Amax developing Fort Knox project

Now that the board of directors of Amax Gold (NYSE) has flashed a green light for the Fort Knox gold project, negotiations for financing are under way.

Situated 15 miles northeast of Fairbanks, Alaska, the property contains a low-grade, porphyry-style deposit with a proven and probable reserve of 174 million tons grading 0.024 oz. gold per ton at a stripping ratio of 1.05-to-1. The deposit remains open at depth.

Amax acquired the Fort Knox project in January, 1992, through an acquisition of Fairbanks Gold, now a wholly owned subsidiary of Amax.

The capital cost of establishing an open-pit mining and milling operation is estimated at US$250 million. Milling of 36,000 tons per day is expected to produce 350,000 oz. per year at a projected cash cost of US$215 per oz. over the first five years. During the first 12 years of mine life, output is expected to exceed 300,000 oz. per year at a cost of US$245 per oz. Metallurgical testing indicates the ore is free-milling, with a high recovery rate.

All necessary permitting is in place, and Morrison & Knudson, the appointed construction contractor, has begun tendering bids. Construction of a 29-mile power line to the minesite will begin soon.

For 1994, Amax reports a net loss of US$37.3 million and an average operating cost of US$340 per oz., compared with a net loss, in 1993, of US$104.2 million and a cash operating cost of US$388 per oz.

A continuing decline in operating costs over each quarter in 1994 is attributed to a significant increase in production at the Guanaco mine in Chile. Production increased to 57,675 oz. in 1994 from 29,862 oz. in 1993, while operating costs declined to US$463 per oz. for the fourth quarter of 1994 from US$668 per oz. in the same quarter of the previous year. Costs are expected to decline through 1995 as Guanaco achieves throughput capacity. Amax produced 240,885 oz. gold in 1994 (an increase of 14.2% over 1993), aided in part by increased production from the Hayden Hill mine in California, which underwent a successful transition to a stand-alone, heap-leach operation.

Improved ore grade at the Sleeper mine added to the overall gold production, as did the Wind Mountain mine with continued profitable gold recoveries. Both mines are in Nevada.

Construction is under way on the Refugio gold property in northern Chile, which is a 50-50 joint venture with Bema Gold (TSE). The project is fully funded and on schedule for production by early 1996. An estimated 112 million tons of minable reserves grading 0.03 oz. will provide 233,000 oz. per year over a 9.5-year life. The stripping ratio is estimated at 1-to-1.