Banks Island hits commercial production at Yellow Giant

Banks Island Gold’s (TSXV: BOZ) Yellow Giant gold-silver project is the latest mine to achieve commercial production in northwestern B.C.

The mine is part of the 160 sq. km Yellow Giant property on Banks Island, 110 km south of Prince Rupert in the Skeena mining division. The underground mine reached commercial production on Jan. 1, 2015, almost a year after it started operating.

Getting to this milestone hasn’t been easy. Banks Island faced escalating costs, unexpected mining dilution and working capital shortages. 

While the junior modified its operations and scaled back its mine development to lower mining dilution and preserve working capital, it still needs more funds to meet its operational goals.  

During 2014, the mine ran for 277 days. The company stopped production from mid-June to early August to add grinding and flotation circuits to its dense media separation (DMS) plant. It also had 24 days of limited or no production in November and December due to low working capital and poor weather.

Over the 277 operating days, the company estimates that it mined and processed 59,000 tonnes of run-of-mine feed at a diluted grade of 7.7 grams gold per tonne to generate 14,529 contained oz. gold. Total sales were 11,533 equivalent oz. gold, averaging 42 equivalent oz. gold a day.

Given the unexpected setbacks, the company relaxed the requirements it made last October to determine commercial production at the mine. Originally, it required a consistent mill throughput of 200 tonnes per day, 90% gold recovery and average gold production of 77 equivalent oz. gold per day.

While Yellow Giant largely met the first two requirements, it fell short on production because of the higher-than-expected mining dilution. Considering the mine produced salable product for 277 days amid the setbacks, the junior’s board decided the current production level is sufficient for commercial production.

The company experienced dilution of 255% last year, up from the estimated 40% in a 2013 preliminary economic assessment (PEA). (The company has not completed a feasibility study on the project.) The dilution resulted from caving at the old workings in the Bob zone, which blocked direct access to the mineralization and required a change in mining technique. 

At the Tel zone, the junior did not have smaller underground equipment it needed to mine within the ore zone. It used larger equipment leading to higher dilution at this zone. 

Both incidents pushed the average mined grade to 7.7 grams gold versus a planned average mine grade of 15.8 grams gold.

The PEA also didn’t consider the cost of adding grinding and flotation circuits to the process plant to achieve the planned gold recoveries and sales, leading to an increase in costs.

Banks Island explains that its working capital took a hit due to the extended commissioning period for the plant. On Aug. 31, it reported a working capital deficiency of $8.3 million. While the current deficiency has not been made public, the company says it would need more funds to increase production and achieve its goals.

So far, to counter the mining dilution, the firm has boosted the capacity of pre-concentration through the DMS plant over the past several months. This has increased average throughput for the four months ended Dec. 31 to 282 tonnes per day.

Once it has more funds, the junior plans to boost its inventory of parts and supplies to ensure continuous production and to buy a second fleet of smaller underground mobile equipment to increase production and further reduce dilution.

Banks Island shares closed Jan. 9 flat at 17¢, within a 52-week range of 13.5¢ to 68¢.