For Livengood project, smaller is better
A smaller, simpler plan for developing the Livengood gold prospect has greatly improved the project’s economic viability.
Vancouver-based International Tower Hill Mines Ltd., or ITH, released an optimized pre-feasibility study for the Livengood project Oct. 24 that determined a mine about half the size of what the company originally planned could reduce development costs by about $950 million and operational expenses by 28 percent.
As proposed, Livengood would be a conventional, open-pit mine near the Dalton Highway about 70 miles north of Fairbanks. First investigated as a 14-year mine processing 100,000 tons of ore per day with a $2.8 billion capital cost in a 2013 feasibility study, the latest report downsized the operation to a $1.8 billion development handling 52,600 tons of ore per day over 23 years.
“Livengood’s fundamentals are compelling, with a substantial gold resource, favorable jurisdiction, proximity to infrastructure and great leverage to the gold price,” International Tower Hill's CEO Tom Irwin said in a release. “We are committed to advancing our basic engineering and metallurgical work to further de-risk the project and prepare for future permitting.”
A smaller, longer-lived Livengood would produce slightly less gold, about 6.7 million ounces of the precious metal as opposed to the original estimate of nearly 7.9 million ounces. Annual production of 294,100 ounces from the smaller mine would be 52 percent of the initial plan, closely mirroring the reduction in ore processing, according to the study.
The Livengood prospect holds more than 8.9 million ounces of proven and probable reserves at an average resource grade of 0.71 ounces of gold per ore ton.
While running a smaller operation for longer seemingly butts against the traditional notion of achieving economies of scale, ITH spokesman Richard Solie said the junior mining company took a holistic look at its plan to ultimately reduce the ore processing cost from more than an esimated $10 per ton to $7.48 per ton.
The corresponding cost of production dropped from $1,481 per ounce of gold to $1,247 per ounce under the scaled back scenario.
Gold is currently selling for about $1,270 per ounce. For much of 2011 and 2012 it sold for between $1,600 and $1,800 per ounce but prices dropped to a recent bottom of about $1,050 late last year.
For starters, Solie said the latest study led ITH to move to a coarser initial ore grind, which would require less power and save money.
“Part of why you grind it up smaller is so you can get more gold out of it. But we didn’t lose much recovery when compared to how much we gained in cost (savings),” Solie said.
Along that same vein, employing a secondary crushing of the ore before sending it to the mill to be ground would allow for a more efficient use of power, he added.
Increasing the grade of the slopes in the mine pit and cutting the leach circuit time from 32 hours to 24 hours after gaining a better understanding of the ore in place reacts to the chemical processes were cost savers as well, according to Solie.
ITH also discovered it could save about $100 million up front by forgoing the construction of water reservoirs that were initially thought to be needed for mine start-up.
“As it turns out we have enough water in the actual aquifers to meet the need,” Solie said.
Being within a two-hour drive of Fairbanks also persuaded ITH to move ahead without a significant cost of doing business that is common to other remote Alaska mines, an operations camp.
The smaller Livengood mine is modeled as a commuter mine, in which employees would congregate each day at a muster point in Fairbanks and take “a nice cushy ride up to the site” via bus each day, Solie said.
While it adds to the length of the workday, he noted ITH also prefers the ability of its future employees to stay more engaged in their community and spend additional time with their families.
“It’s a different culture when your people are living in a town rather than living out at a camp and there’s elements of that we like,” Solie said. “We like the idea of people sleeping in their own beds. We think that’s positive.”
Elwood Brehmer can be reached at [email protected].