ITH still confident Livengood gold mine can be developed

Graphic/Courtesy/International Tower Hills

International Tower Hill Mines is back at the drawing board refiguring how to economically produce the large gold resource the company has identified at its Livengood prospect about 70 miles north of Fairbanks on the Elliot Highway.

In a feasibility study, which found higher costs for parts of the mine, International Tower Hill Mines, or ITH, found the project would be uneconomic at current gold prices and under the development assumptions used.

Don Ewigleben, CEO of the company, is still upbeat, however.

“While the large project feasibility study results are not economically robust in today’s gold market, the Livengood gold project remains a very significant gold deposit in one of the most favorable jurisdictions in the world,” Ewigleben said in a statement.

The company is already evaluating several other cost-saving opportunities identified in the feasibility study.

Livengood has an estimated gold resource in the proven category of 15.7 million ounces and in the probable category 4.4 million ounces for a total of 20.1 million ounces.

At $1,500 per ounce, the reserve contains more than 10 million ounces of gold with 9.62 million ounces in the “proven” category and another 454,000 ounces in the “probable” category. Proven and probable are categories of resources determined by drilling, extensive sample evaluation, assaying and modeling identifying economic minable ounces at a given gold price.

Based on those estimates, the mine could produce 577,600 ounces of gold per year over an estimated 14-year mine life, but the producing lives of most mines are longer that what is initially estimated because there are likely to be resources in the area that are undiscovered. ITH, controls a 75-square-mile land block through state mining claims.

“Yes, operating and capital costs did go up (in the feasibility study) but it is essential that we use the most accurate numbers based on all the information collected through the feasibility process,” said Tom Irwin, vice president of ITH and a veteran miner who managed development of the Fort Knox mine. He is also a former commissioner of the Alaska Department of Natural Resources.

The assumption in the feasibility study included a mill design that would process 100,000 tons or ore daily. The feasibility study assumed a mill requiring just less than 100 megawatts of electricity and employing about 450 workers.

Irwin said “they are evaluating whether a scaled-back ore processing mill and changes to the mining plan will improve the project’s economics enough to offset the decreased economies of scale.” 

The original plan would process 100,000 tons per day and would produce more gold than a smaller mill.

In both the large and smaller mill scenarios, higher grade would be mined in the early years to increase the project economics. This process is typically used in most mines particularly in large, low-grade mines including Kinross’s Fort Knox mine.

There are other opportunities identified in the feasibility study that ITH is evaluating that include: increasing the in-pit resource, exploring new targets, lowering reagent costs and reagent usage, and improving recovery with intensive gravity concentrate leaching. 

“One of ITH’s priorities is to reduce power costs since the power cost is approximately 30 percent of the mill’s operating cost” Irwin said. 

Energy costs, for example, were estimated at the current price of power charged by Golden Valley Electric Association, the regional electric co-op, under the assumption that ITH would pay for a 50-mile power transmission line to connect the mine to GVEA’s system. GVEA currently generates much of its power with oil.

However, the co-op, along with the Fairbanks North Star Borough and other Interior groups, are working with the State of Alaska on a plan to truck liquefied natural gas to Fairbanks from the North Slope. The belief is that trucked LNG would provide energy for power generation for about half the cost of fuel oil.

Irwin said ITH separately considered the option of on-site power generation, but there are pluses and minuses with this even with LNG trucks from the North Slope rolling right past the mine on the highway, which connects to the Dalton Highway to the slope.

“The ‘con’ is that we would have to build a power plant, and incur the capital costs. The ‘pro’ is that we might have cheaper power,” he said.

The feasibility study used power generated by Golden Valley and included capital costs for generating capacity, substations and a 50-mile transmission line, Irwin said.

“Fort Knox has had a good experience with GVEA,” in purchasing power for operation of its mine, he said. The Pogo gold mine, near Delta, also purchases power from GVEA over a long-distance transmission line.

Trucked LNG as envisioned by the state with the current price assumptions would improve the project economics.

One additional factor that might improve the outlook for the mine is that the amount of gold in the ore might turn out to be greater than initially estimated.

The company is still studying this, but the content of the ore was actually higher in large bulk samples of ore that were mined and shipped to Lower 48 facilities for metallurgical studies than was measured in smaller rock core samples extracted during test drilling.

The gold resource estimates used in the feasibility study, and those published by the company in its financial report, are those from analyses of the rock cores from drilling.

However, the gold content in the bulk samples was about 10 percent higher than was measured in the cores. The company is still evaluating this, Irwin said.

The feasibility study also had to include higher costs for some parts of the mine that were originally not contemplated, Irwin said. One big change came from geotechnical drilling and permafrost analysis and other studies that showed the tailings facility needed to be lined to ensure the environment is protected with the ITH design and to meet the strict standards set by the state.

The feasibility study, considered thorough by ITH, was developed over 18-months and included a major drilling and metallurgical test programs, several engineering design firms, reviewed by three independent parties and signed by Independent Qualified Persons.

Summing up the project status, Irwin said, “there are current gold price challenges and this project is highly leveraged to gold price, but gold has always been cyclical. The Livengood Gold Project is significant: with the large gold resource, the project is located adjacent to the Interior highway system, Alaska is a secure political and legal environment and ITH has a great team.”

09/19/2013 - 11:18am