Sutton tables feasibility for Bulyanhulu

The final stamp of economic approval has been given to Sutton Resources’ (STT-T) 85%-held Bulyanhulu gold project in Tanzania.

The final feasibility study for Bulyanhulu was prepared by Kilborn Engineering Pacific for Kahama Mining, Sutton’s Tanzanian subsidiary. The study envisions a 2,500-tonne-per-day underground mine producing 300,000 oz.

gold per year at a total cash cost (including smelting, refining, transportation and royalty costs) of US$163 per oz.

The project’s price tag has been estimated at about US$211 million, which is in addition to the US$63 million expected to be incurred by the end of August. An additional US$42 million will be spent on further development during the first three years of the mine’s life, however, these costs are expected to come from the mine’s cash flow.

Once in production, Bulyanhulu will be the largest gold mine in East Africa.

The Tanzanian government is entitled to 15% of the mine’s after-tax profits.

The feasibility study assumed a long-term gold price of US$350 per oz. The payback period, on a project equity basis (excluding the US$63 million in sunk costs), is estimated at 4.6 years.

Total capital costs were greater than the originally forecast US$185 million. The overrun was pinned on several factors:

* an approximate US$10-million increase in underground pre-production development costs;

* an additional US$10 million for a cyanide recovery plant added to the back end of the milling circuit; and

* Sutton committing to a US$7-million training program for Tanzanian employees.

Proven and probable reserves, taking into account mine extraction and dilution rates, have been pegged at 10 million tonnes grading 11.7 grams gold per tonne (3.7 million oz. gold), which is sufficient for a 11.3-year mine life.

The property contains an additional resource of 5.9 million tonnes grading 13 grams gold (2.47 million contained ounces).

Sutton plans to continue delineating reserves once deeper underground access is made available. Deeper access will also enable the company to further define the Reef 1 deposit, which remains open. The company suggests that mine life could be increased to 18 years upon conversion of these resources into reserves.

By using a 3-stage circuit, Sutton expects to achieve a 92.5% gold recovery: 42% recovery through centrifugal rotary concentrators, 43% through regrinding the bulk sulphide floatation concentrate and an additional 7.5% by way of a carbon-in-leach circuit that will treat flotation tailings.

The Bulyanhulu deposit consists of a number of steeply dipping quartz-sulphide vein (reef) systems. Most of the calculated resource is contained within Reef 1, whereas Reef 0, a short splay structure off of Reef 1, contains about 190,000 oz. gold. Reef 2 is situated about 500 metres northeast of Reef 1 and consists of a series of en echelon vein structures hosted within sheared intermediate volcanics. Both Reef 1 and 2 are open along strike and at depth.

About 85% of the deposit will be mined by mechanized longhole methods and the remaining 15% will be mined by shrinkage stoping.

Currently, Sutton has four drills spinning on the property in order to test 11 km of strike length at Reef 1, as well as the Reef 2 structure. The mine is expected to be put into commission before the end of 1999.