Boddington gets the green light

On care and maintenance since the last of the oxide reserves were mined out at the end of 2001, the Boddington gold mine in Australia received the go-ahead earlier this year for a US$1.35-US$1.5 billion expansion.

“We are very pleased to be building this project in partnership with AngloGold Ashanti,” stated Wayne Murdy, chairman and CEO of Newmont Mining (NMC-T, NEM-N), on announcing the joint approval of the Boddington project in February. “With total gold reserves of over 11 million ounces and significant additional mineralized material not in reserves, Boddington represents one of the world’s largest undeveloped gold projects. We believe the exploration opportunities at Boddington hold the potential to ultimately double reserves.”

The Boddington gold project is 129 km southeast of Perth in the southwest of Western Australia. It’s in the northeastern Jarrah State Forest, 12 km from the town of Boddington.

The project is held 66.7% by Newmont Mining and 33.3% by AngloGold Ashanti (AU-N). Earlier this year, Newmont bought out Newcrest Mining’s (NCMGF-O, NCM-A) 22.2% share of the project for A$225 million ($193 million). AngloGold Ashanti acquired its interest in the Boddington mine through its takeover of Australian-based Acacia Resources in 1999.

A feasibility study update was completed at the end of 2005 (the original study was done in 2000) and Newmont and AngloGold subsequently approved development of the project.

The Boddington gold mine was operated by Worsley Alumina prior to its closure at the end of 2001, when its near-surface oxide reserves were depleted. The oxide operation produced a little more than 4.7 million oz. over a mine life of 15 years from a lateritic deposit. Boddington has been managed since September 2002 by the Boddington Gold Mine (BGM) Management Co. under the direction of the joint-venture partners.

The BGM expansion project relates to the mining and processing of a huge basement resource beneath the oxide pits in two large open-pit cuts at a daily mining rate of 200,000-250,000 tonnes. This basement resource is hosted predominantly by andesitic volcanics and diorites, and contains both gold and copper mineralization that forms the basis of the recently completed updated feasibility study.

New processing plant

It requires the construction of a new processing plant, which will include a three-stage crushing circuit, single-stage grinding, copper-gold flotation and gold-leaching of the flotation residue by the carbon- in-leach (CIL) process to produce gold dor. The copper concentrate will contain about 15% to 20% copper, as well as iron, sulphur and silica. The concentrate will be transported to either the Bunbury or Kwinana ports for overseas refining.

The original feasibility study in 2000 was based on throughput of up to 29 million tonnes per year. The updated plan calls for an average milling rate of 35 million tonnes per year, with a design capacity of up to 41 million tonnes.

The updated study increases the economic viability of the project, particularly in relation to energy consumption and potential water discharge. The project as defined by the 2000 feasibility study received environmental approval in June 2002. The expansion project has a similar environmental footprint to the 2002 study and is in the same location as the existing Boddington mine. Final environmental approval, known as the Section 45C, was received earlier this year.

A 1,000-person accommodation complex will house the bulk of the construction workers, with occupancy to be phased down after construction. The mine will have a permanent workforce of 650. Construction has started and is expected take 2.5 years to finish, with initial production expected in late 2008 or early 2009. Engineering, procurement and construction management services are being provided by a joint venture between engineering companies Aker Kvaerner and Clough Murray and Roberts.

Proven and probable ore reserves are estimated at 444 million tons grading 0.026 oz. per ton (or 0.89 gram per tonne) gold and 0.12% copper, equivalent to 11.5 million oz. gold and 1.08 billion lbs. copper. Recoveries are estimated at 81%-84% gold and 80%-85% copper.

With an expected life of at least 17 years, Boddington will average 815,000 oz. gold and 32,100 tonnes copper production annually, including 1 million oz. per year for the first five years. Cash operating costs are forecast at US$205-220 per oz., net of byproduct credits, in those first five years.

Additional measured and indicated resources are estimated at 159 million tons grading 0.017 oz. (0.58 gram) gold and 0.08% copper, or 2.7 million oz. gold. Another 7.1 million oz. gold is inferred in 357 million tons averaging 0.02 oz. (0.69 gram) gold and 0.09% copper.

Boddington occurs in the Archean-age Saddleback greenstone belt, a fault-bounded sequence of Archean mafic, intermediate and felsic volcanic and intrusive rocks. The belt stretches 26 miles (42 km) long and varies between 3 and 6 miles (4.8 to 9.7 km) wide. The main zone of gold mineralization is “reasonably continuous” over a strike length of 3 miles and a width of about 0.6 mile. The oxide gold zone, which varies from 50 ft. to more than 200 ft. in thickness, forms a semi-continuous blanket in the upper iron-rich laterite, with more erratic distribution in the lower clay and saprolite zones. The “hard-rock” basement under the oxide zone hosts gold and copper mineralization, predominantly in andesitic volcanics and diorite intrusions.

A consortium of companies including Reynolds Australia Alumina, Shell Australia, BHP Minerals and Kobe Alumina Associates formed the Worsley Alumina joint venture in 1980 to mine bauxite and refine alumina from reserves near the town of Boddington. In July of that year, geologists for Reynolds Australia Mines discovered significant gold mineralization in the laterites while following up on a base metal and gold geochemical anomaly, which had been defined in 1979 by the Geological Survey of Western Australia.

Reynolds explored the discovery on behalf of the Worsley joint venture and defined an initial oxide resource of 15 million tonnes grading 2.7 grams gold. Open-pit mining began in 1987 at an initial throughput rate of 3 million tonnes per year. The discovery of isolated areas of supergene copper-gold mineralization in the orebody led to the installation of a separate 250,000-tonne-per-year flotation/leach plant in 1991.

Additional oxide resources outside of the main orebody were being continually discovered, and by 2001, eight satellite pits had been mined out. Between 1989 and 1991, the Boddington mine was the largest gold producer in Australia. By 1996, the mine was operating at a throughput rate of 8.6 million tonnes per year. Over the life of the mine, 105 million tonnes of ore was processed and a further 100 million tonnes of waste extracted.

A small high-grade zone is also present. Steeply dipping quartz veins occur in the oxide and underlying bedrock in the northern part of the orebody. In mid-1992 a decision was made to mine the high-grade ore from underground. Development of the Jarrah decline began that fall and underground mining continued until 1997. The underground operation produced 260,000 oz. from 463,000 tonnes of ore grading 0.55 oz.

The large bedrock resource, known as the Wandoo deposit, was identified in 1994, with feasibility studies conducted between 1995 and 1998. The acquisition of the adjoining Hedges gold mine leases in 1998 resulted in further feasibility studies being conducted from 1999-2001.

“Since acquiring our interest in this project through the acquisition of Normandy in 2002, our team has worked very hard with AngloGold Ashanti to advance and optimize Boddington,” says Newmont’s senior vice-president of operations, Tom Enos. “The result is a long-lived, world-class project that we are now in a position to develop.”

The 2006 exploration budget and reserve development is US$4.5 million and will focus on the discovery of extensions to kno
wn mineralization and upgrading resources into reserves. Exploration efforts in 2005 were directed adjacent to the orebody using geophysical surveys; limited follow-up drilling indicated the potential for mineralized extensions.

Newmont acquired Normandy Mining in February 2002, making it one of Australia’s largest gold producers. Newmont owns 100% of the Tanami operations in the Northern Territory; 50% of the Kalgoorlie operations and 100% of the Jundee mine in Western Australia; 100% of the Pajingo underground mine in Queensland; and 100% of the Martha open-pit mine on the North Island of New Zealand.

Gold sales from the Australia and New Zealand operations declined 15.2% to 1.6 million oz. in 2005, compared with 2004. The production decline was due to lower grades at Tanami and Kalgoorlie, combined with lower throughput at Tanami and Pajingo, plus the sale of the non-core Bronzewing asset. Cash operating costs rose 13.2% to US$317 per oz., primarily caused by lower production, increased labour and commodity costs, and the appreciation of the Australian dollar.

In 2005, Newmont produced 6.5 million oz. to its own account at cash operating costs of US$236 per oz. Forecast gold sales in 2006 were initially expected to total 6.3 million oz. at US$283 per oz., with its Australian and New Zealand mines accounting for 1.5 million oz. at costs of US$337 per oz. For the first half of 2006, the Australian/New Zealand operations sold 649,000 oz. at a cost of U$386 per oz., versus 827,000 oz. at US$316 per oz. in the same period of 2005. Worldwide, the company’s gold sales totalled 2.8 million oz. at US$286 per oz. for the half-year period, compared to 3.1 million oz. at US$239 per oz. in the first six months of 2005.

Newmont has revised its forecast for the year and now expects to sell anywhere from 5.9-6.2 million oz. in 2006 at costs applicable to sales of US$290-US$310 per oz.