Winnemucca, Nev. — The inaugural year of
Building a profitable mining company is nothing new to the individuals that make up Apollo’s management team, led by Chief Executive Officer David Russell. Apollo’s roots can be traced back to the late 1990s, when
In 2000, the group created a private company called Nevoro Gold and spent the next two years evaluating properties. Nevoro then picked up an option to acquire the mining assets of bankrupt Pegasus Gold, chief among which were two mature gold mines: Florida Canyon in Nevada, and Montana Tunnels in Helena, Mont. In return, Nevoro forked over US$500,000 in cash and assumed US$4.5 million in liabilities.
Despite the aging nature of the assets, Nevoro recognized that both operations had been starved for capital for years and held good potential for increasing reserves. In need of US$20 million for new equipment and exploration drilling, Nevoro completed a reverse-takeover of publicly listed International Pursuit. Under a plan of arrangement, International Pursuit raised US$23 million by completing a private placement of convertible debentures. Following the merger with Nevoro, the debentures were converted into Apollo Gold shares, which began trading in July 2002.
Apollo’s flagship project is in Nevada’s Humboldt mining district, some 68 km southwest of Winnemucca. The region has a mining history dating back to the 1860s, but it was not until 1969 that Florida Canyon attracted the attention of the major gold explorers. Homestake (now part of
The gold mineralization lies along the north-south-striking Humbolt deformation zone, where a series of secondary northeast-trending structures cut the main fault and favourable host lithologies. So far, oxide mineralization consisting of native gold and electrum associated with quartz and iron oxides has been mined from eight areas covering a total of 1.6 sq. km.
“Florida Canyon started as a small, heap-leach gold operation producing 60,000 to 80,000 ounces per year,” General Manager Cory Atiyeh told The Northern Miner during a site visit.
By the end of 2001, 123 million tonnes containing 2.5 million oz. gold had been placed on the leach pad, and from that, 1.7 million oz. gold had been recovered.
The 27,216-tonne-per-day operation handles a combination of crusher and run-of-mine ore. The crusher ore constitutes 40% of the ore and usually grades around 0.62 gram gold per tonne, whereas the run-of-mine material grades 0.24-0.62 gram gold. Recoveries come in at 58% for the run-of-mine ore and more than 75% for the crushed material. Gold and silver are recovered from cyanide solution by carbon absorption and then further processed to dor before heading to a refinery.
By industry standards, the grades are considered marginal for an open pit, heap-leach operation, but low production costs managed to keep the mine viable.
“The way the mine survived over the past five years was to cut costs,” Atiyeh said. “In 1997, the cash cost of producing an ounce of gold was over US$300, and today we have dropped that by about US$70 an ounce.”
The mine comprises several closely spaced pits and has a historical stripping ratio of 1.15-to-1. Ore is being mined from three sites, with the Main pit marking the primary producer, followed by the largest contributor of run-of-mine ore at the Radio Towers West pit and then the Brown Derby pit.
The operation moves 21.5 million tonnes of material per year using 150-ton trucks and two 23-cu.-yd. hydraulic shovels.
“There are about 145 million tonnes on the leach pad right now, and we add to it at the rate of seven to nine million tonnes a year,” said Atiyeh.
Recognizing the need to find new ore, Apollo immediately launched a revitalized exploration program. The drilling led to almost immediate success, with resources in the Northeast Extension, Cone, Headwaters and Radio Towers West areas upgraded into the re-serve category. By the end of the year, proven and probable reserves had grown to 18.1 million tonnes grading 0.53 gram gold per tonne.
Another area being looked at to extend the mining operation is the economics of the underlying sulphide ore. “The long-term potential of Florida Canyon is in the recovery of the sulphide resource,” said Engineering Manager William Orr.
The total resource in the sulphide portion is about 29.2 million tonnes grading 1 gram gold per tonne. However, low heap-leach gold recoveries have derailed development of this portion. “Flotation tests indicate more than a 90% recovery,” explained Atiyeh, “but the bottle-roll tests came in at 0-40%.”
Wide-ranging
The wide ranging results on the leachability of the sulphide material led the company to believe the gold mineralization is hosted both in pyrite, which is not leachable, and in quartz veining, which is.
“Initially we thought there was a transition zone between the oxide and the sulphide, but that no longer appears to be the case,” said Atiyeh. “The key now seems to be the amount of quartz veining.”
Mining at the Main pit led the company to the fringes of the North of Crusher sulphide zone, so samples were collected from the sulphide material for metallurgical testing.
Said Orr: “We did some bulk and column-leach tests and got forty to forty-five per-cent recoveries, which renewed interest in the leachability of the material.”
Apollo is re-logging holes and intends to carry out more core drilling in order to outline the high-recovery zone and render it distinct from the low-recovery material.
“If we can’t determine which is leachable, we’ll have to look at it as a milling project,” says Atiyeh. “By using used equipment, it could prove economic.”
In the fourth quarter, the Florida Canyon mine produced 29,551 oz. gold at a cash cost of US$244 per oz., bringing its yearly total to 121,516 oz. at a total cash cost of US$243 per oz.
Apollo expects to produce 125,000 oz. gold from Florida Canyon this year and is developing additional reserves and resources so that mining can continue at least through 2008, with gold production extending through 2010.
Thanks in large measure to the Standard Mine project, 6 km south of Florida Canyon, Apollo managed to double its overall gold reserves during the year. With no reserves at the beginning of 2002, the Standard project ended the year with 15.6 million tonnes grading 0.56 gram gold in the proven-and-probably category.
The project area has a long history of exploration, with 1949 marking the last recorded year of production.
“By some accounts, this was one of the earliest low-grade Carlin-type orebodies to be worked,” says Exploration Manager Robert Thomason.
Modern-day exploration concluded that the mineralized zones were too small for development, but with Florida Canyon up and running, the area became ripe for possible satellite deposits.
So far, Apollo has defined three zones of economic mineralization.
“The main resource areas are Cordex, North Pit and the South pit, which is still open,” adds Thomason. “The High Standard and Star targets still need additional drilling.”
Mineralization at Cordex and the North Pit occurs primarily along a karst horizon at the contact of the Natchez Pass limestone and overlying Gra
ss Valley argillites and phyllites. In the mineralized horizon is a cap of silicified argillite overlying a jasperoid breccia. At the South Pit, mineralization is hosted in a laminated carbonate package. Structurally controlled, the zones form flat, near-surface bodies, giving a favourable stripping ratio of 0.9-to-1.
Small pits
Apollo plans to develop the project as a series of smaller pits supplying its own leach pad. Early-stage capital costs are pegged at US$6.9 million.
“It will be a run-of-mine operation, with no crushing,” adds Thomason. “The mineralization has a 10-to-1 silver-to-gold ratio, compared with 1-to-1 at Florida Canyon.”
Production at the project is to start in the fourth quarter of 2004, and annual output is targeted at 80,000-90,000 oz.
Apollo’s total land package covers nearly 13 km of the promising structural break, so the company is aggressively pursuing other targets that will keep production levels stable.
Said Orr: “We have about four years of production left at Florida Canyon, and five or six at Standard — even longer if the sulphide ore looks attractive.”
Despite being busy on the Florida Canyon property, Apollo is looking to do some work on two early-stage projects in Nevada. Situated 48 km north of Florida Canyon, the Pirate gold prospect has seen limited production of near-surface, high-grade gold shoots. The company plans to explore the project for a larger mineralized system at depth. Moving 48 km southwest, the Nugget Field prospect is also a target. The property is mostly covered by gold-bearing alluvial, which has been exploited by placer mining. Apollo plans to use geophysical techniques in hopes of identifying the hard rock source for the placer.
Montana Tunnels
Moving into the eastern part of Montana, the newly minted gold company wasted no time breathing new life into the Montana Tunnels operation.
“We were within a few weeks of closing down operations when Apollo came in with the capital to keep things going,” says the operation’s general manager, Michael Lee.
Apollo has invested some $18 million in waste-stripping, mining equipment and infrastructure, its overall goal being to develop enough reserves to sustain another eight years of production.
The company’s first move was to restore production by removing 18.1 million tonnes of waste from the top of the next 18-27 million tonnes of ore to be mined.
The equipment fleet was augmented by the transfer of four trucks from Florida Canyon and the purchase of two 23-cu.-yd. shovels and three 150-ton trucks. Most of the waste rock is being used as construction material to build up the face of the tailings dam wall, which is needed to provide additional capacity for future production.
In July, the company was forced to speed up its long-term stripping plan when a slippage occurred in the southwestern wall of the pit. The slide will likely have little impact on the overall mine plan, but it accelerated the waste-rock stripping by more than a year at what is known as the L pit. This rescheduling added US$6 million to capital development costs.
The open-pit operation has been in production since 1987, with ore processed through a 14,500-tonne-per-day mill and flotation concentrator. A gravity circuit recovers some 15% of the annual gold production. By the end of 2001, more than 63.5 million tonnes had been milled, resulting in 1.1 million oz. gold.
The lead-zinc concentrates, which, though treated as a byproduct, represent half the value of the ore, have been shipped to various smelters around the world. In 2002, Apollo inked a 5-year deal with
Bull’s-eye target
The potential of the prolific Montana mining district was first indicated in 1863, when prospectors found silver-rich veins in the Boulder batholith. The first report on the property was published in 1953: a U.S. Geological Survey party evaluated two small tunnels on the property, called Montana Tunnels. The team subsequently ran a geochemical soil survey over the property at 150-metre spacings, resulting in high zinc, lead, copper and manganese values over top of the current pit.
“It’s a bull’s-eye target that was ignored until 1972, when a few holes were put into it,” added Lee, “and they got basically the same grades we get today.”
Over the next 10 years, seven major gold companies worked the property, but, as Lee explained, “they all walked away because the mineralization is all sulphide, and judging only by the gold-silver values, the deposit didn’t make economic sense.”
Finally, in the 1980s, a milling plan was proposed, which considered the benefits of the zinc-lead credits. The results prompted Pegasus to capitalize the project, and production began in 1987. The average grade of ore produced since then has been constant: 0.58 gram gold and 10.9 grams silver per tonne, plus 0.22% lead and 0.6% zinc. The soft friable nature of the mineralized body, along with good recovery rates, made the operation profitable until all the available ore was mined out in April 2002.
The deposit is hosted in the central portion of the Montana Tunnels diatreme, the throat of an extinct 30-million-year-old volcano. The mineralized zone, dubbed the Core zone, consists of a matrix of tuffaceous quartz latite that hosts sub-angular-to-rounded fragments of earlier volcanic rocks. The zone shows a notable lack of silicification and is intensely sericitized.
“It looks like broken concrete, with gold in a stockwork of sulphide veinlets and disseminations in one area of the diatreme,” said Lee.
The sulphide minerals are sphalerite and galena, with gold occurring in native form or as inclusions in the base metal sulphides and pyrite.
The Core zone ranges from 60 to 300 metres wide and 430 to 600 metres long. Despite some post-mineralized faulting, the deposit remains as a circular-pipe-like zone striking northeast 30 and dipping steeply to the northwest.
So far, the mineralization extends to a depth of more than 600 metres, with exploration holes drilled as much as 260 metres below the bottom of the K14 pit, still in ore.
“We starting getting our costs lower and lower as the years went by and all the drilling ended in ore,” said Chief Geologist Jeff Levell. “So it was a no-brainer; we need to go deeper because the deposit does not end.”
A modest drilling program in 2002 expanded the reserves to 17.2 million tonnes grading 0.47 gram gold for 291,600 oz. gold, compared with 50,600 oz. gold at the end of 2001. The bulk of the reserves are in the new pit expansion known as K14B.
With prestripping of the pit walls under way, the operation added 6,687 development ounces and 13,400 gold-equivlent ounces in the fourth quarter of 2002; for all of 2002, it added 33,344 oz. at a total cash cost of US$178 per oz. Full-scale milling is to begin in April, with annual output adding 70,000-80,000 oz. to the company’s gold coffers, plus silver, lead and zinc credits.
As part of the Pegasus deal, Apollo also picked up the nearby Diamond Hill gold mine. Situated west of Montana Tunnels, the underground operation went into production in 1996 and cranked out 60,000 oz. gold per year until it was shut down in 2001 as a result of low gold prices. The project is fully permitted but requires substantially higher gold prices and additional reserves to resume operations.
With a launching pad for steady production in place, the fledgling company’s next move came in September 2002. Sticking to a philosophy of picking up advanced projects in well-known North American gold camps, Apollo inked a deal to acquire the Glimmer mine property in the Porcupine district, 80 km east of Timmins, Ont. The price tag for the property was $3.2 million and 2.1 million shares, with an additional $3 million payment due on startup.
Glimmer began producing in early 1998 but was closed in May 2001 after producing 230,000 oz. gold from material grading 7.5-12 grams gold. At the time, the resource totaled 430,000 oz. gold.
“Our model for Black Fox is a 300-tonne-per-day mine producing 100,
000 ounces a year from grades of seven to eight grams gold per tonne,” says Wade Bristol, Apollo’s vice-president of corporate development.
Black Fox
Intending to prove-up a small open-pit operation before going underground on the high-grade veins, Apollo has launched a 28,000-metre drill program over the property, now known as Black Fox. The 2-pronged program is designed to test the potential for both open-pit mining above and along strike of the old Glimmer mine and new zones of mineralization downdip and along strike.
So far the results are in for 14 of the drill holes, and 10 of those intersected significant mineralization. The highest-grade results came from hole 24, which yielded 363.8 grams gold over 3.3 metres from 86 metres down-hole.
Holes 5 and 27, drilled 300 metres apart, returned 26.5 grams gold over 9.9 metres at a down-hole depth of 443 metres, and 32.64 grams gold over 2.9 metres at 350 metres down-hole. Hole 27 also returned 3.4 metres grading 42.4 grams gold at 296 metres down-hole.
Other highlights include the following:
q Hole 1 — 6.7 metres grading 7.7 grams gold from 126.6 metres;
q Hole 2 — 2.6 metres grading 14.26 grams gold from 94 metres;
q Hole 6 — 1.1 metres grading 13.99 grams gold from 275.8 metres;
q Hole 7 — 1 metre grading 6.38 grams gold from 432.9 metres;
q Hole 10 — 1.5 metres grading 5.6 grams gold from 289.4 metres;
q Hole 11 — 1 metre grading 59.9 grams gold from 342.4 metres;
q Hole 13 — 1.7 metres grading 14.19 grams gold from 87.9 metres.
“It’s still early, but the drilling is going well,” said Bristol. “We are finding good grades near surface and good grades at depth.”
At last count, 25 holes had been completed, with results pending on the remaining 11 holes.
Apollo has 46.2 million shares outstanding, 60.49 million shares fully diluted, and US$10 million in cash.
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