A feasibility study concludes that an integrated open-pit and underground operation would generate $92 million in cumulative pretax cash flow at a palladium price of US$325 per oz.
Plans call for development of a mechanized, 2,000-tonne-per-day underground mine, with longhole stoping used as an extraction method. Reserves would be accessible via a portal in the existing pit.
The underground operation will target an initial 3.5 million tonnes of proven and probable reserves grading 6.6 grams palladium, 0.4 gram platinum, and 0.3 gram gold per tonne, based on a cutoff grade of 4.5 grams palladium per tonne. Copper and nickel credits are also present.
The reserve is contained in a 350-metre-long, sub-vertical zone directly below the mine’s existing pit. The zone averages 12 metres in thickness.
The higher-grade underground ore will be blended with lower-grade material from the existing open pit to produce a little more than 300,000 oz. palladium annually over seven years. Operating costs are pegged at US$152 per oz. palladium after byproduct metal credits.
The cost of underground development is estimated at $40 million. Also, $15 million is budgeted for the leasing of mining equipment, and the company plans to invest $10 million in a secondary crusher to help maintain mill throughput of 15,000 tonnes per day. A portion of the project will be financed via operating cash flow; the balance has yet to be negotiated.
All construction approvals are in place, and the first ore from underground is expected to reach the surface in the third quarter of 2005.
In late 2003, open-pit reserves at Lac des les were halved following a recalculation based on a long-term palladium price of US$325 per oz. (down from US$400 per oz.).
NAP’s sales contracts ensure it a floor price of US$325 per oz. on all palladium production through mid-2005; the contracts are capped on the upside at US$550 per oz. on half of production.
Proven and probable reserves total 39 million tonnes grading 1.9 grams palladium, 0.2 gram platinum, and 0.15 gram gold per tonne, plus 0.06% copper and 0.08% nickel. The estimate employs a cutoff grade of 1.1 grams palladium.
Looking ahead, NAP envisages the underground development as a staging area for resource definition drilling of the deeper Offset High Grade zone, which averages around 23 metres in true width and contains grades comparable to the Main High Grade zone.
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