Homestake subsidiary initiates cost study

Primarily because of a major cost over-run for road access which was largely out of its control, North American Metals (VSE), a 73.2%- owned subsidiary of Homestake Mining (NYSE), is preparing an internal cost study for its Golden Bear project in northwestern British Columbia. Chevron Minerals and North American each have a 50% interest in the property. “Preliminary results of the report indicate that significantly higher costs will have to be incurred to complete the project and bring the proposed gold mine into production,” said Jack Thompson, North American’s president. He also noted the preliminary results were being reviewed “to determine what reductions in costs can be achieved.”

Thompson said they have a good idea what the actual costs will be right now but he conceded the best estimate will be available after bids are in for the project. “That would put it into March,” he told The Northern Miner.

The joint venture is proceeding with engineering work, underground development, and camp construction. Mill construction wasn’t started before winter set in because of inclement weather. That program was also delayed by road access problems.

But Thompson emphasized that “that doesn’t effect the completion date, it just means we hit it harder this summer.” Parts of the mill are being constructed down south including the dry grinding circuit and the roaster.

“What we are doing now is going back and looking at the whole project and we are trying to see where we can reduce the capital cost without sacrificing operating costs too much,” he said, noting that production is scheduled for the last quarter of 1989.

Road access was originally expected to be $9 million but it actually cost $17 million, owing to a change in the anticipated access route. The change was made to alleviate concerns of the provincial government and environmental groups with North American and its joint venture partner, Chevron, footing the bill.

“They are using the road, it’s virtually complete, but some graveling will have to be done on it in the spring,” confirmed Robert Hunter, the chairman of North American.

The 1,400 level at the mine is virtually complete and they have moved down to the 1,360 level which is in over 300 ft. Collaring the portal proved to be difficult but they are well past the portal entrance and into solid ground. Several stopes are ready to go on the 1,400 level including a test stope put in for bulk sampling purposes during the exploration stage. The level has been completely rehabilitated and “we are preparing the stopes right now,” said Thompson.

North American has a 50% interest in the project with Chevron Minerals holding the balance. Chevron is reported to be interested in selling its share of the project and North American has the right of first refusal. They have formed a joint operating entity and each company is providing input into the project.

Homestake is particularly knowledgeable about open pit and underground mining and also the processing of refractory gold ores, the predominant ore type at Golden Bear. Fluid bed roasting will be utilized at the project, something Homestake is very familiar with. Hunter said the higher cost for mine development will not effect project economics and he added “there is no thought of shutting her down.”