First Dynasty to retain New Millennium

The proposed sale of First Dynasty Mines’ (FDM-T) wholly owned subsidiary, New Millennium Mining, to junior producer Cornucopia Resources (CNP-T) has been terminated.

Both parties concluded that the transaction would not have satisfied their objectives. Cornucopia was to have acquired New Millennium by issuing 45 million of its shares valued at $32.4 million to First Dynasty. The proposed deal represented a 53.9% controlling interest in Cornucopia.

New Millenium’s main asset is the Dublin Gulch gold project in the Yukon, which contains a minable reserve equivalent to 1.5 million oz. A bankable feasibility study, completed in April 1997 by Rescan Engineering, concluded that development of the project was “economically attractive.” “In the process of our due diligence and in the process of this fall in the price of gold, it became apparent that it didn’t make sense to each of the parties,” says Cornucopia spokesman Dale Wallster. “From First Dynasty’s perspective, they were looking at being able to consolidate us on their books and, in so doing, being able to show production from our Mineral Ridge project. Obviously with gold at US$317 an oz., we’re not making a whole lot of money.”

Wallster says that, for Cornucopia, one of the critical components of Dublin Gulch was the feasibility study, which was based on a considerable higher gold price of US$400 per oz. The proposed acquisition of Dublin Gulch was a reflection of Cornucopia’s belief that the price of gold was heading north.

But in view of the government of Switzerland’s recent proposal to sell half of its gold reserves, the company is no longer as optimistic about the price of the yellow metal.

Says Cornucopia Vice-President Mining James Currie: “At the same time as we were perhaps looking for a better deal, an easier deal, they [First Dynasty] were looking to drive a harder bargain.”

The feasibility study on Dublin Gulch calls for a seasonal, open-pit, heap-leach operation capable of producing 35,000 tonnes per day. Annual output is projected at 135,000 oz. over a mine life of nine years, with the cash production cost pegged at US$221 per oz. The capital cost is estimated at US$106.7 million.

Minable reserves are calculated at 50.4 million tonnes grading 0.93 gram gold per tonne, with a stripping ratio of 0.8-to-1. The gold recovery rate is 79.6%.

First Dynasty intends to complete the environmental permitting for Dublin Gulch and pursue an impact and benefits agreement with NaCho Nyak Dun First Nation. The company intends to evaluate the feasibility of the project and, if conditions are favorable, advance it to the development stage.

Cornucopia owns the Mineral Ridge open-pit, heap-leach gold mine, near Tonopah in southwestern Nevada. The newly constructed mine poured its first gold in June but has yet to reach commercial production.

Annual production is expected to average 50,000 oz. per year over a mine life of five and a half years. The average production cost is projected at US$237 per oz.; the full cost at US$343 per oz.

Currie says the mine has recently been averaging 3,000 oz. per month and that production for the 1997 calendar year is expected to total 17,000 oz.

Cornucopia has sold forward 120,000 oz. at an average cost of US$407 per oz.

Mineral Ridge was built at a cost of US$25.8 million. The ore is crushed to minus 6 mesh in a four-stage crushing circuit at a design rate of 2,450 tonnes per day, then agglomerated and stacked in 6-metre lifts on a leach pad. Metallurgical testwork has indicated a gold recovery of 80.8% over a leach cycle of 120 days.

“The crushing plant has been consistently crushing more than design capacity,” says Currie. “The mining contractor is doing very well and the mining head grades are holding up.”

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Weather problems

However, production has been hampered by water problems. “We have either had too much, or not enough,” says Wallster.

Torrential downpours, attributed to the weather phenomenon known as El Ni~no, have caused dilution problems and some road washouts. On the flip side of the coin, the mine’s water supply has not been sufficient to keep the heap saturated.

Cornucopia plans to spend US$500,000 to install a pipeline to gain access to a new water source early in the new year.

The other principal asset of Cornucopia is the 25%-owned Ivanhoe property on the northwestern end of the Carlin trend in northern Nevada.

Hunter-Dickinson-led Consolidated North Coast Industries (KNH-V) can earn a 75% interest in the project by spending US$2.8 million on exploration over two years.

The Ivanhoe property hosts large near-surface oxide gold resources, but current gold prices render the resource uneconomic.

A new exploration model for exploring deep gold on the Carlin trend suggests the near-surface, low-grade mineralization is leakage from much deeper higher-grade gold systems in Lower Plate carbonate rocks.

Consolidated North Coast intends to initiate deep drilling based on the geological model that is responsible for the genesis of Barrick Gold’s (ABX-T) Post-Betze and Meikle mines.

Cornucopia has 38.5 million shares outstanding.