Pegasus adds Black Pine to list of low-cost gold mines

The recent official opening of the Black Pine open pit heap leach mine adds yet another low-cost operation to an already impressive portfolio of mines under the control of Pegasus Gold (TSE).

Perched on the southern-most flank of the Black Pine Mountains about 60 miles southeast of here and 10 miles from the Utah-Idaho border, the Black Pine mine has been operating at design capacity since Jan. 1. Pegasus purchased the property from Noranda Exploration in June, 1990, for US$6.5 million. The price included US$4.5 million in cash and the balance in Pegasus common stock which Noranda sold immediately.

During the opening ceremonies, John Willson, president of Pegasus, said he knows there was some reluctance on the part of Noranda’s geologists in selling the property and that, in retrospect, the company should have had more faith in the project.

Willson added a friendly jibe, noting that Noranda would have done well had it held on to the Pegasus stock it received. Pegasus recently touched a year-high of $20.75, almost double the $11 level at the time Noranda sold its stock.

The mine experienced a 6-month permitting delay, and although relatively short compared with many other operators in North America, Willson noted that it had a significant impact on the cost of the project.

This is primarily the result of the time value of the operation’s delayed cash flow.

Capital cost of the operation, including the purchase price as well as pre-stripping on the Tallman pit, totalled about US$20 million. A significant factor in the project economics is Pegasus’ decision to alter Noranda’s original design which including crushing. Operations at Black Pine stack run-of-mine ore on the leach pads, eliminating the capital and operating costs associated with crushing.

A further advantage to the Black Pine ore is its lack of clay, negating the need for agglomeration.

Originally scheduled to come on stream in mid-1991, the permitting delays were relating to the mine’s heap leach operations.

The company had planned to operate a number of separate leach pads, each in the vicinity of the various pits, but agreed to change the mine design to a single valley-fill pad.

Peter Petrowsky, general manager of the mine, said the single pad design probably saved the company about US$2 million in capital costs as well as allowing for more control of pregnant solutions.

The pad is divided into five cells, each with its own separate internal sump. When the pad is fully loaded, Petrowsky said the company will use a counter-current leach, sprinkling leachant from the sump of one cell on the top of the adjacent, with leachant from the fifth cell reporting to the carbon columns in the recovery building.

A disadvantage of the single leach pad site is its remoteness from some of the mine’s future pits and the resulting boost in ore haulage costs. Pegasus has outlined three separate deposits at Black Pine at various elevations above the leach pad.

Stated reserves at the end of 1991 totalled about 15.7 million tons grading 0.028 oz. gold at an average strip of 0.47-to-1.

Gold mineralization is fault-related, most commonly hosted in calcareous siltstone, calcareous fine-grained silty sandstone or silty-sandy limestone. James Carver, ore control geologist, said there is very little alteration associated with the mineralization, noting that he has encountered well preserved fossils carrying up to three-tenths of an ounce gold. The Tallman pit, closest to the pads with about a 500-ft. vertical distance, is now completed to design although Carver said there is still room to mine at least one more bench.

Carver said he has been chasing ore on the edges of each bench and as a result the walls are somewhat steeper than design. A pit tour during The Northern Miner’s recent visit showed the walls to be in excellent shape save for one minor slump.

In any event, the Tallman will not have to stand the test of time since the pit will be backfilled using waste from stripping on the recently opened B pit.

The third and largest pit, called the A, will be opened after mining operations pull out of the Tallman pit.

Pegasus is in the process of completed a second-phase leach pad adjacent to the current pad. The second phase should be sufficient to hold the balance of the published reserves.

Despite a few large “raisins” visible on the top of the leach pad, the ore appears well broken. Carver estimated that 80-90% of the material measures less than five inches in diameter.

The company does have plans and permits for a third-phase leach pad at a cost of about US$2 million, if additional reserves are outlined.

Current reserves should take the operation through 1995 and Petrowsky said there is excellent potential to expand reserves.

The primary target is the E deposit, at the top of the ridge, about 1,500 ft. vertically above the leach pads at an elevation of approximately 8,000 ft. Petrowsky said the E area appears to host up to 1.5 million tons, although additional infill drilling is required. The grade of the deposit is relatively high at about 0.05 oz. gold, making up somewhat for the long ore-haul.

The 1992 budget for development drilling, primarily on the E deposit, will total about US$400,000 while exploration drilling on other areas of the property, which measures over 31,000 acres, is set at about US$750,000. Carver said exploration efforts are best concentrated on drilling for structure, particularly targeting junction points of fault zones. Carver noted that an extension to the B pit was found by chasing a main fault between the B and Tallman pits. Additional development drilling will be required before the company can complete tonnage and grade estimate for the extension area.

Although Pegasus recently took over mining operations from contractors at two of its other operations, the company does not have any plans for self-mining at Black Pine, principally due to the relative short reserve life. Mining operations at Black Pine are contracted to Ames Construction. Petrowsky said all-in, cash processing costs are about US$3.08 per ton of ore. Based on recoveries in the order of 55%, the cash cost per oz. is about US$200.

The company expects to produce about 50,000 oz. gold from the mine in 1992, giving Pegasus a healthy margin from the corporation’s minimum hedged price of about US$380 this year and US$400 from 1993 through the balance of its stated corporate reserves.