AFRICA — Sadiola Hill mine cracks half-million-ounce barrier

Higher-than-expected mill capacity allowed Iamgold (IMG-T) and its South African-based partner, Anglogold (AU-N), to produce more than half a million ounces from the Sadiola Hill gold mine in western Mali last year.

The 2-year-old mine produced a record 506,113 oz. at a total cash cost of US$126 per oz., compared with an expected 496,000 oz. at US$133.

Iamgold attributes these results to the nature of the deposit, Anglogold’s operating expertise, and the exceptional performance of the mill, which is treating ore at a rate 30% above the original design of 4 million tonnes per year.

The mine’s stellar accomplishments allowed the partners to reach yet another milestone at Sadiola: free cash flow. After fulfilling all of the conditions for profit distribution set under the original financing agreement, the mine paid out an US$8-million dividend to shareholders Iamgold (38%), Anglogold (38%), the government of Mali (18%) and International Finance Corp. (6%).

The partners also restructured Sadiola’s hedge book to include 1999 forward sales of 221,6000 oz. at a price of US$339 per oz.

The mine plan has been extended by two years to 2007, though 1998 may mark the deposit’s peak performance, as waste-to-ore stripping ratios begin to increase and head grades decline. Projections for the current year include a drop in production to 450,000 oz., a rise in costs to US$153 per oz., a doubling of the stripping ratio to 1.7, and a decline in the head grade to 2.8 from 3.3 grams per tonne.

“The upcoming year will be the worst year in terms of the amount of waste we’ll have to move to expose these ores,” says Iamgold President Todd Bruce. “It’s purely a matter of geometry.”

By 2000, head grades are expected to return to the long-term average, and head grades will likely improve in the following year.

Moreover, these production and cost estimates may prove to be conservative if modifications to the plant are successful in improving recoveries of mixed and soft sulphide ores.

An aggressive exploration program now under way on the mine property and surrounding permits is also expected to add to reserves.

On the mine property, the discovery of several oxide anomalies has prompted the partners to double the exploration budget to US$2.2 million this year. The program will include 10,000 metres of reverse-circulation and air-blast drilling, 2,500 metres of diamond drilling, 25,000 metres of definition drilling and a regional airborne geophysical survey.

To date, the 187-sq.-km property has yielded significant intercepts on four separate anomalies, one of which, FE-4, returned 3.9 grams gold over 34 metres. Other encouraging results include 6.8 grams over 10 metres on anomaly FE-3, 3.6 grams over 12 metres on anomaly TS-1, and 6.9 grams over 6 metres on anomaly FN-3.

Iamgold reports that last year’s sulphide drilling program below the open pit confirmed that the Sadiola Fracture zone hosts mineralization grading more than 3 grams per tonne gold over a strike length of more than 1 km and to a depth of 700 metres.

Some of the shallower sulphide zones appear to be suitable for mining from the open pit, while the deeper, higher-grade mineralization (including a 76-metre intersection averaging 6.9 grams per tonne) is said to have underground mining potential.

On a regional scale, the partners will focus on areas beyond the limits of the existing permits. Work will be based on a compilation of regional geology, geochemistry, satellite and radar imagery, and airborne magnetic and radiometric surveys.

Iamgold says the decision to continue exploration on the existing permits will partly depend on results from the airborne geophysical survey scheduled for this year.

But while the Anglogold-Iamgold exploration program may be proceeding at a rapid clip, the future of many surrounding projects is less certain. Several Canadian juniors active in the area are struggling to raise the financing necessary to keep their projects alive.

Nevsun Resources (NSU-T), for example, has stopped work on its Kakadian concession, 20 km west of Sadiola. Although geochemical exploration on the property outlined a 5-km anomaly coincident with the intersection of two shear zones (similar to the Sadiola environment), the company has been forced to slashed in half its holdings in the area and direct its remaining cash to more advanced projects. And Robex Gold (RBX-M), while encouraged by a surface program on its Diangounte concession, which suggests a Sadiola-like mineralization, says it needs more financing to proceed.

Quebec-based Raymor Resources (RAR-A), which was once active on the nearby Yeremounde property, could not be reached for comment.