Cliff gold production scheduled for year-end

Gold production from a placer eluvial deposit is scheduled to begin by year-end Cliff Resources says. The company plans to start open pit mining and processing of gold- bearing eluvial accumulations from the Olinghouse deposit this December, James Bates, president and chief executive officer, explained to The Northern Miner.

Located 25 miles northeast of Reno, Nev., the Olinghouse project was purchased by Cliff this year for $1.5 million(US). Following an additional investment of $4.5 million, the company believes the property will be capable of producing 17,000 oz of gold per year during its 2-3-year operating life.

Previous operators of the project ran into several problems which precluded profitability. These included grade control problems which resulted from an inability to selectively mine the deposit. Also, appreciable fine gold was lost to tailings, Mr Bates says. Another burden was a hefty 15% net smelter royalty.

Cliff plans to employ a dragline mining system which will enable selective mining of the pit. This, combined with detailed drill data, will alleviate the grade control problem. Also, a fine gold recovery circuit will be added to the mill which, Mr Bates says, will add 25% to gold recoveries. Finally, the 15% royalty has been renegotiated down to 5%.

A majority of the company’s operating projections are based on data acquired by the previous operators, which included the Kiewit Mining Group. Kiewit mined 1.4 million tons of placer material which yielded 8,376 oz of gold. This translates to a low grade of 0.006 oz gold per ton. Cliff hopes the fine gold recovery will improve this grade by 25% to 0.007 oz gold per ton or 0.012 oz per cu yd of material.

A study completed by Hatch Associates, a consulting engineering group, concludes the project will have an operating cost of $1.64 per cu yd. or $151 per oz of gold. As with any placer operation which is sensitive to grade control, the Hatch study notes that the “project has a short operating life and is sensitive to expected head grade, gold price and operating efficiency of the plant.”

Mr Bates and company chairman Gary Last are extremely bullish on the project’s chances for success. Including the changes planned for the project by Cliff, “the numbers just bounce,” Mr Last says, explaining how the operating parameters change favorably. “The critical element here is the dragline,” Mr Bates explains. “We have a 4-month schedule to put up the dragline and that’s tight.” Cliff plans to purchase a 10-cu-yd dragline from another mining operation in the U.S.

Once established, the company’s main priority will be to ensure that the dragline delivers the required throughput to the mill in order to meet operati ng projections. This requires that 395 tons per hour or 1.7 million cu yd per year be processed. Reserves stand at 5.3 million cu yd, sufficient for a 3-year life. Project payback is expected within 12 months, Mr Last says.

Financing for the project, which will be via a gold bullion loan, is expected to be completed this month, Mr Last says. On a fully diluted basis, the company will have 6.4 million shares outstanding. Currently 4.2 million shares are issued with warrants exercisable by April, 1988, to purchase one common share at 1.25 per share.