Usak, Turkey — Once a curious anomaly, Kisladag has grown into a major deposit that promises to propel
Situated a short drive from this provincial capital, Kisladag was discovered by a German company in 1989. The project soon passed over to Gencor of South Africa, which, in turn, sold it to Eldorado in 1996 as part of an asset-for-share swap that included the Sao Bento gold mine in Brazil.
Then, Kisladag was little more than a geochemical prospect. Today, it’s a multi-million-ounce deposit that is expected to yield 2.9 million oz. gold over 15 years.
“We’ve waited a long time for this, and we’ve reached a point where we believe strongly we will be building a mine within the next nine months,” Eldorado President Paul Wright told analysts during a site visit.
Kisladag sits on the western edge of the so-called Anatolia Plateau, in one of several mid- to late-Tertiary volcanic complexes. The volcanics are related to a regional subduction zone along the Hellenic Trench to the southwest, and in the Kisladag area, erupted on a schistose basement known as the Menderes massif.
Locally, the main lithologies are pyroclastics intruded by sub-volanic latite bodies. The gold is in the intrusives and associated with at least three phases of partially overlapping quartz-pyrite stockwork veining and brecciation. Higher grades form a horseshoe-shaped zone around the northern, southern and eastern sides of a barren latite stock.
Gold is homogenously dispersed in the host rock and occurs as free particles on grain boundaries and as inclusions in pyrite, which averages 3.5% but tops 7% in places. Zinc, molybdenum and copper are present as well.
“We have 15,000 assays, and of those, you can count on your hands the number exceeding ten grams,” said David Bickford, general manager of Eldorado’s Turkish office.
Topographically, the deposit forms a north-facing hill, and oxidation in the up-hill portion extends as deep as 80 metres below surface, and in the eastern end, as deep as 100 metres. Column tests predict 81% recovery rates for oxides and 60% for primary ore, though the oxides are less sensitive to crush size and may lend themselves to higher throughput rates.
Eldorado’s mining plan envisages a 2-stage process, for a total capital investment of US$131 million. Average annual production in the first four years, when contract miners will be employed, is pegged at 142,000 oz.; in the following years, the estimate grows to 230,000 oz., owing to a doubling of throughput rates to 10 million tonnes annually.
Run-of-mine ore will be processed by conventional heap-leaching, using a 3-stage crushing circuit that will grind 80% to minus 6.33 mm. Given its granular nature, the ore does not require cement agglomeration, and reagent consumption rates are moderate.
Stage-1 cash costs ring in at US$138 per oz.; life-of-mine cash costs, at US$152 per oz. Total production costs over the life of the operation are expected to be US$203 per oz.
Proven and probable reserves stand at 115 million tonnes grading 1.23 grams per tonne, based on a cutoff grade of 0.35 gram for oxides and 0.5 gram for primary material and a gold price of US$325 per oz. This excludes 180,000 oz. on the perimeter of the pit-shell and 250,000 oz. inside it, which, in the case of the latter, if bumped up to the indicated category, reduce the stripping ratio to 0.8-to-1 from from 0.92-to-1.
“When you look at blocks, it’s a bit of a stretch to say they have no value,” said Wright.
Drilling is under way in the western end of the deposit, and the results will be incorporated in the database to determine an optimum production schedule.
Eldorado plans to cover the initial, US$54.2-million capital cost through a combination of debt and equity. It is currently debt-free and, at March 31, had US$42 million in cash or equivalents, giving it plenty of legspace at the negotiating table.
“It depends on how restrictive the banks are as to how much debt we assume,” Earl Price, chief financial officer, told The Northern Miner.
Price noted that US$25 million of debt will be provided by the Export/Import Bank of the United States. Negotiations with commercial banks continue.
Payback is anticipated in 2.6 years; the after-tax net present value, at US$146 million (using a 5% discount rate); and the after-tax internal rate of return, at 33%. All estimates are based on a gold price of US$325 per oz.
Since Eldorado tabled its independent feasibility study early this year, the Turkish Minister of Environment has accepted its environmental impact statement. When an “environmental positive certificate” is provided, which should be shortly, the company can acquire construction and operating permits.
Turkey wants more foreign investors, and Prime Minister Recep Tayyip Erdogan includes gold miners among them. His AK Party won Turkey’s first majority government in 15 years in the November 2002 elections and has continued the pro-business policies of the previous government.
“We value the importance of foreign investment,” Erdogan told Eldorado management and analysts during a meeting at his office. “Whatever privileges and rights our local investors have will be shared by foreign investors.”
Turkey’s first attempt at permitting a gold mine nearly ended in failure. In the late 1990s, after constructing the Ovacik mine on the Aegean coast, Normandy Mining became embroiled in court challenge over its intended use of cyanide. The company, which has since been absorbed by
Regarding Eldorado’s status, Erdogan said: “I respect the environment very much, but not those who claim to be environmentalists — those who exploit and take advantage of the administration, especially mine.”
Erdogan went on to recall his own experience with Turkish environmental groups while serving as mayor of Istanbul in the mid-1990s. A group had opposed his development of an 80-km-long water pipeline to a mountainous acquifer that now supplies half the city with potable water.
“They tried to tell us it was desert area and had no water,” he said. “They even said we were destroying trees, but they were actually small bushes, and I planted 800,000 trees. As far as I am concerned, I’m the real environmentalist.”
He added: “My priority is the human being . . . and you are creating jobs. Don’t give up, and we will do what’s necessary on the legal matters.”
Local support
Eldorado’s political backing reflects the importance it has placed on community and political relations. Since its arrival in 1996, it has held 20 meetings with local villages, as well as kept in contact with regional and central governments.
For the locals, Kisladag’s development offers them the chance to sell land at a premium and to gain employment. Now they rely on subsistence farming and grazing, earning an average of US$1,000 per year — less than half the national average.
“These guys are eager to sell their land,” said Mehmet Yilmaz, Eldorado’s government and public relations manager. “I’ve taken many calls from people asking when the purchasing will begin.”
About 95% of the 157-sq.-km Kisladag concession falls under Turkish land categories six and seven, which are deemed unsuitable for cultivation. Water is scarce here, save for ephemeral streams and a few stock ponds, so Eldorado has connected the surrounding villages to its main pipeline, which taps an sedimentary aquifer 13 km away.
Given the crystalline structure of the primary ore, acid-mine drainage will not be a problem. Nevertheless, primary waste will be placed on oxide waste, and ditches around the dump will catch runoff water as a separate, internal system catches laden water.
Following mining, the pit will be enclosed by a fence, except for a small opening for curious grazers. Flooding also presents little concern, as evaporation more than doubles precipitation rates.
The leach pad itself, which will ultimately measure 2 km long by 800 metres wid
e, will lie overtop artificial and clay liners. Each will be 2 mm thick, and starting in year 10, the heaps will be rinsed, detoxified and reclaimed.
Simply put, the operation’s design takes Turkey’s tectonism into account.
Efemcukuru
Eldorado’s progress at Kisladag bodes well for its activities elsewhere in Turkey, especially at Efemcukuru. Situated near the Aegean coast, about 20 km southwest of the provincial capital of Izmir, the advanced project is expected to add 87,000 oz. to the company’s annual production profile starting in 2006.
Efemcukuru, which came with the Gencor deal, is hosted by a 1.8-km-long, steeply dipping structure dubbed Kestane Beleni Vein. Hornfels form the hangingwall and phyllites, the footwall.
Dale Churcher, manager of project development, likens the geological setting to a zone of shearing. The veins — a parallel vein sits at a lower elevation, separated by a valley — are sandwiched between rhyolite dykes, near which grades fall off.
“With a setting like that, it opens up a lot of blind opportunities,” he noted.
Mineralization at the Kestane Beleni Vein is found in open-space fillings, such as multi-stage breccia and quartz-carbonate veinlets. Quartz, rhodonite and rhodochrosite are the main gangue minerals, and pyrite, pyrrhotite, chalcopyrite, sphalerite and galena are the predominant sulphide minerals.
Gold occurs freely as fine particles in the veins and sulphide minerals.
Low-grade stockwork mineralization occurs locally between shoots and is relatively abundant in the hangingwall. This is not common in the footwall.
Unlike Kisladag, the topography here is rugged, which lends itself to the use of adits. Three will be driven in the deposit — one as the main haulageway and the others as waste and ventilation tunnels.
“Our plan is to leave as little a footprint as possible,” said Wright.
Toward that end, Eldorado will use mechanized cut-and-fill mining, meaning half the waste goes back in the hill. Tailings will be dried, and only gravity and flotation processing techniques will be used, with the concentrate shipped to Kisladag and treated in a separate carbon-in-leach circuit.
The 1999 internal prefeasibility study considered daily mining rates of 800 tonnes, though actual rates may be 300 tonnes higher. Most of the reserve sits in the middle shoot, which remains open downdip, as does the south shoot. The north shoot remains virtually unexplored.
“We expect this project to perform better in terms of cost, operations, and resources/reserves,” said Wright.
At a gold price of US$325 per oz., reserves stand at 1.9 million tonnes grading 13.14 grams per tonne. This excludes 1.8 million tonnes of measured and indicated material averaging 14.44 grams and 590,279 tonnes of inferred material averaging 12.63 grams.
Eldorado expects to begin a feasibility study next year and wrap it up by mid-2005. The study will cost $3 million and include 10,000-12,000 metres of drilling to tighten and extend existing patterns.
“I would like to think that once we have Kisladag up and running, adding ounces will have value to the market,” said Wright. “But in terms of a project, we have one already.”
Elsewhere in Turkey, Eldorado has begun drilling several promising greenfields projects. Among these are: the KS porphyry-skarn joint venture, in which Eldorado can earn a half-stake; the Subeylidere and Yatiktas epithermal vein projects; and the bulk-tonnage Keditasis high-sulphidation or porphyry-style project.
“Dave and his team have done a tremendous job of moving forward and identifying in excess of 9 million oz., and we certainly believe there is an opportunity to add to that total,” said Wright. “We are and remain committed to building a long-term business in Turkey.”
Eldorado has just under 212.6 million shares issued, or 234.2 million fully diluted. The Gencor-held shares, which passed to
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