Western Goldfields buys fleet for California mine

Now that US$60.9 million in fleet equipment has been ordered for the Mesquite gold mine in Imperial County, California, Western Goldfields (WGI-T, WGDF-O) is on track to meet its target of producing 165,000 oz. per year beginning in April 2008.

The fleet is expected to arrive by mid-2007 and includes 11 Terex 190-ton haul trucks, two O&K RH340 shovels, a Letourneau 1350 loader and Caterpillar ancillary equipment. The tire inventory for the first year has also been ordered.

Initial capital costs are estimated at about US$98 million, nearly US$10 million higher than indicated in the feasibility study, because the company decided to buy trucks with lower emission levels.

Western Goldfields estimates cash operating costs will be US$335 per oz. with an expected mine life of 9.5 years.

The company is deciding between three proposals to finance the initial fleet and will sign a mandate letter by the end of November.

In the meantime Western Goldfields, which acquired Mesquite in 2003, will continue producing gold through residual leaching from ore left in heaps by past owners. This year’s production is expected to be around 14,000 oz. gold.

Mesquite became an open-pit heap-leach mine in 1985. It was eventually acquired by Newmont Mining, which put expansion plans and mining activity on hold in 2001 due to low gold prices. It continued the permitting process and obtained the permits in 2002.

Mesquite has a proven and probable reserve of 130.9 million tons grading 0.018 oz. gold per ton, or about 2.36 million contained oz. Measured and indicated resources, exclusive of reserves, are estimated at 74.4 million tons at 0.017 oz. gold, or 1.25 million contained oz.

As gold production gets underway in 2008, the Los Angeles County Sanitation District will begin hauling garbage to North America’s largest-ever landfill on a portion of the south-west sector of the Mesquite site. Previous owners signed a landfill lease agreement in 1993. The landfill operators will use Mesquite’s spent leach material (with the cyanide cleaned out of it) to cover the garbage on a daily basis.

The agreement exempted Western Goldfields from California’s stringent law that forces mining companies to refill an open-pit mine when the project is finished.

Western Goldfields has about 75.6 million shares outstanding or 111 million fully diluted. The management team includes former Barrick Gold president Randall Oliphant as chair and Raymond Threlkeld as president and CEO.