Vancouver —
The senior gold producer plans instead to develop the Pueblo Viejo gold project in the Dominican Republic, along with several new deposits near existing operations, including its 60%-owned Cortez Hills project in Nevada.
Cerro Casale, described as one of the world’s largest undeveloped gold and copper deposits, is owned 51% by Placer Dome, 24% by Bema Gold, and 25% by Arizona Star.
Bema discovered the low-grade, high-altitude project in 1995, and with partner Arizona Star, granted Placer rights to earn a majority interest. After confirming a large deposit and completing a feasibility study, Placer estimated that it would cost US$1.65 billion to build a mine at Cerro Casale, up from a previous estimate of US$1 billion.
Annual production was estimated at 975,000 oz. gold and 130,000 tonnes copper at cash costs of US$115 per oz. (net of copper credits) and total costs of US$225 per oz. for at least 18 years.
Placer has since concluded that Cerro Casale “is not financially viable at this time” under the terms of its partnership agreement.
Arizona Star and Bema believe the project can be financed in today’s metal market, and note that Placer Dome used the same metal price assumptions for pit design as were used in a 2000 feasibility study — namely US$350 per oz. gold and US95 per lb. copper.
The minority partners state that “this approach to mine planning has resulted in the loss of 4.3 million oz. gold and 1.1 billion pounds of recoverable copper over the life of the project.”
Arizona Star and Bema plan to take steps — including using all “legal avenues” deemed necessary — to have their senior partner’s interest returned to them. Both companies cite their partnership agreement with Placer, which states that if the project can be financed, the senior partner must arrange most of the necessary funds, or return its 51% interest to its partners. If successful, Bema and Arizona Star would then seek a new senior partner for the project.
Bema and Arizona Star also note that Placer has not completed “key optimization studies” promised to the joint venture. Placer counters that it has presented its partners with a proposal to evaluate “alternative development scenarios” for Cerro Casale.
Bema’s faith in Cerro Casale prompted the company to make an offer to acquire shares of Arizona Star (beyond its 5% equity interest) through a proposed share swap earlier this year. The company subsequently dropped the takeover bid after Arizona Star rebuffed the offer as inadequate.
Arizona Star subsequently released a National Instument 43-101-compliant technical report that cited total measured and indicated resources of 1.1 billion tonnes grading 0.71 gram gold per tonne and 0.26% copper, plus an inferred resource of 171 million tonnes of 0.63 gram gold and 0.33% copper. These resources (inclusive of reserves) were based on a 0.4-gram cutoff grade.
Bema describes Cerro Casale as a “viable project,” and cites its own model, which assumes a US$375-per-oz. gold price for all non-hedged oz. gold, a US$1-per-lb. copper price, and an industry-standard hedging program. The company says this model can support a US$1-billion project loan. Furthermore, the company adds that several mining companies have expressed interest in developing Cerro Casale.
Placer says discussions with its partners are ongoing. Meanwhile, the company is forging ahead with plans to advance Pueblo Viejo, which it describes as a “long-life, low-cost opportunity.”
The proposed mine would produce about 12 million oz. gold over a 20-year mine life, at average cash costs of between US$200 and US$210 per oz. The strip ratio is estimated at less than 1:1, waste-to-ore.
Capital costs are estimated at about US$1 billion.
The proposed 5,000-tonne-per-day operation would treat refractory tonnage by whole-ore pressure oxidation, followed by cyanide leaching, for recoveries of between 89% and 94% (depending on rock type).
Production in the initial six years is expected to average 800,000 oz. gold annually at cash costs of between US$175 and US$185 per oz.
Before construction begins, Placer Dome must file a project notice with the government and obtain necessary permits for the mine and for a US$350-million, 140-megawatt power plant to support the mine.
Pueblo Viejo has proven and probable reserves of 130 million tonnes grading 3.2 grams gold, or about 13.4 million contained ounces. Measured and indicated resources stand at 34 million tonnes of 2.3 grams gold, or about 2.46 million contained ounces.
Placer Dome says Pueblo Viejo and the Cortez Hills gold project in Nevada would be funded from current cash resources and internal cash flow, without additional equity financing.
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