Livengood owners focused on costs, optimizing production


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Exploration drilling at the Livengood prospect north of Fairbanks has revealed it to be one of the world’s largest gold deposits with about 20 million ounces of gold, but the construction and operation of the mine is challenged by current prices and the company owners are focused on finding an economic way to develop it.

Photo/Courtesy/International Tower Hills

International Tower Hills Ltd. is continuing its work on the large Livengood gold project about 70 miles north of Fairbanks. The focus now is on reducing costs and optimizing the production process.

“We are proceeding towards a reevaluation of the capital and operating costs as we optimize the project,” said International Tower Hills CEO Tom Irwin.

Gold in the Livengood district has long been known. Early-day placer miners were active in the area. The hardrock deposit that has now been outlined is large and low-grade, and would be mined with a large surface mine similar to the way gold is mined at Fort Knox, another large operation near Fairbanks.

The Livengood project is on the Elliot Highway north of Fairbanks, and having year-around road access is a key advantage if a mine is developed, company spokesman Rick Solie said.

Livengood is one of the world’s largest undeveloped gold deposits with about 20 million ounces of gold identified through drilling, 16 million ounces in the “measured and indicated” category and 4 million as “inferred” resources, Solie said.

Measured and indicated refers to gold estimated through closely-space drill holes while inferred resources are those estimated by drill holes that are more widely-spaced. About 800 test holes have been drilled at Livengood so far, enough that the amount of gold can be estimated with reasonable certainty.

There is likely more gold present, Solie said. The deposit is still “open” at its sides and bottom, meaning that the limit of the gold-bearing geologic formation has not yet been determined and there are exploration prospects close to the existing resource.

There’s clearly enough gold for a mine, he said. The challenge now is to find a way to mine it economically.

ITH completed a feasibility study in 2013 based on a 100,000 ton-per day mine but the study results showed that total capital and operating costs were higher than the gold price at the time. 

Gold prices have recovered somewhat but are still not robust, so the focus of the current effort is on cost reduction and a possible rescoping of the mine.

“A big area of our work is on scale. The feasibility study was done on the basis of a 100,000 ton-per day mine. That’s about twice the size of Fort Knox (another gold mine near Fairbanks), so we are considering whether that is still the best size,” Solie said.

It’s a tradeoff, though.

“If we lower the mill size and throughput we lower our capital costs but our operating costs may go up. So, we’re still working to find that sweet spot,” where costs and revenues are optimal, he said.

A lot of other work is being done including continued work on metallurgy. The ore at Livengood is more complex than at Fort Knox, so the mill process is an area of interest, he said. Work is being done on the reagents, or chemicals, used in the extraction of gold, and ITH is reviewing both the costs and the gold recovery compared with what was estimated in the feasibility study.

The ongoing environmental baseline monitoring is another priority.

“We’re now in the sixth year of monitoring,” to compile the large amount of data that will be needed to support state and federal permits for the project, Solie said. “The data shows that we can build this project in an environmentally responsible manner.”

“Energy is another focus of our work, because power will be 30 percent of our operating costs.”

The company’s current plan is to purchase power from Golden Valley Electric Assoc., the Interior electric co-op, and to build a transmission line parallel to the Elliot Highway to bring power to the mine.

With that in mind, ITH is closely monitoring the possibility of reduced electricity prices in GVEA system if liquefied natural gas, or LNG, is trucked from the North Slope to Fairbanks for space heating and power generation.

The company will also consider options of on-site power generation because the LNG trucks from the Slope will pass very near the mine, Solie said, but there are pluses and minuses to on-site power generation. It may raise capital costs compared with purchasing power from a utility, and it can also pose a risk of “stranded investment” in an on-site power plant, when mine production ceases in the future.

Solie said ITH has sufficient funds on hand to keep its team of about 12 people working on project design well into 2015.

“However, we’ll have to raise more funds to advance the project,” to development, he said.

The company has a strong management team. Tom Irwin, a former state Natural Resources commissioner and a 40-year mining industry veteran who also led development of the Fort Knox mine, is the ITH Chief Executive Officer.

Karl Hanneman is general manager of the project. Hanneman is a 30-year industry veteran who led development of the Pogo underground gold mine near Delta, east of Fairbanks, and who played a key role on the team resolving permit issues for an expansion of the Red Dog lead-zinc mine in Northwest Alaska.

ITH has its company headquarters in Fairbanks and is listed on the Vancouver, Toronto and New York stock exchanges.

The majority of ITH’s stock is owned by U.S. based shareholders.  The company’s three largest shareholders, Tocqueville Asset Management, L.P., Anglo Ashanti LTD, and Paulson & Company, Inc. have been owners since the early days of the company and have continued to invest as the development needs of the project have required additional capital. 

As ITH considers its financial needs to support the future development of the the Livengood project, the company said it is considering all appropriate financing options, including a strategic alliance with another company.

The size of the gold resource, the favorable location, and the proven team are some of the reasons that ITH believes it will attract a strategic partner with a long term development horizon.        

“With its excellent fundamentals and strong leverage to gold price, ITH remains a credible investment opportunity,” said Irwin.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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