Franco-Nevada revises projections

Lower head-grades and unexpected dilution in the Colorado Grande vein have induced Franco-Nevada Mining (FN-T) to revise production projections at its Ken Snyder mine in Nevada, north of the Carlin trend.

Colorado Grande is one of two veins being exploited and accounts for 60% of all mined material. The other, Gold Crown, has met with expectations.

Franco-Nevada now expects to produce 230,000 oz. gold-equivalent in the fiscal year ending March 31, at a cash operating cost of US$100 per equivalent ounce. This is 8% lower and 25% higher, respectively, than 1997 feasibility projections.

The revision follows a troublesome third quarter in which 54,086 oz. gold-equivalent were produced at US$106 per oz., bringing the 9-month figures to 185,037 oz. and US$96 per oz., respectively. In total, 55,110 tons grading 1.02 oz. were milled in the recent period, deflating the 9-month average to 1.15 oz. on 168,148 tons treated.

“The problem stems mainly from the makeup of the Colorado Grande vein,” says Andre Douchane, vice-president of operations. “There seems to be a high-grade ribbon that is 20% of the vein’s width and wanders from side to side, often sitting on the footwall. At the bottom of the stope, this ribbon rests on the footwall, and, at the top of the stope, on the hangingwall — all of which makes stope design crucial.”

Though it accounts for only 20% of the vein’s width, the ribbon constitutes 80% of the contained gold. Corrective measures are already under way, including the conversion from 3- to 1.5-cubic-yard muckers and redesigning of sills. The new load-haul-dump machines will allow for smaller, tighter sills and, consequently, quicker stope development; they will also help decrease external dilution caused by caving, itself a reflection of the hangingwall rock’s being softer than anticipated. (The hangingwall shows signs of increasing competence with depth.)

Despite the mining problems, the mill is performing beyond expectations, handling more than 700 wet tons per day on occasion. Recovery rates have consistently averaged 96%; availability, 97%.

Improvements to the grinding circuit are complete, and a 350-ton-per-day verti-mill grinding circuit is being installed. Modifications to the existing thickening and Merill-Crowe circuits are also under way, and the number of stopes is being increased to between 12 and 15 from the current eight to match the increased mill throughput.

“This will put us not only in a good position to produce 250,000 oz. next year, at about the same cost and grade experienced in the last quarter, but give us the flexibility to produce much more in future years,” says Franco-Nevada President Pierre Lassonde.

Capital costs for the expansion program are pegged at US$2 million. Completion is scheduled for June.

In calendar 1999, Franco spent US$3.3 million on exploration at Ken Snyder, and an additional US$1.8 million is budgeted for 2000. Priorities include regional targets, such as Queen, which yielded 3.98 oz. gold and 1.25 oz. silver over 7.7 ft. (true thickness) in drilling.

Proven and probable reserves stand at 3 million tons grading 0.816 oz. gold and 9.835 oz. silver per ton, or 700,000 oz. less than a year ago (a reflection of mining, further infill drilling in high-risk areas and the fact that some stopes have already been developed).

“Any new mine comes with surprises,” says Lassonde. “For us, ground problems were one thing and stope design was another. It took both us and the contractor some time to figure out what was happening and to respond appropriately. It has cost us some ounces.”

Inferred resources increased slightly, but not enough to compensate for the mined ore and lost measured and indicated resources. Total mine resources now stand at 4.8 million tons grading 1.33 oz. gold-equivalent, bringing to 7.5 million the number of equivalent ounces for the entire property.

Reserves at Ken Snyder are estimated using a 0.25-oz. cutoff grade and a silver-to-gold conversion ratio of 50-to-1. The global resources are expected to convert to reserves with additional drilling.

Franco-Nevada has $1 billion in working capital and marketable securities. For the first nine months of Franco’s fiscal year, Ken Snyder generated US$25.3 million in pretax cash flow, representing more than 25% of capital costs.