Slow start for Premier Gold Mine, Westmin reviewing problems

The company said the open pit mining program is now several months behind schedule due in part to equipment and operational difficulties during the first months of operation. These early production shortfalls are reported to have adversely affected grade control. Dilution levels and operating costs are also higher than anticipated.

Westmin owns 50.1% of the 2,018-ton-per-day operation which can be reached by road. Partner Pioneer Metals (TSE) has 40% and Prime Resources (VSE) holds the remaining 9.9% interest.

“In the last few months there’s been some major improvements on the mining side,” said Ross Banner, interim mine superintendent. He also confirmed that a personnel shakeup did occur at the mine site. “Now it’s just a matter of reviewing where we are on costs.”

Project capital costs to put the former Silbak Premier and Big Missouri mines back into production were originally estimated at $88 million. An increase in capital costs to $92 million combined with the slow start-up further strained the financial resources of Pioneer Resources which is attempting to re-negotiate its long-term debt obligations. Pioneer suspended operations at its Puffy Lake gold mine in Manitoba earlier this year.

The Premier Gold project has proven and probable reserves of 8.2 million tons with an average grade of 0.072 oz gold and 2.01 oz silver per ton. Operations began in late May and the first dore was poured in early June.

Westmin reports that a total of 159,899 tonnes of ore and 2.57 million tonnes of waste have been mined to the end of September from the Premier, Dago and S1 pits. During the same period the mill was tuned up and operated with 243,894 tonnes of low grade development ore mined in 1988.

Production to the end of September totalled 6,119 oz gold and 104,169 oz silver, with nearly half this amount credited to September production.

Westmin said fourth-quarter production shows a steady improvement to reaching commercial production. As of Oct 11, the company recovered 1,446 oz gold and 10,022 oz silver from 20,823 tonnes of ore. Mill recovery is reported to have averaged 90% for gold and 49% for silver, with the mill averaging 93% design capacity during the period.

Westmin is now reviewing its start-up difficulties and plans to implement measures to achieve targeted performance. In the meantime the company is reporting positive results from ongoing exploration on the Premier Gold properties where work is focused on defining underground reserves. To date 161,445 tonnes (probable and possible) grading 6.2 g (0.18 oz) gold and 28.4 g (0.8 oz) silver have been outlined.

Westmin also secured an agreement with Tenajon Resources (VSE) allowing it to earn a 50% interest in the nearby Tenajon’s SB property. Mineable reserves in the Facecut 35 zone are reported as 105,590 tonnes grading 10.6 g (0.310 oz) gold and 39.7 g (1.1 oz) silver per tonne.

A feasibility review will be conducted by Westmin on all underground zones as the company plans to supplement its open pit mining operation with underground reserves early next year.

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