Nevada Goldfields mining expertise shines at underground gold mine

With all the surface mining going on in Nevada these days the Kingston mine project of Nevada Goldfields (VSE) is a refreshing change of pace. For one thing it’s an underground gold mine grading about five times that of a typical heap leach operation in the state; and it’s making money.

On a recent visit to the project, Alan R. Bell, vice-president and general manager for the company, said Nevada Goldfields will report an after tax profit of $2.8 million(US) or 29 cents per share for the year ended June 30. (Approximately $1 million of that is from the sale of a property near its Aurora gold project, a conventional open pit gold mine in the Hawthorne area.)

During the 1988 fiscal year, Nevada Goldfields produced 49,549 oz gold and 101,841 oz silver from its two principal properties — a six fold increase from 1987.

The Kingston mine is a major contributor to the company’s bottom line despite the fact the mill is operating below capacity because the underground operation lacks working faces. Improving mill throughput from 535-ton-per-day to the 700-ton rated capacity would substantially increase gold production while reducing unit costs.

Proven and probable reserves at Kingston are approximately 900,000 tons grading 0.19 oz gold and there are some 560,000 tons at a similar grade classified as possible.”We think these reserves are extremely conservative,” Bell said, while noting there was still considerable exploration potential on the property. In the near future, the company will drill several deep holes to see whether the oxide zone repeats itself to the northeast.

Freeport-McMoran is drilling a property to the northwest with similar geology to the Kingston mine and it’s been sharing information with Nevada Goldfields. Indeed, Bell suggested that Freeport might consider some sort of custom milling arrangement in the event it found something that wasn’t large enough to develop independently. At last report, Freeport had three drills operating on the adjoining property. Nevada Goldfields is currently drifting to their common boundary and it will explore the area from underground workings.

Although the Kingston operation is a tough mine geologically, Nevada Goldfields has formulated a mining plan that fits the Kingston ore body to a tee. Split into two distinct areas by a major fault, one side of the deposit contains highly siliceous oxide material and generally consistent mineralization which is amenable to room and pillar mining.

The other side, however, consists of graphitic sediments and quartz intrusions which are difficult to follow and much more complex metallurgically. The ore pinches and swells along bedding planes and locally is subject to intense faulting which has caused problems on the mining side.

The graphite in the ore is “preg- robbing” so no leaching is done in the ball mill or thickener, only in the CIL (carbon-in-leach) plant. Activated carbon will apparently leach gold out of solution preferentially to graphite and mill recoveries have been averaging better than 90%. Following a detailed feasibility study in 1986, Nevada Goldfields spent $6 million to replace the previous operator’s (Crested Butte Silver) flotation mill which was totally inadequate. With the exception of a number of power interruptions, the plant has been running beautifully and additional refinements are being made.

To ensure adequate mill feed, the mine at times has 25 active work headings; about 35% of all broken muck is discarded as waste and the “official” cutoff grade is 0.08 oz gold but 0.04 oz material was being fed into the mill during our visit to “take advantage of the additional mill capacity,” said Bell. Running an underground mining operation requires a considerable amount of technical skill and (equally) a good dose of common sense.

The company’s choice of equipment matches the orebody and mining conditions almost perfectly. Hydraulic drill jumbos are utilized for development drilling, and rock bolting, and a single 26-ton haul truck is available to transport ore and waste from the underground. In the event of a breakdown, scoop trams substitute for the single haul truck until it’s repaired. So there is little in the way of surplus equipment at the mine site.

There is no way of telling what individual ore faces grade each day because the gold deposition is so erratic, The Northern Miner was told. And actual mine grades are 15-20% lower than indicated by three independent consultants before production began, probably because of dilution coupled with inadequate cutting of drill hole assays.

Mining at Kingston is development intensive and most of its production comes from drifting although benching and slashing also account for a portion. Fan holes are used to define the limits of the ore zone and they drift in ore under visual and assay control. Ore is segregated and stockpiled on surface according to working place; then it’s sampled and sent to the mill. This simple but effective blending process is critical to the operation’s success.

Previous operators hauled ore down the mountain side which was expensive and tended to restrict production capacity. Nevada Goldfields eliminated that treacherous haulage problem by driving a 600-ft long circular bore hole from the mine to a transfer point down the mountain side to simplify ore handling. The actual mine is located 8,000 ft above sea level and the topography is more like Colorado than Nevada. (U.S. Navy jet fighters routinely fly manoeuvers in the valley below which tends to put the elevation into perspective).

Cash costs are presently running $240 per oz which Bell said is all inclusive. Claiming the company “never gets less than $420 for 90% of our production” Bell said that “today I’m acknowledged as a genius * * * but given time you never know.” Nevada Goldfields has a price protection program associated with a gold loan which guarantees a minimum price for all but 9,700 oz of its production.

All revenue from the Kingston mine accrues to Nevada Goldfields until the company recovers its development costs. (The exact cost is currently being negotiated with New Beginnings Resources (VSE), one of the Applegath group of companies.) But Nevada Goldfields predicted that New Beginnings 50% net profits interest would take effect towards the end of 1990.

The exact date of course will be a function of gold prices and an agreement between the two companies on what the actual development costs were. From that point on, gold production would be split on a 50/50 basis. There is a 2% royalty and a 3% royalty payable to two parties. The latter is capped at $2 million and is almost paid off, The Northern Miner was told.