Miramar ends 2002 in the black

Vancouver For over 60 years the Con and Giant gold mines near Yellowknife have dutifully produced gold. However, as the operations near the end of a long and productive mine life, owner Miramar Mining (MAE-T) has shifted focus by targeting growth prospects at the Hope Bay gold project in Nunavut.

“We have a twin track approach to exploiting the Hope Bay project, mine development and continued exploration of the belt," says Miramar’s President, Anthony Walsh. " Development of the Doris North deposit is forecast to provide us with low cost gold production that would generate significant operating cash flow at current gold prices and provide a platform for future expansion, while our intensive exploration program is intended to lead to continued resource growth through new discoveries.”

Earlier this year, an independent feasibility study of the Doris North gold deposit called for a 668-tonne-per-day operation and production of 311,693 oz. gold over a mine life of two years.

“We believe Doris North provides potential for high-grade, high-return, and low-risk gold production commencing approximately two years from now,” says Walsh.

The study suggests that at a gold price of US$325 per oz., the mine could pull 467,157 tonnes daily grading 21.9 grams gold. Capital costs are pegged at US$39.3 million and cash operating costs, at US$109 per oz. The pretax rate of return on investment would be 136% with a payback period of 6.6 months.

A ramp would provide access to the underground operation, with mining focused on the Doris Hinge and portions of the Central and Lakeshore veins in the limbs of the Doris Hinge. Also, some 9,000 tonnes grading 19.5 grams gold stockpiled at the Boston deposit will be hauled to the mill for processing.

The study proposes a combination of mechanized cut-and-fill and open-stoping, assuming a minimum mining width of 2.5 metres and external dilution averaging 17% at zero grade. Ore would be hauled from underground by truck to a crusher adjacent to the portal, which would feed a modular mill.

Gold will be produced on site using conventional crushing and grinding with an integrated gravity gold recovery circuit followed by flotation and cyanidation of flotation concentrates.

Since there are several other advanced prospects on the property, Miramar intends to develop the mine as a potentially long-term operation. For example, it intends to buy rather than rent the power plant and mining equipment. The company has also elected not to use contract mining. The mill has been designed for throughput of 800 tonnes per day.

The mill and facilities are designed for a 10-year life and therefore allow for an extension of operations beyond the 2-year life of the Doris North zone.

Miramar expects permits to be in-hand by the third quarter, allowing construction to commence and major equipment to be ordered by year-end. Startup is planned for early 2005. In 2002, capital expenditures for the acquisition of Hope Bay Gold and exploration and project activities at Hope Bay came in at $73.8 million.

This year, the company expects to spend $18.3 million on Hope Bay, including $1.8 million on permitting and feasibility work on the Doris North development project. Some 43,000 metres of core and 4,500 metres of reverse circulation drilling are planned for the Madrid area and related structures, where as 9,000 metres will target the Boston deposit at depth.

At last count, the Hope Bay project held measured and indicated resources of 3.4 million tonnes grading 15.4 grams gold, plus an inferred 6.7 million tonnes grading 12.3 grams gold. Looking to increase these numbers, the company aims to carry out 43,000 metres of core and 4,500 metres of reverse-circulation drilling this year.

On the back of its Yellowknife gold mines, Miramar managed to post net earning of $600,000, or $0.01 per share in 2002,compared to a loss of $5.9 million or $0.1 per share in 2001. The gain came despite a production shortfall that saw the aging operations crank out 115,134 oz of gold, down from the 129,607 oz in 2001. Cash cost to produce an oz of gold came in at US$246, a slight improvement over the US$257 per oz tallied in 2001.

Driving the jump in earnings was a higher gold price. During 2002, the company realized US$293 per oz of gold, compared US$274 per oz in 2001. Operating cash flow hit $8 million, compared to $5.5 million and revenue from gold sales came in at $53.1 million,, compared to $54.9 million in 2001.

As of the end of 2002, the company had some 66,600-oz of gold hedge at between $470 and $478 per oz through 2004. During the first three months of 2003, Miramar reduced its hedged oz. and outstanding call options by 24,100 oz through scheduled deliveries and repurchases of contracts.

“Despite the efforts of our operational team, mine production in Yellowknife was below forecast for the year,” adds Walsh. “Mine-site management were successful in meeting many of the challenges they faced during the year, including recovery from the collapse of the roof of the oxygen plant which resulted in a four-month shutdown of the autoclave circuit, completion of labour negotiations with the unions at both of the mines, and implementation of a revised operating plan to maximize gold production and extend the economic life of the mines into 2005.”

The Giant mine treated 64,896 tonnes of refractory ore grading 11.82 grams gold per tonne. Recoveries came in at a steady 88%, generating 23,899 oz of gold, compared with 25,361 oz in 2001. At the Con operation some 184,185 tonnes of ore grading 12.75 grams gold of free milling ore was treated, about the same as in 2001. However, a slight improvement in recoveries to 92.1% helped production hit 75,799 oz, compared to 75,512 oz in 2001. On the refractory side, the operation treated 69,499 tonnes of material grading 9.33 grams gold, generating 19,714 oz of gold, down from the 85,946 tonnes processed in 2001 at a grade of 9.64 grams gold, yielding 25,480 oz. Arsenic tailing added 2,524 oz of gold in 2002, down from the 3,806 oz tallied in 2001.

Discovered in 1935 and 1944, the Con and Giant mines poured their first gold bars in 1938 and 1948, respectively. Production estimates for the combined operation come in at 105,000-110,000 oz. this year; for 2004, they’re pegged at 80,000-85,000 oz.; and for 2005, they dwindle to 20,000 oz. Cash costs are expected to average US$250 per oz. Depletion of the free milling ore is planned for the third quarter, after which operations will be converted to refractory ore processing only. Miramar anticipates that the reclamation of arsenic tailings from the Con and Negus ponds will be completed in 2003 with final pond closure scheduled for 2004. Full mine closure is expected by the second quarter of 2005.