As the gold price rallies, only to sink again, the measure of a good gold project is less and less its production and more and more its operating margin. The need to make money in a small way is winning out over the impulse to lose it in a big way.
So it is that the biggest developments today are leaning more on grade than on tonnage. One of the operations that might be thought symbolic of the new generation is the Sadiola Hill open pit, owned by
Yet there’s even a “new generation” at Sadiola: the Yatela heap-leach operation, 25 km to the north, held by the same consortium and newly in production. Yatela poured a 22.8-kg bar in early May, a month ahead of schedule and US$2 million below budget, and it is set for a 6-year mine life as an adjunct (though definitely not a satellite) of Sadiola. Only downstream elution recovery and final pouring will be done at the parent mine.
Yatela is not especially high-grade, though, with 12.3 million tonnes at 3.6 grams per tonne, it is distinctly different from those every-last-ounce open pits of the 1980s. But it is low-cost, carrying a total cash figure of US$175 per oz. over its projected life.
Another anticipated winner in the new gold game is El Peon, in the Atacama country of northern Chile. There, owner
Production at El Peon will only be about half that of Sadiola, which poured 289,000 oz. in 2000, but with its silver grade at 187 grams per tonne, byproduct credits should keep costs low over the mine life.
Commercial production got under way last month at the Bulyanhulu deposit of
Despite the difficulties of working in East Africa, the project came in on schedule and on its US$280-million budget. Projected cash costs are US$166 per oz.
Another young Barrick project, the Pierina mine, in Peru, has been turning out gold at a low cost since late 1998. Pierina’s cash costs, which were US$43 per oz. in 2000 and US$42 in 1999, rest on cheap production, not high grades or byproduct credits. The 84-million-tonne reserve runs 2.1 grams.
Pierina needs those low direct costs, as it is still clearing off development and acquisition costs that are adding another US$200 to its total unit production cost. And, although resources have been reliably converted to reserves, few new resources have been discovered at the property. At the present production rate of 870,000 oz. annually, Pierina’s existing resource base will be gone in seven years.
For companies that want to survive in a consolidating industry, then, not only costs but resource growth will be vital. Barrick, for one, is deliberately conserving cash to acquire new assets, and had, at the end of the first quarter, US$695 million in cash and receivables. Some others with war chests are either known or thought to be looking at acquisitions:
But apart from filling the long-awaited need for “consolidation,” what are the big producers to buy?
Among the development-stage projects shaping up to look like large producing mines (the kind that would interest the majors),
But Rosia Montana is a huge gold deposit — a big, low-grade resource, as in the good old days — with a resource of 344 million tonnes grading 1.3 grams gold and 6 grams silver per tonne. That resource, based on a 0.6-gram cutoff grade, shrinks to 127 million tonnes of 2.1 grams gold and 9 grams silver at a cutoff grade of 1.2 grams.
Recent metallurgical work at Rosia Montana indicates recoveries of 81% for the gold and 54% for silver in a conventional plant using gravity and cyanidation circuits.
Gabriel’s prefeasibility study on Rosia Montana, now nearly a year and a half old, predicted cash costs of US$113 per oz. including byproduct credits from silver. The study proposed mining an 85-million-tonne resource that grades 1.7 grams gold and 10.9 grams silver. Results of the final feasibility study might indicate whether big, low-grade gold projects such as Rosia Montana have a future in an industry where low production costs are ever more important.
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