Homestake projects 1996 startup for Eskay Creek

By July of this year, the Canadian unit of Homestake Mining (NYSE) expects to submit an application to government for permission to build a mine at the Eskay Creek project, north of Stewart, B.C.

“We feel that early in 1996 is not unrealistic for start-up,” said Gil Leathley, vice-president of operations for Homestake Canada. “Homestake is confident we can build and operate this mine to produce 250,000 oz. gold and 11 million oz. silver per year.”

Leathley provided details of Homestake’s plans for the project at a recent meeting of the Canadian Institute of Mining, Metallurgy and Petroleum in Vancouver, which was also attended by Peter Steen, president and chief executive officer of Homestake Mining (TSE).

Since the recent Corona acquisition, Homestake has an overall project interest of 55.2% and is managing the project on behalf of Prime Resources Group (VSE). Placer Dome (TSE) has a 22% interest in the project, and a joint-venture agreement to develop the property is reported to be “well advanced.”

Diluted (by about 27%) reserves total slightly more than one million tons grading 2.1 oz. gold and 94.2 oz. silver per ton plus 5.7% zinc, 0.77% copper and 2.89% lead. The centre of the deposit has a high-grade core containing about 40% of the total precious metals, yet only 25% of the tonnage (about 250,000 tons grading over 5 oz. gold equivalent per ton).

The bulk of reserves lies in the contact zone of the carbonaceous mudstone, close to the footwall rhyolite. Further north, the zone moves into the rhyolite in a vein or stockwork presence. The deposit averages 16-20 ft. thick and consists of layers of massive to semi-massive sulphide, with gold in the form of microscopic grains of a gold-silver-mercury alloy (with some visible gold). The ore fragments naturally during blasting.

To date, some 6,561 ft. of development has been carried out in ramp and crosscut drifts. About 700 holes were drilled from surface, and an additional 70 holes underground. A section of the deposit was tested to get some correlation between surface and underground drilling.

“Results from this exercise, which included drifting in ore, gave us confidence in the overall accuracy of the surface drilling interpretations,” Leathley said.

Homestake is proposing to mine at a rate of 396 tons per day using a drift-and-fill method, with cemented rockfill. Leathley said this method was chosen to ensure maximum extraction of the extremely rich ore and to provide a safe mining method in the 45 dipping orebody.

“There are a fair number of clay seams in the ore that will make milling difficult and also demand close attention to ground support,” Leathley said. Homestake will not be building a mill at the Eskay Creek property, reasons being high snowfall, lack of local power, and complications involving environmental concerns.

“After reviewing various options, we decided to build the plant at Equity Silver to make use of existing infrastructure,” Leathley said. “Our plan is to build near existing facilities. However we have not ruled out using some of the buildings if a satisfactory agreement with Equity Silver can be concluded. We have also investigated building the process plant at Bob Quinn (on Highway 37) as an alternative.”

Leathley said the deposit is metallurgically complex but that the company is confident it has a satisfactory process that can provide good recoveries with satisfactory effluents.

Metallurgical testing to date has led to a flow sheet incorporating 80% minus 270 grind, pre-leaching and a 4-compartment autoclave, with the slurry washed to separate the liquid and pulp. The liquid contains copper and zinc and will be treated by copper cementation and subsequent solvent extraction electrowinning of zinc. Solids will proceed to a hot cyanide leach, followed by Merrill Crowe silver-gold recovery, and the pulp will be treated by carbon-in-leach to collect the remaining precious metals. This circuit is being tested at Hazen in Denver.

The Eskay Creek project will provide 235 direct jobs for at least 8-10 years and will bring economic benefits to several northern communities. Through a subsidiary, North American Metals (VSE), Homestake Canada also operates the Golden Bear mine, north of Eskay Creek. This high-cost producer has not been a commercial success, nor has Corona’s Nickel Plate gold mine near Hedley in the southern part of the province.

However, through Prime Resources Group, Homestake will have an indirect interest in the highly successful Snip gold mine operated by Cominco west of Eskay Creek. Despite its remote location, Snip produced 153,402 oz. gold in 1992 at a cash cost of US$145 per oz.

“This has been a real success story and full marks must be given to Cominco,” Leathley said.

But the biggest jewels are still the Hemlo operations in Ontario, which turned out 338,555 oz. gold last year (about 68% of Homestake Canada’s total production) to Homestake’s account at a cash cost of US$206 per oz. In 1992, Canada accounted for 29% of Homestake Mining’s total production of 1.85 million oz. gold from all operations worldwide.