Study gives thumbs-up for Eskay Creek mill

Construction of a gravity and flotation mill would add 30,000 oz.

gold-equivalent annually to the the Eskay Creek mine in northwestern British Columbia, according to a feasibility study.

“The milling project has a payback of one year and will significantly increase the long-term profitability of the mine,” said Ronald Parker, president of owner Prime Resources Group (PRU-T). “It is an excellent project. Sixty-five per cent of our production costs are related to transportation and smelting. This project will reduce those costs materially by producing a high-grade gravity and flotation concentrate, thereby allowing us to process lower-grade ore while maintaining our low cash costs per ounce.” Since startup in 1995, the high-grade mine has operated without a mill, shipping its ore directly from the property to smelters in Quebec, Japan and the U.S.

In 1996, Eskay Creek produced 211,276 oz. gold and 12.05 million oz. silver, which equates to 372,279 oz. gold-equivalent at a cash cost of US$170 per oz.

gold-equivalent.

Prime began reviewing processing options after preliminary metallurgical testwork on the NEX and 109 zones indicated the ore was amenable to gravity and flotation processing. Though the zones have lower gold and silver grades than the main 21B zone, they contain significantly reduced levels of deleterious elements, such as mercury and antimony.

The estimated capital cost of constructing a 165-ton-per-day mill is $17 million.

Production from the mill circuit is projected at 70,000 oz. gold-equivalent annually over an expected life of nine years, based on current reserves and geological resources. Cash costs are projected at US$175 per oz.

gold-equivalent, including third-party smelter charges.

Startup of the mill will require an increase in the daily mining rate to 440 tons from the current 330 tons. Direct shipments to smelters will be reduced to 275 tons per day. The mining rate will balance direct shipments and mill production throughout the mine’s remaining life.

More than 381,000 tons of proven and probable reserves grading 0.9 oz. gold and 36 oz. silver, plus 147,000 tons of geological resource, have been identified as amenable to gravity and flotation separation.

Metallurgical tests indicate a 23% recovery of the precious metals by gravity concentration and a 64% recovery by a flotation concentrate, after third-party smelter recoveries, for an overall recovery rate of 87%.

Final engineering and design of the mill expansion are in progress, as is permitting. The mill will be built next to the existing crusher building at the mine site. The project is expected to add 22 permanent jobs to the 120 that already exist.

Construction is expected to last five months, though Prime’s ability to complete the project this year is contingent upon regulatory approval and permitting.

As of Jan. 1, proven and probable reserves at Eskay Creek stood at 1.4 million tons grading 1.73 oz. gold and 79.3 oz. silver per ton, equivalent to 2.4 million oz. gold and 110.8 million oz. silver. An additional geological resource is estimated at 278,000 tons grading 0.54 oz. gold and 31.6 oz.

silver.

San Francisco-based Homestake Mining (HM-N) owns a 50.6% share of Prime.