One year later, Anaconda still fixing Pine Cove mill

Anaconda Mining (ANX-T) has started shipping ore from its Pine Cove mine in Newfoundland to Crew Gold‘s (CRU-T) nearby Nugget Pond mill while it continues to figure out what’s wrong with its own mill.

The Pine Cove open pit  mine and mill, located in the Baie Verte Peninsula, were brought into production about a year ago but the company has been having problems with the concentrator equipment.

Anaconda originally thought it would reach commercial production by October 2008.

The company has not said how much time it will take before the Pine Cove mill is up to speed, but some improvements to throughput and recovery have been made.

Anaconda has been consulting with the equipment manufacturer, Gekko Systems, to improve gold recoveries. The mill is only operating at 100 tonnes per day, much lower than its capacity of 500 tonnes per day. At full capacity, the company expects to to produce 16,000 oz. of gold per year.

Crew Gold has agreed to mill Anaconda’s ore for up to 12 months, custom milling 450 tonnes per day, or up to 200,000 tonnes of ore. Recoveries at Nugget Pond are expected to be in excess of 90%.

The Pine Cove mine has reserves of 2.3 million tonnes grading 2.76 grams gold per tonne for 207,000 oz. gold.

Before Anaconda could go ahead with toll milling, it had to reach a deal with its Pine Cove joint venture partner, New Island Resources (NIS-V). New Island challenged Anaconda’s right to toll mill, claiming it went against their joint-venture agreement and sought arbitration.

Under their joint venture, Anaconda can earn a 60% interest in the project once it reaches commercial production, and has a 30% interest prior to commercial production. Anaconda is supposed to earn 100% of the project cash flow until it has repaid all capital expenditures.

Instead of arbitration, they formed a “Side Agreement” along with the milling agreement under which Anaconda will recover certain agreed to capital expenditures to a maximum of $4 million.

Also, New Island and Anaconda will equally split net cash flows from the custom milling arrangement.