Homestake books new reserve at Veladero

Further drilling by operator and 60% owner Homestake Mining (HM-N) at the Veladero property in the Argentine Andes has nearly doubled gold reserves and upped silver reserves by 60%. But engineering work and economic projections indicate only a 7% rate of return from developing the property’s gold deposits.

The new reserve figure is part of Homestake’s engineering study on the property, which is in the El Indio belt, on the Chile-Argentina border. Barrick Gold (ABX-T), which holds the adjoining Pascua-Lama project on the Chilean side of the border, owns the minority interest in Veladero.

The new engineering study envisages the treatment of ore from two open pits on the property, centred on the Filo Federico and Amable deposits, in a combination mill and heap-leach facility.

The proposed Veladero pits contain reserves on Amable, Filo Federico and Filo Norte, the last being on Barrick ground across the boundary from Filo Federico. The proven and probable reserves of Amable and Filo Federico stand at 168.6 million tonnes grading 1.48 grams gold and 24 grams silver per tonne. The Filo Norte deposit sports a further 19.1 million tonnes at 1.36 grams gold and 13.9 grams silver per tonne, putting the full reserve in the proposed pits at 187.7 million tonnes running 1.47 grams gold and 23 grams silver.

Of that reserve, 176.2 million tonnes at grades of 1.1 grams gold and 21.3 grams silver are heap-leachable. The remaining 11.5 million tonne reserve, which grades 7.04 grams gold and 48.5 grams silver per tonne, would require milling.

According to the study, mining would run at a rate of some 200,000 tonnes per day over a 11.5-year lifespan. Including pre-stripping, the pit should have a stripping ratio of 3.2 over the life of the mine.

The current plan provides for the millable ore to be ground in a 3,500-tonne-per day mill. That ore would be leached in a conventional cyanidation plant, and tailings from the mill would be stacked on the main leach pad, along with a daily 52,000 tonnes of crushed leach-grade ore averaging 1.1 grams. Gold production is forecast at 621,000 oz. annually, averaged over the mine life.

The mill is expected to recover, on average, 94% of the gold, and the leach pads, 73%. Metallurgical testing has shown highly variable results for silver, and average recoveries have been assumed to be down around 34%.

Bulk sampling over the coming field season will permit further metallurgical testing, and Homestake hopes to come up with an improved flow sheet.

The study estimated a capital cost of US$608 million to bring the project into production, an estimate that does not include sustaining capital. Cash costs are projected at US$117 per oz. after silver credits.

Using gold prices of US$300 and US$275 per oz. and silver prices of US$5 and US$4.75 per oz., the study estimates the internal rate of return, after tax, to be around 7%.

Homestake continues to investigate a 100% heap-leach or dump-leach operation at Veladero, with the aim of bringing the initial capital costs down and so improving the project’s economics.

The present plan does not include an enlarged Filo Federico pit. This would incorporate the Cuatro Esquinas deposit, about halfway between Amable and Filo Federico. Cuatro Esquinas has an estimated resource of 104.7 million tonnes grading 1.02 grams gold and 18.1 grams silver, but further drilling and some metallurgical tests will be needed to bring that resource into the reserve category.

The plan for the remainder of 2001 and 2002 is a program of underground tunnelling and drilling into Filo Federico and Amable, plus follow-up metallurgical tests on large bulk samples, with a price tag of between US$25 million and US$30 million.

The proposed Barrick-Homestake merger holds out the hope that the Veladero project can be combined with Barrick’s adjoining Pascua-Lama project, which is on hold pending improvements in the gold price, though some construction and design work is continuing. Pascua-Lama hosts proven and probable reserves of 285 million tonnes grading 1.92 grams gold per tonne, including the Filo Norte reserve.

Alan Hill, Barrick’s executive vice-president in charge of development, notes that the two project development teams were trying to identify ways of saving on capital and operating costs by co-ordinating the two projects.