Aurizon plans production from Casa Berardi

The Casa Berardi gold mine in northwestern Quebec emerged from a long tunnel into the sunshine this week, with the release of a positive feasibility study by operator Aurizon Mines (ARZ-T).

The study concludes that reopening the mine, 95 km north of La Sarre, is economic at gold prices down to US$275 per oz. It proposes a plan under which the mine would produce an average 200,000 oz. annually over a mine life of 7.5 years, milling 2,800 tonnes daily. Capital costs, which include an expansion of the existing 2,000-tonne-per-day mill and sinking a new shaft on the West Zone, are estimated at $121 million.

Unit cash production costs are estimated at US$145 and sustaining capital costs, at US$22. Aurizon estimates the total cost of production to fall somewhere near US$240 per oz.

The positive feasibility results mark the end of a turnaround for the Casa Berardi operation, which, in 1998, had looked like a potential casualty of the low gold price. TVX Gold (TVX-T) had put Casa Berardi on the block in early 1997, announcing that the mine would close if a buyer could not be found, and 40% partner Golden Knight Resources (gkr-t) had sold TVX its interests for $1, plus the assumption of all closure liabilities.

Aurizon bought the mine in 1998 for $2 million, plus $4 million payable either when the mine returns to commercial production or on the nominal third anniversary of the deal in August 2001. TVX retains a net smelter return royalty at a rate that varies between 2% and 4%, according to the price of gold, with a total value capped at $10 million.

Aurizon, which inherited a resource of 3.8 million tonnes grading 6.7 grams gold per tonne, immediately started drilling to block out more resources at the mine, especially in the new West Mine area. The program was an unalloyed success, expanding the resource in all categories to 9.2 million tonnes grading 7.8 grams. Of that, 6.9 million tonnes of measured and indicated resources graded an average 7.4 grams per tonne.

The feasibility study based the mine plan on the measured and indicated resource, diluted to a grade of 6.7 grams per tonne.

The West Mine, currently accessible only by a 5-km drift from the existing East Mine shaft, would get a 1,031-metre shaft capable of hoisting 3,920 tonnes daily. The shaft would be sunk rather than raised from existing workings. With an eye to depth potential in the West Mine’s 113 North and 118 zones, new workings, including the shaft, have all been designed for later extension.

Aurizon plans to carry out more drilling on extensions of these two southeasterly plunging zones, as well as other targets in the immediate area. Inferred resources will also receive further drilling so that they may be upgraded to the measured and indicated categories, and the company also plans surface work for the rest of the 140-sq.-km Casa Berardi property.

At a mine that had gained a reputation for poor ground conditions, including cave-ins of crown pillars, Aurizon plans to use long-hole open stoping and backfilling with cement paste. Stopes are limited to a 15-metre strike length and a 20-to-25-metre height. The two zones carrying most of the tonnage have average widths of 9 metres (the 113 zone) and 20 metres (the Lower Inter zone).

The Casa Berardi mill will undergo minor modifications and be equipped with a gravity circuit. Metallurgical tests have shown recoveries of 92% from models of the new mill flowsheet. Grinding capacity, which was rated at 2,400 tonnes per day when production was suspended, can be edged up to 2,800 tonnes by sending a coarser grind to the gravity circuit, and the gravity tails to the existing carbon-in-leach plant.

Aurizon will need to modify existing mining and milling permits, which currently limit the West mine to 470 tonnes per day and the mill to 600,000 tonnes per year. The company expects to adhere to a 30-month preproduction schedule.

Financial analyses on the project (using a 5% discount rate) show pretax internal rates of return ranging from 11% (at US$275 gold) to 20.4% (at US$325). After-tax IRRs range from 8.6% to 15.8%, and the company says that adding enough resources for another year of mine life nudges the IRRs a further 2%.

Aurizon’s books show it coming off a record production year with earnings of $3.1 million (8 per share) on revenue of $27.7 million. The company’s share of gold production from the two mines in which it has an interest rose to 60,162 oz. from 56,291 oz. in 1998, when Aurizon made $454,741 on revenue of $24.9 million.

At Sleeping Giant, where Aurizon shares a 50% interest with operator Cambior (CBJ-T), mill throughput and total production were slightly higher than in 1998, while millhead grades stayed steady at 12 grams per tonne. At Beaufor, where Aurizon operates on behalf of 50% owner Louvem Mines (LOV-M), milling rates were up 17% and the head grade fell to 8 grams from 8.6 grams, yielding a 9% increase in gold production.