New development plan for Eskay

A decision to sell Eskay Creek ore directly to smelters will benefit Prime Resources Group (VSE) in two respects.

The company, which owns the high-grade gold project north of Stewart, B.C., can expect lower capital costs and fewer technical and environmental risks. Prime plans to develop a 330-400-ton-per-day underground mine, and transport and sell the metallurgically complex ore to smelters in Canada and elsewhere. Two development options — direct shipping and an owner-built plant — were both found to be economically viable by separate feasibility studies. Prime President Jack Thompson said the decision to choose the smelter option was based solely on economic considerations.

“Capital requirements drop by about $190 million, compared with a revised, autoclave option estimate,” Thompson explained. “The technical risks associated with building and operating a complex plant are also avoided.” The capital cost of completing the project is estimated at $75 million. Prime and its major shareholder, Homestake Mining (NYSE), are of the view that Eskay Creek will have “robust economics” and be one of the lowest-cost producers in the industry. Homestake holds about 54% of Prime and will operate the project.

The development plan is based on a proven and probable reserve of 2.3 million oz. gold and 102 million oz. silver. Annual production is expected to be 210,000 oz. gold and 9.4 million oz. silver, over at least 10 years. Cash operating costs are projected to be US$81 per oz. gold equivalent contained (exclusive of smelting and refining charges). The reported cost per oz. of gold equivalent rises to US$187 if the combined smelting and refining charges are presented as cash operating costs.

Letters of intent have been signed with Noranda’s Horne smelter and Dowa of Japan and final commitments are expected by mid-year. An application for a mine development certificate has been filed and, if all goes as planned, production could start in early 1995.