Crystallex gets Cristinas numbers (September 22, 2003)

A feasibility study on the Las Cristinas gold project in Bolivar state, Venezuela, has concluded that a 300,000-oz.-per-year operation would be economic at present gold prices, and project operator Crystallex International (KRY-T) plans to award a project management contract in early 2004.

The study, performed by SNC Lavalin (SNC-T), was premised on a 20,000-tonne-per-day open pit with a conventional mill. The study assumed a gold price of US$325 per oz.

The pits were designed around a minable reserve of 246 million tonnes grading 1.3 grams gold per tonne, part of a resource of 439 million tonnes grading 1.1 grams gold. The stripping ratio was 1.34-to-1, and at a nominal mill throughput of 7.3 million tonnes per year, the mine would have a life of 34 years.

An earlier feasibility study by former owner Placer Dome (PDG-T) used a reserve of 323 million tonnes grading 1.1 grams gold and 0.14% copper, but Crystallex does not mention any copper recovery in the present plan.

The mine plan resembles the Placer design in having two pits, the larger Conductora and smaller Mesones. Conductora would exploit a reserve of 224 million tonnes at an average grade of 1.3 grams gold, while Mesones would exploit a 22-million-tonne reserve grading 1.2 grams.

The Cristinas mineralization occurs in both weathered saprolite and fresh rock, and the feasibility study assumed the saprolite would be ripped and trucked, while the bedrock would be blasted. The study assumed the pits would be mined by a contractor.

The conceptual mill would use a semi-autogenous grinding circuit with a secondary ball mill, followed by gravity recovery and a carbon-in-leach plant. The feasibility study assumed a 20,000-tonne-per-day milling rate, but the cost estimates allowed for expansion to 40,000 tonnes per day.

Metallurgical tests by SGS Lakefield Research and researchers at McGill University concluded that a blend of oxidized and transitional saprolitic material, carbonate-leached bedrock and fresh bedrock would respond to gravity concentration and cyanide leaching with carbon-in-leach recovery. The average recovery rate was 89%.

The conceptual design also assumed a conventional saprolite tailings dam.

SNC Lavalin estimated capital costs at US$243 million, plus US$39 million in value-added tax recovered during the first 30 months of operation. The mill was the major cost, ringing in at US$80 million, with US$27 million for the mine, US$24 million for the tailings dam and pond, and US$28 million for infrastructure.

The project is close to a paved highway and is 6 km from a substation on a power line from hydroelectric plants on the Orinoco River.

Owner’s costs come to US$10 million, and another US$72 million is reserved for indirect costs including contingencies.

The study put mining costs at US$2.94 per tonne, milling costs at US$3.38 per tonne, and general and administrative costs at 38 per tonne. These translate to US$182 per oz. in cash production costs. Royalties — a 3% direct national royalty and a sliding-scale royalty payable to Corporacion Venezolana de Guayana (CVG) — would add US$14 per oz. to the cash cost.

The mine would have a net present value of US$239 million, before taxes, at a gold price of US$325 per oz. and a discount rate of 5%. That increases to US$327 million at a gold price of US$350 and to US$421 million at a price of US$375. Payback in the base (US$325) case is 4.7 years, falling to 4.1 years at US$350 gold and 3.7 years at US$375.

At Venezuelan corporate income tax rates of 34%, the base-case net present value is US$140 million. At US$350 gold, it rises to US$198 million, and at US$375 gold, US$260 million.

The Las Cristinas property dispute, which now consists of actions between CVG and Vancouver-based junior Vannessa Ventures (VVV-V), has not yet been resolved. Vannessa is seeking a nullification of CVG’s cancellation of the earlier development contract for Las Cristinas, under which Placer Dome, and subsequently Vannessa, were 70% owners of Minera Las Cristinas (Minca), a joint venture company formed to develop the Las Cristinas gold resource.

In a June decision, the Venzuelan Supreme Court ordered an inspection of the Las Cristinas property to determine whether the Crystallex operations were potentially damaging to the interests of Vannessa. The Attorney General’s Office is reviewing the court decision and the inspection is scheduled to take place after that review is complete.

Vannessa charges that local artisanal miners have resumed mining on the property and are high-grading the surface gold deposits.

Crystallex, for its part, points to a June report by the Permanent Comptroller Committee of the Venezuelan National Assembly, which called for the investigations into CVG’s cancellation of the contract to be terminated.