Echo Bay to launch two new gold mines

Echo Bay Mines (ECO-T) has announced production plans for two new gold mines — one in Canada, the other in Mexico.

Over the next two years, the major plans to contribute a total of US$167 million toward development of the Aquarius gold project, near Timmins, Ont., and the Paredones Amarillos project in Baja California.

The two mines are expected to add 240,000-250,000 oz. to Echo Bay’s total annual gold production, which currently stands at 725,000-750,000 oz. Startup for both is slated for late 1998, with full-scale production projected for the following year.

The 6,987-acre Aquarius project, wholly owned by Echo Bay, is expected to crank out 166,000 oz. annually over an open-pit mine life of seven years.

A mill, to be constructed on site, will be capable of processing 7,500 tonnes per day, with a 95% recovery rate projected for the gravity and carbon-in-pulp (CIP) circuits.

Proven and probable reserves at Aquarius stand at 19.7 million tonnes grading 2 grams gold per tonne (equivalent to 1.3 million contained ounces), based on a 0.45-gram cutoff and a gold price of US$375 per oz.

Cash costs for the mine are expected to total US$218 per oz., whereas production costs are projected at US$316 per oz. Payback is anticipated in 53 months, for an internal rate of return of 12%.

Meanwhile, the company plans to drill-test exploration targets east and west of the proposed pit.

Total capital expenditures required for startup are estimated at US$100 million, most of which will come from a US$75-million unsecured corporate credit facility.

Echo Bay’s decision to develop the Paredones Amarillos deposit at the tip of Mexico’s Baja Peninsula will depend on its ability to secure a US$36-million non-recourse project loan.

The project is a joint venture with Viceroy Resources (VOY-T), which holds a 40% interest, and will be the largest open-pit gold mine in the country. Over a mine life of nine years, the operation is expected to yield 128,000 oz.

annually.

Echo Bay’s 60% share translates into 77,000 oz., and the company can raise its ownership to 65% by assisting Viceroy in arranging project financing.

An on-site mill, yet to be constructed, will be capable of processing 11,000 tonnes per day. The gravity and CIP circuits are expected to recover 91% of the gold.

Proven and probable reserves stand at 36 million tonnes grading 1.1 grams per tonne (equivalent to 1.3 million oz.), based on a 0.5-gram cutoff. Echo Bay’s share amounts to 775,200 oz.

The mine is expected to start up in the third quarter of 1998, with commercial production slated for the end of that year, or early next. Echo Bay’s share of the capital expenditures required for startup is US$67 million.

Covering 12,750 ha, the Paredones Amarillos is believed to contain excellent potential for additional mineralization. Echo Bay has already outlined another half a million ounces below, and east of, the proposed pit.

Cash costs are projected at US$223 per oz., with total production costs reaching US$338 per oz. Assuming a gold price of US$375, the payback period will take 84 months, for an internal rate of return of 8%.

In other news, Echo Bay has decided to write off its investment in the A-J deposit in Alaska, based on a feasibility study that concluded mining would be uneconomic.