Allied Nevada to expand gold production at Hycroft mine

The commissioning phase of the recently reopened Hycroft gold mine in Nevada will be completed by the middle of the year and Allied Nevada (ANV-T, ANV-n) says it expects the mine will produce about 90,000 ounces of gold this year.

By the end of last year, Hycroft near Winnemucca, Nevada, was operating at planned production levels of 2.1 million tons of ore and waste mined per month. The ore release portion of the first phase of mining is expected to take place in the first quarter.

Allied Nevada says it believes the mine, on the western flank of the Kamma Mountains, will produce 20,000 ounces of gold in the first half of 2009 and 70,000 ounces in the second half and anticipates the average cost of sales per ounce of gold will be between US$460 and US$480 per oz. for the full year.

According to a technical report released in October 2008, Hycroft’s proven and probable reserves of 73,159 tons grading 0.016 oz. gold per ton for total contained gold of 1.1 million ounces, are economic at a three-year historical gold price average of US$720 per oz. Gold recovery by the run-of-mine heap leach process is estimated at 56.6% for both proven and probable reserves.

Based on current proven and probable reserves and an expected annual production rate of 90,000 ounces of gold, Hycroft should produce gold for about seven years, Allied Nevada forecasts.
The Hycroft development project involved reopening the Brimstone oxide open-pit mine, which had been on care and maintenance since 1998.

Historically, gold mineralization was thought to be limited to the oxide cap of a large sulfide gold and silver system. However Allied Nevada discovered that a portion of the oxide cap has extensive sulfide gold and silver mineralization lying beneath.

Allied Nevada reported a loss of US$79.6 million in 2008, up over its 2007 loss of US$11.3 million.

Management attributed the greater losses to a combination of mineral property impairments (US$39 million); mine start-up costs (US$12 million); an increase in exploration, property evaluation and holding costs (US$10.4 million), and general corporate and administrative costs (US$4.7 million).

The company ended the year with US$16.5 million in cash and equivalents.

Working capital as at Dec. 31, 2008 totaled US$12.9 million, down from US$19.7 million a year earlier.

At presstime in Toronto, Allied Nevada was trading at C$5.18 per share. It has a 52-week trading range of C$2.06-$6.90 per share and has 57.4 million shares outstanding.