Photo by: Allied Nevada Gold
TORONTO (miningweekly.com) – US precious metals miner Allied Nevada Gold on Wednesday released the results of a feasibility study to expand its flagship Hycroft mine’s mill, stating that the expansion would cost $66-million more than that set out in a May prefeasibility study (PFS), but would pay itself back quicker and create more value.
The TSX- and NYSE-listed company said the feasibility study, prepared by consulting engineering firm M3 Engineering and Technology, expected the two-phased project to lift the operation’s milling capacity to 120 000 t/y at a cost of $1.39-billion.
The cost increase was mainly attributable to design improvements, such as opting to rather switch from installing two 120 kV power lines to one 345 kV line to ensure more reliable power availability; additional conveyors and crushed ore storage for the crushing/pre-crush and pebble crushing circuits; increased site costs related to the required earthworks; and increased sizing for the thickener tanks.
These cost increases were partially offset by a decrease in contingency, reflecting an improved confidence level of the capital estimate, with 88% of the estimated equipment capital costs now associated with vendor quotes.
However, Allied Nevada said an optimised mine plan had resulted in 52-million tons of ore being added to the life-of-mine (LoM) throughput, as well as in reducing the strip ratio to 1.5, from the previous 1.56. Expected mining unit costs had also decreased slightly as a result of improved haul profiles and reduced mining equipment fleet requirements.
At a discount rate of 5%, and assumed prices of $1 300/oz gold and $21.67/oz silver, the feasibility study indicated an internal rate of return (IRR) of 28.6% and a net present value (NPV) of $1.81-billion.
This compared with an IRR of 26.5% and an NPV of $1.7-billion projected by the PFS.
The feasibility study estimated that Hycroft would sell 13.7-million more gold-equivalent ounces at 13.1-million ounces, while the total revenue over the mine life would rise to $17.04-billion, up from $16.33-billion.
“This project is one of the only economic, permitted large projects in the gold space today and has the potential to become a significant, low-cost producer with a long reserve life and large open resource behind that,” president and CEO Randy Buffington said.
The process flow sheet did not change and still considered a process plant capable of processing oxide, transition and sulphide ore and the associated heap leach for lower-grade oxide and transition ores as presented in the PFS.
The feasibility study found that the mill process costs did not change materially on a per unit basis. Total ton weighted costs increased by $0.31/t to $9.14/t, resulting from potentially processing an additional 440-million tons tails leach, which would be more than offset by the revenue from additional ounces recovered.
The 18-year LoM model included 266 000 oz of recoverable gold and 2.13-million ounces of recoverable silver in the heap leach inventory at January 1, 2015, and also accounted for ounce reductions due to melt loss and nonpayable ounces from the refinery.
The mill was designed and scheduled to be built in two phases of 60 000 t/d each. Throughput would vary based on ore hardness. The mill flow sheet components would include crushing, grinding, flotation, concentrate regrind, concentrate oxidation and leaching, tails leaching, Merrill-Crowe extraction and refining.
The company expected to start detailed engineering early next year, and to start Phase 1 construction in the second quarter of 2015, subject to securing the necessary financing. Phase 1 was scheduled to be completed within two years, with commissioning expected in the second quarter of 2017.
The feasibility study expected Phase 2 commissioning to take place at the end of the second quarter of 2018, 12 months after completing Phase 1.
Allied Nevada said it was still working with interested parties to establish a financing plan for the first phase of the mill’s expansion.
The company also on Wednesday reported output of 49 630 oz of gold for the three months ended September 30. This was 5% lower year-on-year. Silver output jumped to 525 942 oz, up from 184 070 oz in the comparable period last year, the result of more effective silver recoveries from the Merrill-Crowe plant.
It expected 2014 metal sales of between 220 000 oz to 230 000 oz of gold and 1.9-million to 2-million ounces of silver.