Hecla, Santa Fe to develop Rosebud deposit

Two American majors plan jointly to develop Rosebud, a high-grade, underground gold deposit 50 miles west of Winnemucca, Nev.

Hecla Mining (HL-N) and Santa Fe Pacific Gold (GLD-N) will form a 50-50 joint venture to mine the oxide deposit of 1.2 million tons grading 0.45 oz.

gold and 2.75 oz. silver per ton.

Construction is expected to begin shortly, once all permits are in hand, and first production is planned for early next year. The 750-ton-per-day mining operation is targeted to produce 100,000 oz. gold annually at a cash cost of US$160-180 per oz. Capital costs are estimated at US$20-25 million.

Hecla, which acquired 100% of Rosebud through its 1994 takeover of Equinox Resources, will operate the joint venture and truck the mined ore to Santa Fe’s Twin Creeks gold mine, 45 miles northeast of Winnemucca.

Santa Fe Chairman Patrick James says his company will receive a half interest in Rosebud by contributing the use of its existing facilities at Twin Creeks to process the ore, as well as a nearby exploration property. “And Hecla saves more than US$30 million in capital, which would be needed to construct stand-alone milling facilities. It’s a win-win situation.”

Santa Fe also agreed to fund project development costs of $12.5 million, plus about US$3 million in other facility improvements. It will also fund the first US$1 million of exploration to boost reserves at Rosebud and 67% of future exploration costs.

The two companies also revised the terms of their partnership at the Golden Eagle project in Washington state, near the Republic gold mine.

Santa Fe will pay Hecla US$2.5 million for an immediate 75% interest in the joint venture, and will fund all expenditures to advance the project through the feasibility stage. The original agreement called for Santa Fe to earn a 70% interest by spending US$7.5 million over three years to produce a bankable feasibility study by mid-1998. At last report, this project contained a mineral inventory of 11.3 million tons averaging 0.1 oz. gold.

Santa Fe is one of the largest gold mining companies in North America. An expansion program at the company’s Nevada operations is attempting to boost production there to 1 million oz. by 1998.