Placer Dome green-lights Granny, Cortez Hills

Placer Dome (PDG-T) has approved development of its 60%-owned Cortez Hills gold project in northeastern Nevada and the Wallaby underground project at the Granny Smith mine in Western Australia.

At Cortez, 80 miles southwest of Elko, Nevada, Placer will spend US$245 million developing the adjacent high-grade Cortez Hills and lower-grade Pediment deposits. Partner Rio Tinto (RTP-N) will chip in US$182 million toward mining equipment, open-pit development, and a conveyor system and heap leach facilities.

Plans call for open-pit mining with conventional equipment, with ore conveyed 16 km for processing at the existing Pipeline mill or leached at a proposed facility nearer the deposits. Gold recovery from the mill is pegged at 88%, with heap leaching expected to yield around 67%.

The scheme includes shallower pit wall angles and overall pit depth than originally planned, owing to safety concerns. That change means that part of the year-end 2004 reserve has been reclassified as resource.

As a result, total proven and probable mineral reserves now amount to 150.2 million tonnes running 1.4 grams gold per tonne, for 6.6 million contained ounces, based on a gold price of US$400 per oz. Measured and indicated resources are pinned at 168.2 million tonnes of 1.1 grams gold, with another 21.3 million tonnes of inferred material grading 2 grams gold. The resource estimates employ a gold price of US$450 per oz.

With high-grade resources now sitting below the bottom of the planned pit, Placer plans to immediately begin sinking an exploration decline from a nearby pit. Placer will put up US$30 million for the four-year project, which is aimed at allowing closer-spaced drilling on underground targets under the pit and to the west.

Placer says that subject to additional permitting, the decline could be utilized during any future underground mining or during open-pit development.

“The deep exploration from surface completed to date shows good indications of mineralization suitable for underground extraction,” said Placer’s executive vice-president, strategic development Geoff Handley in a prepared statement.

“As a result of the current pit design, an underground operation takes on greater significance. We will look to advance the decline, underground exploration and evaluation as quickly as possible,” he added.

Placer expects to take home 2.8 million oz. of gold produced at average cash costs of US$170 per oz. over the operation’s proposed seven-year mine life.

Placer has submitted its plan of operations for permitting, which is expected to take up to two years, followed by a year of construction.

Meanwhile, Placer and X-Cal Resources (XCL-T) recently agreed to jointly explore the Reese River Pediment properties originally staked by Placer on the western side of the Shoshone Range in Lander Cty., Nevada. The 12-sq.-km project is situated west of X-Cal’s Mill Creek gold property, where Placer is in the midst of a drilling campaign being completed under a 6-month option agreement.

X-Cal has paid the annual federal claim fees for Reese River, and has committed to at least US$200,000 worth of drilling by the end of next September. The two companies plan to soon ink a definitive deal that will see the claims transferred to X-Cal, with the junior funding at least another US$200,000 worth of work in 2006.

Thereafter, Placer can earn a 51% stake in the properties by tripling X-Cal expenditures over the subsequent two years. Placer can boost its stake to 70% by carrying X-Cal through a feasibility study. If Placer decides not to participate it will retain a 2% net smelter return royalty.

Back at Mill Creek, Placer can buy the project outright for US$5 million, with X-Cal retaining a 1.5% net smelter return royalty.

Farther afield, in Western Australia, Placer has also okayed underground development aimed at converting gold resources in the 60/250 ore body immediately below the active Wallaby open pit at the Granny Smith mine, 9560 km northeast of Perth.

At the end of 2004, Granny Smith’s proven and probable reserves amounted to 8.7 million tonnes averaging 3 grams gold per tonne. Measured and indicated resources stand at 2.9 million oz. running 2.8 grams gold, with 16.2 million tonnes of inferred material running 5.3 grams.

In 2004, the mine produced 267,267 oz. of gold at a total cost of US$440 per oz. Production for 2005 is projected at 350,000 oz. at US$430 per oz.

Looking ahead, Placer says it intends to decide whether to advance the Pueblo Viejo gold-silver project in the Dominican Republic and Cerro Casale gold-copper porphyry in Chile by the end of the year. Evaluations of Donlin Creek refractory gold project in Alaska and Mount Milligan copper-gold deposit in British Columbia continue.