Pioneer reactivating an Idaho gold mine

Almost everybody wants higher gold prices, but to profit from them you need a producing mine — or at least one that is ready to start up.

The Stibnite mine 93 miles northeast of here fits into the latter category; Superior Oil bailed out of the minerals business a few years ago and agreed to sell the mine — lock, stock and barrel — to Pioneer Metals for $3 million(US). Superior also happened to leave $930,000 worth of gold in the system which reduced the purchase cost to about $2 million. They even stripped the orebody for anticipated production in the future.

At the official “reopening” of the mine, Pioneer President Robert Willis noted that British, American and Canadian capital was used to reactivate the heap leach producer. But special mention was given to MFC Mining Finance Corp. (formerly Consolidated Barrier Reef), the company’s joint venture partner, and its president, Douglas H. Nicholson.

A financing arrangement for the property fell through a few weeks before the closing date so MFC stepped in and provided funds to complete the purchase. For two- thirds of the capital cost, MFC acquired a 50% interest.

Mr Willis admitted that Pioneer “might not have had the total fuel required to feed our blast furnaces” if MFC hadn’t stepped in. Besides a 50% interest in the Stibnite mine project, MFC has a 50.3% equity interest in Blackdome Mining which recently brought into production a highly successful underground gold producer near Clinton, B.C. Both companies are aggressive players in the gold sector and Pioneer is moving in a similar fashion.

Superior put Stibnite into production for $9.8 million and operated the mine for three years before walking away from it for good last April. So the purchase was an exceptional deal for the joint venture which expects to produce up to 30,000 oz gold this season.

The mine is located at approximately 7,000 ft so the operation is very seasonal, which is not unusual for heap leach producers. The maximum period they would expect to leach is about six months and a minimum of five. But offsetting that to a large extent is the leaching time required to extract gold from the ore which averages about 0.08 oz gold per ton.

The ore is extremely porous and friable and they get a 90% recovery rate in 10 days — almost unheard of in the business. However, the total cycle is 50 days including loading and unloading of pads, spraying, drawing off pregnant solution and neutralizing heaps with chlorine. Costs not high

There are five leach pads but little room to build additional ones, so they are loaded and unloaded as needed, which represents the largest single component in production costs. Not that costs are all that high — Mr Willis estimates they are currently less than $200(US) per oz and they could go lower with more experience and improved operating techniques. Pioneer justified the acquisition of Stibnite with gold at $325.

Mining is done by a contractor so there was no investment required for open pit equipment including trucks and shovels. A division of Peter Kiewit & Sons handles the mining and crushing and it has performed well with good equipment availability. But the joint venture doesn’t rule out purchasing its own equipment in the future, should enough reserves be found to justify it.

The West End pit is being mined at present and Pioneer has a 25% interest in that particular orebody. MFC holds a 50% interest and TRV Minerals the remainder. The agreement with TRV covers only 28 of the 700 claims held by the joint venture in the region. And Pioneer and MFC own the plant and other facilities. Because TRV was unable to contribute capital to the project, Pioneer has been receiving TRV’s share of revenues. As a result, Pioneer and MFC are splitting gold production on a 50/50 basis. 8,000 tonnes per day

With existing surface facilities, they have the capacity to process and mine about 500,000 tonnes per year and the crushing plant will handle about 8,000 tonnes per day. Material is crushed to 1 1/4 in which appears to be the optimum size based on earlier studies. Mining in the West End pit was supposed to wind down next year but the last bench appears to have 50,000 more tonnes than expected, meaning production could be extended into 1988. They are leaving some ore in pit walls and should gold prices remain at present levels or increase, a redesigned pit could add more reserves.

A side hill cut is used to mine the oreody which is 200 ft wide and extends right into the mountainside. All the mineralization is structurally controlled and related to a collapsed caldera and radial faulting. The gold-to-silver ratio is about 2:1 and the metals occur in oxide material which simplifies the extraction process. The gold is free but very fine and is not associated with residual pyrite. Importantly there is no clay or slimes in the orebody.

Mine reserves exist in three separate zones including one containing 300,000 tons grading 0.14 oz gold. This is known as the Garnet Creek zone and a 60% interest is held by the joint venture (Pioneer/MFC). Superior has paid $700,000 in advance royalties on this particular property.

Pregnant cyanide solution is processed through a carbon-in-pulp circuit and a dore bullion is produced. The plant is operating at maximum capacity and the inhibiting factor to increasing production is the stripping plant. They wouldn’t be able to strip gold from solution fast enough, says Mr Willis. Superior also ran it at full capacity but leached on a calendar cycle, assuming that all the metal content had been recovered.

Like so many other Vancouver companies, Pioneer raised money in Europe to fund the project. The company raised $3.5 million(C) for Stibnite, its Puffy Lake project in Manitoba, the purchase of shares in Maverick Mountain Resources, and also for working capital.

According to Steve Sorenson, vice-president finance, private placements are done quickly, don’t require a prospectus and “you don’t have any stock coming back at you.” Pioneer also has a convertible debenture that will probably be converted by next May, he states, adding that this type of thing happens often in conjunction with a private placement.

Shareholders have approved the merger of Pioneer with Maverick Mountain which will simplify development of the Puffy Lake deposit north of Flin Flon, Man. Kilborn Engineering is preparing a feasibility study for the project and that should be completed by year- end, says Mr Willis. Pioneer will also be providing input. The project will be 100% owned by Pioneer subject to a 20% net profits interest to Granges Exploration after payback.

About $2 million worth of underground development work and exploration is under way and there appears to be an upgrading of reserves based on sampling of development headings. At last report, reserves were 1.3 million tons grading 0.203 oz gold. The deposit is flat-lying and studies are under way to determine the best mining method.