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OceanaGold narrows 2017 guidance as Haile teething problems dent project progress

The most expensive item to fix is the Haile plant control system, some parts of which have not performed to expectations

The most expensive item to fix is the Haile plant control system, some parts of which have not performed to expectations

Photo by OceanaGold

27th June 2017

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

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VANCOUVER (miningweekly.com) – Melbourne, Australia-based gold producer OceanaGold on Monday said it has narrowed the top-end of its 2017 gold production guidance, as teething problems at its new Haile gold mine, in South Carolina, stymy progress.

The TSX- and ASX-listed midtier miner, with assets located in the Philippines, New Zealand and the US, now expects to produce between 550 000 oz and 600 000 oz of gold this year, down from previous estimates of 550 000 oz to 610 000 oz of gold.

All-in sustaining costs (AISC) for the mine also jumped from an estimated $500/oz to $550/oz, to a range of between $600/oz and $650/oz, as throughput is impacted by commissioning issues.

OceanaGold reported that, during the first quarter and early in the current quarter, plant throughput ramped up well and the Haile team achieved nameplate throughput several times. However, in the middle of the June quarter, some commissioning issues surfaced, leading to a shortfall in tonnes milled and recovery underperforming the mine plan.

The most expensive item to fix is the Haile plant control system, some parts of which have not performed to expectations, OceanaGold said. Lower data processing speeds have resulted in suboptimal responses through some areas of the process plant. In parallel with the process plant expansion, enhancements to the process control system will be identified and undertaken, at an additional cost of $2-million to $3-million over time.

It has also been determined that the pipes between the carbon-in-leach (CIL) tanks and the leach circuit are too small. The company is planning to redesign and install a new CIL piping circuit in August, estimated to cost about $700 000. A temporary workaround has been implemented, the company said.

The CIL tank liners have also been failing at various times owing to faulty installation on the inner tank walls, which will be replaced under warranty. One tank will be upgraded at a time, with completion slated for December.

Further, the variable slurry density into the fine grinding circuit is resulting in inconsistent grinding size. The company plans to close the feed circuit in July to better control slurry density and product size, at a cost of $200 000.

Meanwhile, the current steel grates in the semi-autogenous grinding mill are holding back finer steel grinding media, causing too much small grinding material and resulting in lower throughput. OceanaGold will replace some of the grates with larger aperture grates to allow the smaller steel media to pass through the mill, estimated to cost $50 000.

OceanaGold has lifted its 2017 guidance for copper output to between 18-million and 19-million pounds, on the back of strong performance from the Didipio mine, in the Philippines.

OPTIMISATION STUDY
OceanaGold also on Monday published the results of an optimisation study on Haile, upgrading the mineral reserves, increasing gold output and outlining a longer mine plan with strong economics.

OceanaGold has lifted the compliant proven and probable reserves some 70% from previous estimates of 2.02-million ounces to 3.46-million ounces of gold. It also announced a maiden reserve of 440 000 oz for the Horseshoe underground operation, following a successful resource definition drill programme on the upper portion of the Horseshoe deposit in 2016. Horseshoe also has an inferred resource of 20 000 oz.

Haile now also has 61.9-million tonnes grading 1.84 g/t gold, for 3.67-million ounces of gold in the combined measured and indicated resource categories.

OceanaGold has revised the mine plan and design of the surface operations. Pit optimisations were based on a $1 300/oz gold price assumption, with a $1 150/oz gold price pit shell selected for its design (previously $950/oz gold price). This has resulted in larger pits with the total openpit reserves now standing at 3.02-million ounces of gold.

With the larger openpits and the inclusion of an underground operation at Horseshoe, OceanaGold has revised the overall mine plan.

Based on a proposed expansion of the plant and the underground operation at Horseshoe, ore feed will average 3.3-million tonnes a year from surface operations and 700 000 t/y from underground. The openpit operations currently have a mine life of 16 years while the Horseshoe underground has a mine life of six years.

The larger openpits require more tailings and waste capacity, including the addition of a new potentially acid generating tailings cell; however, the revised design is within the company's existing land package.

The Horseshoe deposit will be accessed from a portal originating from the north wall of the Snake openpit, where the company recently commenced mining ore, four months ahead of schedule. The mining method for Horseshoe will be long-hole open stoping from a single access and backfilled with cemented rock fill.

Mining costs are estimated to range between $35/t and $40/t mined. The company expects first ore from the underground operation in 2021, with preproduction development capital costs estimated to be $55-million (excluding preproduction operating cost).

Once underground, OceanaGold plans to develop exploration drives to further drill the Horseshoe deposit at depth and carry out additional and more comprehensive fan drilling of nearby underground target Palomino and mineralisation beneath the Snake pit.

The optimisation study envisions an expanded process plant from three-million to four-million tonnes a year, to support the higher overall mining rate. The current estimated capital cost to upgrade the process plant is $67-million, while the initial capital cost associated with a larger openpit and associated mining infrastructure is expected to be $132-million, which includes $60-million allocated for upgrading the mining fleet.

OceanaGold said the study has demonstrated robust economics, with undiscounted pretax cash flows of $1.4-billion, based on current reserves only, plus a further $400-million inclusive of total current mining inventory.

Overall sustaining capital cost is expected to be $245-million over the life-of-mine.

Operating costs for surface operations are expected to fall to between $1.45/t and $1.55/t mined. Processing costs are expected to remain unchanged at $10/t to $11/t milled.

Edited by Creamer Media Reporter

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