Tower Hill up on Livengood development options (September 14, 2010)

Vancouver – International Tower Hill Mines (ITH-T) is keeping very busy at Livengood: the company has six drill turning at the Alaskan gold property and just added to the project’s recent preliminary economic assessment (PEA) with two other development options.

Tower Hill is investigating several options for developing its Money Knob deposit, which is home to almost 20 million oz. gold in indicated and inferred resources. The August PEA looked at starting out with a 100,000 tonne-pre-day heap leach operation, then reducing the heap leach throughput to 35,000 tonnes daily in year four when a mill and flotation facility would come on line. That scenario produced a net present value (NPV) of US$813 million and generated a 15.4% internal rate of return (IRR).

Now Tower Hill has added two other potential development scenarios for Livengood. The first is a heap-leach only mine, which is a low capex option to maximize cash flow. The second is similar to the initial PEA, with the mine starting out as a heap leach operation and adding a mill and flotation circuit several years in, but this time the scale is much bigger.

In the heap-leach only scenario, Tower Hill investigated mining 100,000 tonnes of ore daily from a pit with a strip ratio of 1.1 to 1. For just over seven years, the oxide resource at Livengood would produce 513,000 oz. gold annually, at an operating cost of US$486 per oz. Gold recovery in the heap leach would average 71%.

To build the heap leach operation would cost US$638 million. Using a gold price of US$950 per oz., this development option gives the project a NPV of US$579 million, using a 5% discount rate, and should generate a 26.9% IRR.

“The heap-leach only option is emerging as a highly attractive initial stage for ITH because it is a simpler project from the permitting, process, construction, and operational standpoints,” said Jeffrey Pontius, Tower Hill’s president and CEO, in a statement. “This alternative also has much lower capex and operating costs, which produces a compelling internal rate of return, NPV, and annual gold production.”

The second new development plan looked at expanding the sulphide milling circuit to enhance the project’s returns through economies of scale and decreased mine life. The large-scale combined project would involve a 100,000-tonne-per-day heap leach operation for six years, declining to 89,000 tonnes daily in year seven. In year four, the sulphide milling and flotation facilities would start processing 100,000 tonnes of ore daily as well.

The combined operation would produce an average of 833,000 oz. gold annually, over a 12.6-year mine life. Including the milling circuit improves the expected recovery to 78%. It would cost Tower Hill US$534 to produce each ounce of gold. But it would cost the company US$625 million to get the initial heap leach running and then another US$1.03 billion to add the milling and flotation circuits. The combined operation gives the project a NPV of US$1.1 billion and generates an 18.5% IRR.

Pontius says the large mill and heap leach option “reflects overall project value”.

Now, with several development options on the table Tower Hill says it will continue with optimization studies while starting on a prefeasibility study.

Tower Hill also announced drill results from the latest 17 holes in its 50,000-metre summer drill campaign. The program includes significant infill drilling, aimed at upgrading the majority of the resource to measured and indicated levels while also expanding the deposit at depth and better defining its higher-grade portions. The company is also probing the new Olive zone and testing several district-scale targets.

Hole 405 cut 6.1 metres grading 18.2 grams gold per tonne, confirming the presence of a trend of mineralization grading better than 6 grams gold that extends for almost 500 metres. The zone is less than 50 metres below surface, making it a key early mining target. Other intercepts from the high-grade zone include 4.6 metres of 7.13 grams gold and 21.3 metres of 6.28 grams gold.

And at the Olive zone, which sits just southeast of the deposit, hole 391 returned 45.7 metres grading 1.1 grams gold while hole 396 hit 13.7 metres of 2.1 grams gold. Mineralization at Olive is hosted in the same units as at Money Knob but Tower Hill is particularly excited about Olive because the area does not carry a gold-in-soil anomaly. The presence of gold in rock without a soil anomaly opens up a large area for exploration to the south of the deposit, which will be one of Tower Hill’s exploration foci in the fall.

The latest resource update for Money Knob pegged indicated resources at 789 million tonnes grading 0.62 gram gold and inferred resources at 229 million tonnes averaging 0.55 gram gold, using a cut-off grade of 0.3 gram gold, for 19.7 million contained ounces of gold. Raising the cut-off grade to 0.7 gram gold highlights the higher-grade core of the deposit, which is home to 202 million indicated tonnes grading 1.07 grams gold plus 40 million inferred tonnes averaging 1.06 grams gold, for 8.3 million contained ounces.

Mineralization at Livengood remains open in several directions, particularly to the west, southeast, and at depth.

The Livengood project lies 110 road kilometers north of Fairbanks, Alaska, along the paved Elliot Highway. Tower Hill owns 100% of the 145-sq. km land package, which consists of fee land leased from the Alaska Mental Health Trust, several smaller private mineral leases, and 115 Alaska state mining claims.

Tower Hill investors were pleased with the company’s PEA optimization efforts and lifted the company’s share price 37c or 6% to reach $6.44. The company has a 52-week trading range of $4.12 to $8.35 and has 68 million shares outstanding.