TONS OF FORTUNE

The size of the winnings has yet to be determined. But at the very least, the McCoy/Cove gold-silver deposit in north-central Nevada illustrates how a successful exploration program can boost the overall reserves of a company — even when the deposit was thought to have been completely drilled out by previous operators. The numbers speak for themselves: At year-end 1986, Echo Bay’s company-wide reserves stood at 5.6 million oz gold (proven and probable). One year later, the figure had practically doubled to 10.4 million oz gold equivalent.*

*(In light of significant silver reserves at the Cove deposit and a small amount from the company’s Sunnyside mine in southwest Colorado, silver ounces to gold have been converted using a silver-to-gold price ratio of 70:1. This approximates current market values for both metals. The combined gold and silver content is called “gold equivalent.”)

This substantial increase is largely attributable to the 53-million-ton Cove and, to a lesser degree, the 11.8-million-ton McCoy open pits. Gold, grading as low as 0.04 oz per ton, is recovered via heap leaching.

When asked whether the Cove/ McCoy operation might eventually become the cornerstone of the company, Echo Bay President John Zigarlick, Jr. told The Northern Miner Magazine: “There is a reasonable chance, but it would first have to succeed the roughly 195,000 oz gold which the Lupin mine (in the Northwest Territories) produced in 1987.” (See “Lupin Leads the Way” in our August issue.)

Because of their proximity, Cove and McCoy are considered part of the same operation, though they are actually two separate pits. While McCoy’s first gold was poured in April, 1986 (by then-owner Tenneco Minerals Co.), the first ore from the near- surface portion of the Cove deposit went on to the leach pad in January of this year.

“The difference between Cove and McCoy is the difference between a world-class orebody and a nice, little mine,” according to Safety Officer Stephen Jarvis. “Cove is a long-life mine, and quite a bit deeper than McCoy.”

When we dropped by the bustling operation, Echo Bay was mining 75,000 tons of ore and waste per day from the Cove over a 5-day work week. And 10,000 tons per day were being crushed and leached on a continuous basis. Production from McCoy has been put on hold, but only so that mining of the upper portion of the Cove can get fully under way. The ore here, which is amenable to heap leaching, is being mined to generate fast cash flow for ongoing development. (The next phase of mining McCoy involves setting the final limits of the pit.)

Most new operations encounter teething problems during the start-up phase, and McCoy/Cove is no exception. Last month, Echo Bay announced that production costs had inflated to $480 (us) for the second quarter. The main reason for this rise is an increase in the estimated stripping ratio for the Cove deposit to 5.6:1 (5.6 tons of waste rock mined per ton of ore) from 3:1. The 3:1 ratio was based on open-pit mining of the near- surface ore only; the newer figure reflects actual year-to-date experience and assumes a larger pit. Other factors contributing to higher-than-expected production costs include temporarily reduced output and higher costs incurred in the start-up of Cove ore heap leaching.

But assuming there is no change in the 5.6:1 strip ratio in the second half of 1988, production costs should drop to $300 per oz during that period. Moreover, Echo Bay is predicting costs will be “significantly lower” in 1989, when a mill is brought into production and the overall McCoy/Cove production climbs substantially.

Other wrinkles are being ironed out. During the second quarter, Echo Bay began agglomerating the high-clay Cove ore prior to heap leaching by mixing water and small quantities of cement with the ore. This has solved previously encountered percolation problems and recovery of the gold is proceeding smoothly, the company has reported. In addition, about 90,000 tons of higher-grade ore from the Cove deposit have been stockpiled for milling, since milling can recover significantly more ounces of the contained gold and silver than heap leaching. Echo Bay has therefore converted its Manhattan mill, 160 miles away, to process 1,000 tons per day of this ore until the new McCoy/Cove mill is completed in mid-1989.

The Cove and McCoy pits are separated by less than a mile and are embedded in the north-central part of the Fish Creek Mountains. To the immediate southeast stretch hundreds of acres of desert-like open range dotted with lazy cattle. The nearest town, Battle Mountain, lies about 30 miles southwest.

Despite being known as a gold district, McCoy has had little historical production — fewer than 10,000 oz from shallow underground workings during the late 1920s and early ’30s. It wasn’t until the 1960s, when several companies began hunting for porphyry-type copper deposits, that the area started to buzz with exploration activity. In 1977, Houston Minerals, a predecessor of Tenneco, purchased the property from Summa Corp. (owned by the late millionaire Howard Hughes). And in 1985, the holdings passed hands from Consolidated Goldfields back to Tenneco. Following a detailed reappraisal, Tenneco brought the McCoy gold- skarn deposit into production. The decision was based on a geological reserve of 280,000 oz gold.

In October, 1986, immediately before gold prices began a short-term decline, Tenneco sold to Echo Bay three operating mines and all its precious metals exploration properties. The majority of these, including the McCoy mine, were in Nevada. The price? A mere $130 million (us).

Subsequent exploration and development drilling of McCoy has practically doubled reserves. At year-end 1987, proven and probable reserves stood at 521,000 oz gold, including some high-grade underground ore. The average grade of current reserves is 0.045 oz per ton.

Exploration work on the large 100-square-mile claim block which contains the Cove/McCoy operation began in early 1986. By 1987, the Cove deposit had been discovered immediately northeast of McCoy. Current reserves (proven and probable) for Cove are 2.1 million oz gold and 97.7 million oz silver.

“But by year-end, the Cove deposit could potentially have a mineable reserve approaching 4 million oz gold and 250 million oz silver grading 0.061 oz gold equivalent per ton,” says Neil Muncaster, vice-president of exploration.

The Cove orebody consists of an upper, oxidized zone and a lower, sulphide zone (see “Core Shack” in our August issue). The upper zone crops out at the surface and extends to a depth of about 400 ft. Laterally, the upper zone extends over an area measuring 800×1,000 ft. The lower zone extends to a depth of more than 1,500 ft; laterally, it extends over an area at least 1,200×3,000 ft. It is hosted by clastic and carbonate rock of the Panther Canyon Formation and by carbonates of the Favret Formation. During alteration of these units, base metal sulphides and pyrite were introduced into the host rock, filling fractures and partially replacing the host. This resulted in a fine stockwork of sulphide veins. Vein thicknesses range from hairline veinlets to widths greater than two feet. The average thickness is only about 0.1 inches or less, although a considerable range is present, according to geologists.

To date, 442 reverse circulation holes have been drilled for a total of 308,650 ft. In addition, nine core holes have been drilled for a total of 17,163 ft. Rigs are continuing to work round the clock to define the deposit, though all drilling is now concentrated on the lower ore zone. Two conventional circulation drill rigs, two reverse circulation rigs and four core rigs are operating 24 hours a day. So far, Hole 245 has proven the best hole for gold, with a 540-ft intercept of more than a quarter of an ounce.

The company now has holes that have encountered gold and silver as deep as 2,500 ft. “But the mineralization is questionable ore at this depth,” explains General Manager David Naccarati. “It’s either not high enough grade or not sufficient quality.”

According to Muncaster: “Many of the 1,200-ft-deep holes in the centre of the Cove deposit ended in mineral, and recent drilling indicates there is a significant zone below this depth. Whether or not it is ore remains one of our big unanswered questions. More detailed drilling is required.

A study is under way to determine the best mining method for the two deposits. The final plan will likely be a combination of open pit (for the near-surface ore) and underground extraction (for the deeper areas), with a 5,000-ton-per-day mill. Echo Bay will expand the mill to process double that amount if final reserves prove higher than expected. Contractors have already begun pouring concrete, and the operation should reach the 5,000- ton-per-day rate around May, 1989.

Because of the high silver content of the Cove ore, a Merrill-Crowe recovery system will be used. The process involves adding zinc powder to a de-aerated pregnant solution to precipitate the gold. The mill will feature a grin ding section and a flotation/gravity system, combined with an agitation leach and counter-current decantation. The decantation will allow for a clearer solution in the Merrill-Crowe recovery. Crushing and leaching will drop back to 5-7,000 from 10,000 tons per day after milling begins. (In winter, the solution is susceptible to freezing, explained Safety Officer Jarvis. To prevent this problem, a barren solution heater has been installed.)

When we visited the site, Cove/ McCoy’s equipment fleet was crawling about with clankety-clank determination. The fleet consists of the following:

* one Drilltech DK50 and three Ingersoll-Rand DM45E blast-hole drills (both models are capable of drilling 6 3/4-inch holes about 20 ft deep.);

* six Wabco (120- and 140-ton) Haulpaks;

* two Caterpillar 992-C loaders and four Dart 600-C loaders;

* one Caterpillar D8K and three D9N dozers;

* two Caterpillar rubber-tired dozers (models 834 and 824);

* two Caterpillar 16-G graders;

* two Caterpillar 777 water trucks with 12,000-gallon tanks; and

* one Caterpillar 776 truck pulling a 40-ft-long flatbed (for moving heavy equipment).

Much of this equipment (plus about 20 trucks) was purchased second-hand from Pine Point Mines (50%-owned by Cominco Ltd.) which, until recently, operated an open-pit zinc/lead mine and concentrator on the south shore of Great Slave Lake, N.W.T. The equipment had to be disassembled into various components and then trucked south, across 2,790 miles, to the Cove/McCoy minesite. It was reassembled and refurbished there, mainly during the first quarter of 1988. Purchasing used equipment was “considerably cheaper” than had Echo Bay decided to splurge for a brand-new fleet, Naccarati said.

“The minesite has been in a constant state of change over the past year,” said Naccarati, “and it’s not letting up. We’re definitely on a fast- track approach.” In fact, the current whirlwind of activity has created considerable demand for housing in the area. In response, Echo Bay Development (a construction arm of Echo Bay Mines), plans to construct about 150 modular-type homes for employees, in the Battle Mountain area.

Miners are engaged in the first stage of stripping the Cove deposit. South of the Cove pit, core drillers are busy trying to determine a suitable site to collar a shaft.

In April, a decline at the Cove deposit was started towards a particularly high-grade horizon between 600 ft and 700 ft. Meanwhile, a McCoy decline is going down beneath the planned pit. It was begun in January and is now down about 800 ft laterally.

Already constructed is a 10,000-ton- per-day crusher utilizing a jaw crusher for the primary ore, with secondary and tertiary cone crushers. Also completed are a carbon filtration plant and about half the shop/office complex.

Two leach pads are being used: A new, expandable pad now measures one million square feet and is capable of handling about three million tons of ore. The other pad measures about two million square feet and is capable of handling six million tons. It has been used since 1986.

About 240 Echo Bay workers were on-site, compared with 35 at the same time last year, according to Jarvis. An air of almost frenzied enthusiasm was evident during our visit. Which is understandable, considering the golden potential of this recent addition to the heap leach pantheon.