Coeur gets a grip on Kensington

Opening a new mine is seldom a smooth process.

But after toughing it out through operational issues and the death of one of its miners, Coeur d’Alene Mines (CDM-T, CDE-N) says its Kensington gold mine in Alaska is back to full production, and ahead of schedule.

The company announced a slowdown at the mine last November so that it could focus on projects aimed at reducing costs and achieving consistent production levels.

The need for improvement was apparent in last year’s operating results — the first full year of production — as the mine turned out 88,420 oz. gold at high cash costs of US$1,088 per oz.

The mine generated operating cash flows of US$36.1 million despite its higher-than-average costs, and Coeur is working to realize the mine’s potential.

Over the last five months Coeur commissioned an underground paste backfill plant, upgraded the mine’s electrical infrastructure and further developed the underground mine. As a result, it gained exposure to more working faces and achieved greater operational flexibility.

The company also accelerated its drill work this year and has finished 8,500 metres of definition drilling so far at the project, which sits 72 km north of Juneau in Alaska.

On the surface, Coeur is busy building a new warehouse, dormitories and a bigger dining facility.

In November Coeur said it would reduce processing rates by 50% to 700 tonnes per day at the mine and get a better handle on inconsistent early results. The company predicted this would take six months, but it finished a month ahead of schedule.

Coeur also said at the time that it was improving safety at the operation.

Safety has special relevance in light of miner Joseph Tagaban’s death last September. Tagaban’s death was connected to a mine blast at the site, and an investigation by the United States Department of Labor’s Mine Safety and Health Administration ruled that the company should have better-trained workers on blast safety.

Coeur says 2012 production totals will be similar to last year’s, but it predicts costs could decline in the second half of the year as production levels increase.

For 2013 and beyond, the mine is slated to turn out between 125,000 and 135,000 oz. gold per year. The higher production totals will help drive down costs — a large component of mine costs are fixed, and they decrease as they generate more revenue.

Kensington has proven and probable reserves of 5.4 million tonnes grading 6.24 grams gold per tonne for 1.3 million oz. gold, and measured and indicated resources of 2.8 million tonnes grading 5.47 grams for 587,000 oz. gold.