Production woes at Colomac

Production problems at the Colomac mine north of Yellowknife, N.W.T., have prompted owner Royal Oak Mines (TSE) to downgrade its overall 1994 production forecast for the four gold mines that it owns.

Output is now projected at 315,000 oz., not 360,000 as previously forecast. The problems started with a fire in the semi-autogenous grinding mill, which delayed, by about four months, the resumption of operations. Milling finally began in mid-July, although production was delayed further by mechanical problems with the grinding circuit, which reduced utilization and availability of processing equipment.

The fire damaged the mill’s trunion (the device, containing bearings, around which the ball mill turns), and the unit still must be shut down periodically to ensure that it is safe to operate. A new trunion is being cast in France and should be installed in February.

Margaret (Peggy) Witte, president of Royal Oak, stresses that mining operations have gone well since startup. She adds that most of the production shortfall is a direct result of the mill fire and that the resultant lost profit is expected to be covered by the company’s business interruption insurance policy.

She also cites the mill’s poor original design as having contributed to the shortfall. (Royal Oak says it is working to streamline the operation.) Colomac actually operates at about 8,000 tons per day, compared with its design capacity of 9,400 tons. Head grades, at about 0.053 oz. gold per ton, compare well with the ore reserve grade estimate of 0.052 oz., and the company reports that good correlation exists between blast-hole assays and mill values.

Daily production rates are expected to increase to about 9,000 tons in January and the mill should be operating at capacity by March or April. At full capacity, Colomac is expected to produce 170,000 oz. per year at a cash cost of less than US$275 per oz.

Royal Oak had planned to produce 475,000 oz. in 1995 before the Colomac setback. Witte expects to release an updated output forecast for 1995 in January.

In addition to Colomac, Royal Oak operates the Giant mine, also in the Northwest Territories; the Pamour-Hoyle complex in Timmins, Ont.; and the Hope Brook mine in Newfoundland.

During the 9-month period ended Sept. 30, these four mines produced 224,633 oz. at an average cash cost of US$305 per oz. Net income for the period totaled $25.8 million, or about 27 cents per share, on revenues of $121.8 million.