Money-losing Hope Brook keys on four problems

Management of Hope Brook Gold (TSE) is under heavy pressure this year to bring about a turnaround in operations at the company’s problem-plagued gold mine on the southwest coast of Newfoundland. Last year’s gold production of 84,324 oz. at Hope Brook was well below the target level of 120,000- 140,000 oz., and the mine’s average cash cost hit a high of $556 (US$471) per oz.

The 75.7% owned subsidiary of BP Canada (TSE) racked up a hefty loss of $18.8 million last year, compared to a profit of $2.9 million in 1988.

In its first year of full-scale production, the mine fell short of targets due to four main problems, the company said. There were difficulties with effluent treatment, underground haulage, mill throughput and metallurgical recovery. The resolution of those difficulties has become priority for Hope Brook this year.

“Our intention is to see these problems through,” President John Auston told The Northern Miner. “We’re optimistic we can lick them.”

He stressed that the difficulties at the mine have been technical in nature, rather than with the tonnage of reserves or gold grades in the orebody.

Originally designed for a 10-year mine life, the Hope Brook deposit hosts proven and probable reserves of 11.2 million tons grading 0.112 oz. gold per ton. Forecast production for 1990 is 124,000 oz. at a targeted average cost of US$250 per oz.

One of the most severe problems last year was a failure in the effluent treatment system which caused a 5-week shutdown of the mill and added considerably to costs. “It’s costing us a lot of money to regulate the effluent,” said Auston, but a new sulphur dioxide treatment system is being installed this year which should reduce costs.

Problems in the mill also occurred when throughput in the grinding section was reduced by a high content of mafic rocks scattered throughout the ore zone. Auston explained that irregularly shaped mafic inclusions accumulated in the SAG mill and cut down on throughput of gold ore. “The mafics are about 17% of the orebody and they create a crushing and grinding problem,” he said.

To remedy the situation, the company is hoping to sort out the mafic inclusions by their size and magnetic characteristics. “There may be a solution in hand in the form of a dual system to separate these rocks,” he said.

Early tests have been promising, and a decision on installation will be made by mid-year.

Metallurgical recoveries have also been lower than expected averaging only 83% in 1989, compared with a design level of 91%. Further bulk-sampling and metallurgical tests are under way to improve the shortfall, he explained.

Difficulties have also been experienced with the Kiruna electric haulage trucks which carry 50-ton loads of uncrushed ore up a decline to the surface. “Getting the trucks to operate effectively has been a problem,” he said. Meanwhile, the electric trucks have been supplemented by diesel units pending a resolution of the operational problems.

On the financial side, a total of 35,100 oz. of the mine’s 1990 gold production has been sold forward at an average price of US$433 per oz. Some form of debt restructuring will also have to be considered this year by the company as interest payments of nearly $8 million and $9.6 million in principal repayments on a bank loan come due.

Shares of Hope Brook, of which nearly 22.7 million are held by BP Canada, have traded recently at a low of $1.35 within a 12-month range of $1.20-3.95.