Newmont takes Turquoise stake

Vancouver — Denver-based Newmont Mining (NEM-N) has agreed to take a 25% stake in Placer Dome‘s (PDG-T) Turquoise Ridge and Getchell gold deposits in northwestern Nevada’s Humboldt Cty.

Under the deal, Newmont will buy up to 1,800 tonnes a day of joint-venture ore at cost and process it at its nearby Twin Creeks mill. The majors will each contribute a pro-rata share of mine-development costs, as well as environmental-closure expenses related to future joint-venture operations. A current 2% net smelter return royalty payable to Newmont will be eliminated.

“The formation of the joint venture is the right business decision as it reduces capital requirements, lowers operating costs, and represents a more efficient use of resources,” says Placer Dome President Jay Taylor. “The joint venture . . . serves as a good model for the industry in terms of efficient use of infrastructure.”

Placer has been producing gold from the Getchell portion of the property under an earlier processing agreement with Newmont. According to that agreement, Newmont received a credit for its processing cost of Getchell ore, plus a fee. The deal was inked in October 2001 and is good for 30 months (until June 2004), or until 1 million tons of ore are sold.

Ore resulting from development of the new Turquoise Ridge operation was also slated to be processed under that agreement. The Turquoise Ridge mine started up in April and is expected to hit full production of 300,000 oz. annually by the end of 2004.

Placer acquired the two deposits in 1999 as a result of its $1.1-billion merger with Denver-based Getchell Gold. Some two months after the deal was completed, Placer stopped production at the problem-plagued Turquoise Ridge in order to focus on exploration and development. Ore from the underground Getchell mine was stockpiled for later processing.

In late 2001, Placer took a US$292-million writedown on the project after extensive analysis failed to produce a mine plan that would recover the carrying value of the asset. The geology and poor ground conditions required a highly selective mining method that limited daily production to 1,500-2,500 tonnes.

Last year, Placer began evaluating the high-grade resources in the North zone of the Turquoise Ridge deposit. The program included 600 metres of drifting and 33,000 metres of diamond drilling. The results prompted the company to consider resuming production at Getchell.

Proven and probable reserves at Turquoise Ridge, based on a gold price of US$300 per oz. gold, are estimated at 3.5 million tonnes grading 23.9 grams gold per tonne, or 2.7 million contained ounces. Placer expects to convert additional known mineralization into reserves within the next 30 months.

The capital cost of ramping up to full production is estimated to be US$80 million, including US$41 million for underground development, US$26 million for refurbishing the existing mill, and US$14 million for surface work and initial operating costs.

The new deal is expected to lower operating costs and improve recoveries, with cash and total costs coming in at US$190 and US$230 per oz., respectively, compared with the original estimates of US$215 and US$265 per oz. The move saves Placer the US$26 million in capital required to refurbish the existing mill, and the expected life-of-mine capital investment in the project will be reduced by more than US$40 million as Newmont contributes its share of capital expenses.

The savings will allow the joint venture to reduce the economic cutoff grade at Turquoise Ridge, which in turn will improve the continuity of the resource, boost reserves, and extend the life of the mine beyond the existing 9-year plan. Placer aims to issue a revised production forecast, along with updated resource and reserve estimates, using the new cost structure.

Geologically, the Turquoise Ridge deposit is hosted by hornfelsed mudstone, limestones, calcareous mudstones and some pillow basalts. Mineralization generally occurs at the intersection of north-south-, northeast- , and northwest-trending faults. The North zone is hosted in interbedded, carbonaceous mudstones and limestones, as well as calcareous mudstone breccias. Gold distribution is related to low-angle structural zones and to intersecting, high-angle, north-south- and northeast-trending faults. Anticlines trending to the northwest and northeast play a significant role in localizing the gold mineralization.

The Getchell deposit is hosted in the Getchell fault, and in footwall of the fault. The footwall deposits occur at the intersections of northeast-, north-south- and northwest-trending faults and are hosted in carbonaceous limestone, silty limestone and calcareous mudstone breccias.

Gold mineralization is associated with arsenic, mercury and, to a lesser extent, antimony, as well as pervasive de-calcification, silicification and carbonaceous alteration.

The joint-venture agreement limited to an area surrounding the Turquoise Ridge shaft; Placer Dome retains 100% ownership of properties outside the area of influence.