1997 were estimated at 12.7 million tonnes grading 1.17 grams, equal to 479,000 oz.

Viceroy realized an average gold price of US$403 per oz. in 1998. The company has hedged 145,000 oz. for 1999 at an average price of US$400 per oz.

Viceroy forecasts 1999 production will total 138,000 oz. at an average cash cost of US$244 per oz. Brewery Creek is expected to produce 74,000 oz. at a cash cost of US$212 per oz., while projections for Castle Mountain are 84,600 oz. (64,000 oz. to Viceroy’s account) at US$280 per oz.