Positive prefeasibility at Kisladag

Vancouver — Junior Eldorado Gold (ELD-V) has tabled a positive prefeasibility study for its wholly owned Kisladag project in western Turkey.

The study proposes a 3.4-million-tonne-per-year operation that would churn out 103,600 oz. gold per year at a total cash cost of US$154 per oz. Total capital costs are pegged at US$47.4 million.

The study was performed by Kilborn Engineering Pacific in conjunction with Knight Piesold and Micon International, and represents the first-phase development program of the 6.7-million-oz. resource.

“This is a major step forward in our plan to develop Kisladag,” says Eldorado President Paul Wright. “The study strongly establishes the viability of the first phase development and provides the basis to eventually expand the project and to explore our adjacent land.”

Wright adds that the permitting regime in Turkey has improved, stating that Eldorado continues to benefit from strong support from the local community and from the provincial and central governments.

Having already completed a baseline environmental study, Eldorado is preparing to begin environmental impact assessment. The EIA report will be submitted to the Ministry of the Environment, which, in turn, will pass it along to regulators and other ministries. Eldorado hopes to complete the final feasibility study by mid-2002.

Micon International has calculated a measured and indicated resource of 125.9 million tonnes grading 1.2 grams gold per tonne, or 4.4 million contained ounces. The inferred portion of the resource weighs in at 55.5 million tonnes grading 1.02 grams gold, or 1.8 million contained ounces. Only the measured and indicated resources have been incorporated into the mine design.

Proven reserves are pegged at 6.4 million tonnes grading 1.44 grams gold, or 297,000 oz. Ore classified in the probable category is set at 33.3 million tonnes grading 1.44 grams gold, or 1.5 million oz. The resources and reserves were classified in accordance with the definitions and standards adopted by the Canadian Institute of Mining.

According to the study, the mine will be operated as a conventional open-pit, heap-leach mine utilizing a loader and truck fleet for production. It is expected to produce 10,000 tonnes of ore per day, drawn exclusively from proven and probable reserves, over 11.5 years.

Process facilities will consist of a 3-stage crushing circuit with a conveyor transfer and radial staking on to a permanent heap-leach pad. Gold will be recovered through adsorption-desorption (ADR) and electrowinning, with dor bars produced on-site. Gold recoveries from both oxide and sulphide ore are expected to be 57% and 80%, respectively. These estimates are based on column-leach tests of both oxide and sulphide composites.

The major capital expenditure at Kisladag will be for the processing and heap leach plant, which will cost about US$17.8 million. Mining equipment will run about US$5.4 million and road and power line costs are estimated at US$5.7 million. Indirect costs, owners’ costs and contingency total US$12.6 million and the engineering and management contract itself is worth US$3 million.

Mine and plant equipment costs are based on prices for new equipment quoted by both domestic and foreign suppliers. Capital costs over the initial 11.5-year phase are estimated to range from US$6.3 million to US$7 million.

Cash and operating costs are based on a gold price of US$300 per oz. and are expected to average US$154 per oz. of refined gold. The combination low labour rates and a low (0.49-to-1) stripping ratio will help keep operating costs down. Per-tonne operating costs, including costs for mining, processing and administration, average US$4.50 per tonne of ore.

A financial analysis indicates an internal rate of return (IRR) of about 21% (using an 8% discount rate) after taxes and royalties. The net present value (NPV) is pegged at US$36.3 million, based on a gold price of US$300 per oz. At US$275 per oz, the IRR is reduced to 16% and the NPV to 20 million. At US$325 per oz., the IRR jumps to 25% and the NPV is US$48.3 million. Financially, the project is more sensitive to changes in metal prices and less sensitive to capital and operating costs.

Determined to expand Kisladag, Eldorado will begin another round of definition and stepout drilling, in June. The drilling will also test the nearby Sayacik anomaly, within the Kisladag land position.

Kisladag is accessible via paved roads that service several small villages in the immediate area. Economic activity in the area consists of a mixture of subsistence farming and grazing. The Kisladag deposit is hosted in an andesitic-to-dacitic, Tertiary-aged volcanic complex formed by two partially overlapping calderas. Kisladag is in the older of the two strato-volcanoes, whereas Sayacic, a second, less-explored prospect, is 6 km to the southwest, in the younger Beydag volcano. Gold mineralization on the property is part of what is believed to be stockwork, veined, porphyry-style system. Mineralization is associated with clay-sericite potassium-feldspar alteration of andesitic tuffs and volcanic breccias.

Eldorado recently incurred a loss of US$900,000 (or 1 per share) on gold revenue of US$9.3 million. The company produced 28,086 oz. gold during the first quarter at a cash cost of US$228 per oz. Its hedge position added US$2.1 million to its coffers at an average realized gold price of US$302 per oz.

Eldorado ended the quarter with US$8.5 million in cash, of which US$5.3 million is restricted. Total debt, excluding convertible debentures, was reduced to US$22.8 million, from US$25.3 million a year ago.