After more than a century of production, the venerable Homestake gold mine in Lead, South Dakota, will cease mining and milling operations at the end of 2001.
The decision to close America’s oldest gold mine was not an easy one for owner,
The Homestake mine made, and was shaped by, history ever since a gold rush in the Black Hills began in the 1870s. A newly completed transcontinental railway had just opened up the American West and the Industrial Revolution was changing the nation’s landscape. The gold rush lured prospectors and others West, including those whose lives had been disrupted by the American Civil War, which ended a decade earlier. Clashes with natives were not uncommon: General George Armstrong Custer was killed by the Sioux at the Battle of Little Bighorn within several day’s ride from Lead in 1876, the same year the Homestake mine was discovered.
Despite the tumultuous times, the mine quickly became an important contributor to the nation’s economy. While gold was then a fraction of its present value, initial production from Homestake contributed to the growing nation’s money supply.
During its operating history, the mine produced an impressive 40 million oz. gold, making it one of the largest mining camps in North America. Homestake was listed on the New York Stock Exchange in 1877, making it the longest running listing in the exchange’s history. And the mine helped launch the publishing empire of William Randolph Hearst.
Thompson noted that the mine also developed “several generations of highly skilled American operators who have pioneered new methods of mining, mineral processing and exploration.”
As might be expected, the mine has shown its age in the past few decades. It is the deepest underground mine in the country, extending to a depth greater than 7,000 ft., and costs have steadily increased as the easily exploited ores were depleted.
In 1998, the combination of high cash costs and low gold prices prompted Homestake to restructure the operation and implement a new mine plan. Uneconomic portions of the mine were closed and production fell to 277,400 oz. from 397,300 oz. in 1997.
Cash costs initially responded to the changes by falling to US$250 per oz. (on production of 212,700 oz. gold) during most of 1999, though they rose to US$272 per oz. in the first six months of 2000 because of falling head grades and the discontinuous nature of the remaining ore. Cash flows have been negative since the company completed milling stockpiled open-pit ore in December 1999.
Thompson noted that despite the “terrific efforts” of employees, slumping gold prices and the poor outlook for the metal left the company with no choice but to shut down down the mine permanently. “We didn’t give up easily,” he added.
While the remaining ounces are extracted, the company will launch a long-term community transition plan that will include support for its remaining 370 employees.
The “mine-out” closure plan is expected to generate improved cash flow from production of the last 240,000 oz. Cash costs are expected to fall to US$237 per oz. The plan will also result in a loss of 1.4 million oz. in proven and probable reserves.
The company expects to take a US$43-million charge in the third quarter. It also expects to spend US$66 million, of which US$48 million is already accrued, over the next eight years on final reclamation and remediation of the mine.
Once the mine is closed, Homestake’s overall cash costs are expected to improve to US$168 per oz. in 2001 on production of 2.3 million oz. Homestake has taken on growth projects beyond its traditional base in the American West, including the Veladero gold project in Argentina. The company is Canada’s second largest producer (almost 1 million oz. in 1999), and produces about 835,000 oz. annually from interests in Australian mines.
Homestake is converting its reporting of production from the Eskay Creek mine in British Columbia to pure gold production, with the silver as a byproduct credit. The company had previously reported production on the basis of gold equivalents. Production this year would then be 330,000 oz. at cash costs of US$16 per oz.
Be the first to comment on "Homestake closes namesake mine"