U.S. REPORT Positive study for Fairbanks on Fort Knox

The prefeasibility study on the Fort Knox property indicates the deposit can be mined profitably as a large scale open pit operation. The project is about 15 miles northeast of Fairbanks, Alaska, and is 51% owned by Fairbanks Gold (TSE).

The study identified two alternative projects. The base case project outlined a minable reserve of 135.7 million tons grading 0.030 oz. gold per ton, based on a cutoff grade of 0.020 oz. gold per ton.

During the initial 11 years, the operation would mine an average of 35,700 tons of ore per day at a strip ratio of 1.96-to-1. During the period, about 62.8 million tons of low-grade material will be stockpiled for processing in years 11 through 16, giving the project an overall strip ratio of 1.02-to-1.

Gold production for the first three years is projected to total over one million ounces at a cash cost of US$145 per oz. The feasibility calls for mechanical upgrading by pebble reject followed by conventional cyanide leaching.

Gold mineralization in the deposit occurs as fine gold within and along the margins of quartz veinlets in a harder and essentially barren granodiorite host. The pebble reject process involves rejecting a portion of the secondary grinding feed based on size. In theory, a certain size fraction will tend to be the granodiorite which is harder and less friable than the quartz.

Preliminary tests have shown the feed to the secondary grinding circuit can be upgraded by rejecting material that passes through a screen with 1-inch openings but does not pass through a second screen with quarter-inch openings. As a result, the base case assumes 30% of the material is rejected, upping the feed grade to the leach circuit to about 0.039 oz. gold per ton.

Leach recoveries are estimated at 94-95%, with overall recoveries, taking into account the pebble reject, running at about 83.5%.

Capital cost for the base case scenario is estimated at US$209 million including a US$25.5-million contingency plus working capital requirements totaling US$20.4 million.

Cash cost including financing charges over the mine’s 16-year life is estimated at US$215 per oz. gold produced. The cost is based on a 70-30 debt-equity financing with the debt portion covered by a gold loan at an interest rate of 3%.

The feasibility, completed by consultants Davy McKee, also studied a larger alternative case.

This study was based on a 52,000-ton-per-day operation which would produce more than 400,000 oz. gold per year during its first three years of operation.

Minable reserves in the alternative case are 220.4 million tons grading 0.024 oz. gold with an overall strip ratio of 0.82- to-1.

Operating costs drop to US$3.83 per ton from US$4.85 per ton in the base case with the production cost (including financing) dropping to an average of US$204 per oz. over the life of the project.

Fairbanks plans to spend about US$3.36 million to July 31 to complete pilot metallurgical test work, reserve enhancement, geotechnical drilling and environmental studies. The company hopes to complete a bankable feasibility study by the end of the year.

If the construction period lasts 23 months and financing and permitting can be obtained by spring 1992, President Ian Gray said the mine could be up and running by 1994.

The company has been publicly looking for a buyer for some time and recently hired investment bankers Gordon Capital to act as co-agents with Yorkton Securities, for the solicitation and assessment of offers.

Permitting the project is not expected to be a problem. Gray noted the deposit is environmentally clean and added the Fairbanks area is generally pro-mining and in need of jobs. Chairman Eric Friedland said he expected the prospect for the sale of the company to increase significantly with the completion of the prefeasibility study.