Rea pours first gold at Mt. Hamilton mine

Within five months of acquiring the Mt. Hamilton gold project in eastern Nevada, Rea Gold (TSE) has poured its first gold-silver dore bar.

An open-pit, heap-leach operation, Mt. Hamilton was acquired by Rea in June for a purchase price of US$5.25 million paid to Costain Minerals, plus a 2.5% net smelter return royalty capped at US$2.5 million. The project, which lies in the southern end of the Battle Mountain trend on the western slopes of the White Pine range, is also subject to two underlying net profit interests totaling 5.5%.

Prior to the acquisition, Costain had spent US$9 million on exploration and development, completed a feasibility study and carried out a major portion of the permitting. Rea’s acquisition costs amounted to US$16 per oz. of recoverable gold.

Two adjoining deposits, the NE Seligman and Centennial, contain a minable reserve of 9 million tons grading 0.052 oz. gold and 0.37 oz. silver per ton. The total geologic resource is estimated at 16.6 million tons averaging 0.04 oz. gold and 0.39 oz. silver. NE Seligman remains open to the east, whereas Centennial is open towards the southeast.

Based on projected recovery rates of 75% for gold and 45% for silver, Mt. Hamilton is expected to produce 352,700 oz. gold and 1.5 million oz. silver over a mine life of at least 7.5 years. The combined stripping ratio of the two deposits will be 5.8-to-1.

The cash cost is projected to be under US$240 per oz. gold, with an ultimate target of less than US$230 per oz. Capital costs will total about US$21.4 million, consisting of a mining equipment lease cost of US$11.4 million plus a pre-production expense of US$10 million.

On a recent visit to the property, The Northern Miner observed that mining was under way in the NE Seligman deposit, with three separate pits — NES 1, 2 and 3 — being worked. The deposit will eventually consist of five pits, compared with the Centennial deposit which will consist of only one. The Mt. Hamilton property comprises about 15 square miles and, when combined with the neighboring Monte Cristo property (in which Rea holds a 65% interest), the company controls a total land package of 25 square miles. The deposits occur along broad north-south-trending anticline and syncline folds, and are hosted in Middle Cambrian limestone and shale units. Two Cretaceous-aged stocks — the Seligman (a granite diorite) and the Monte Cristo (a quartz monzonite) — intruded the sedimentary sequence of rocks, creating a hydrothermal alteration aureole 3 miles long by 1.25 miles wide. John Hurley, mine geologist at Mt. Hamilton, believes the deposits are epithermal, and while the skarn alteration helped prepare the ground, gold development is thought to be controlled by high-angle fault structures trending in three northerly directions.

A summer program of 2,000 soil samples collected over the entire project area indicated a good correlation between zones of high gold-silver values and known structural faults. The survey defined no fewer than four major gold anomalies on-trend to the north and south of NE Seligman and Centennial, and in new geological environments to the east and southeast.

Drilling is planned for next spring, priority targets being NE Seligman’s eastern extension and areas north and southeast of the deposit. Hurley believes the area around the deposits has the potential to double reserves, and that the overall property could potentially host 1 million oz. gold. Two blast-hole drill rigs are operating, and two new Hitachi 13.5-cu.-yd. shovels are being used to load material onto six 85-ton haulage trucks. Two valley-fill waste dump areas are immediately adjacent to the deposits, while 55-ton trucks haul the ore downhill to the leach pad area along a 4-mile road with an average grade of 7 degrees.

Mining is carried out seven days a week, each day consisting of two 10-hour shifts. More than 100 workers are on the payroll.

Rea expects to produce 240,000 tons of ore this year and be operating at capacity before year-end. An annual mining rate of 1.3 million tons will produce, on average, 55,000 oz. gold and 141,000 oz. silver per year.

To ensure the quickest cash payback, Rea is concentrating its mining efforts on the NES 2 open pit, from which 2.5 million tons of overburden and waste rock have already been removed to provide access to 175,000 tons grading 0.12 oz. gold. The company is pleased with the ore recovered to date from NES 2, as the grade of 0.088 oz. gold is double the predicted grade of 0.044 oz. Run-of-mine ore is crushed to minus-7/8-inch by a 2-stage crushing system, then agglomerated with cement. A conveyor system and a radial stacker place the ore on the leach pad in 30-ft. lifts, and a cyanide solution is sprayed on the ore to initiate leaching.

At the time of our site visit, construction work was underway on the conveyor system, and only one shift per day was running. The crushing facility will operate at a maximum capacity of 400 tons per hour, and on the same schedule as the mining operation.

The radial stacker is expected to arrive on site shortly. In the meantime, 34,000 tons of crushed ore are already stacked on the leach pad. Leaching was initially applied to 10,000 tons of ore averaging 0.066 oz. gold, and in only four days 65% of the gold had been recovered. Todd Fayram, plant supervisor at Mt. Hamilton, believes the projected gold recovery of 75% is conservative and that 80%-85% is not unlikely. One explanation he offers for the sooner-than-expected recovery rate is that the ore now being mined is different from the rock types on which the metallurgical testwork was performed.

In addition, operators believe the ore may not have to be crushed as fine as minus-7/8 inch. Testing is under way to determine if the size can be increased to minus-1.5 inch, which would lower crushing costs. The leached cyanide-gold solution is collected in a pregnant solution pond, from where it is pumped into a standard carbon recovery plant at a maximum rate of 800-1,000 gallons per minute. The carbon plant can produce 150,000 oz. per year.

A new laboratory, constructed on-site, has the capability of assaying 400-500 samples per day, using both wet and dry methods.

All power is provided by a diesel generator.

In other activities, Rea has completed a $3-million exploration and development program at its Bissett gold mine project in Manitoba. An internal feasibility study is in progress.

Between 1932 and 1968, Bissett produced 1.36 million oz. gold from 4.9 million tons of ore. Minable reserves stand at 1.5 million tons grading 0.22 oz. gold, and Rea believes the property has a reserve potential of 1 million oz. gold.

The combined capital and preproduction cost of bringing the mine up to a production level of 1,000 tons is estimated at US$24 million. A refurbished 500-ton-per-day mill is in place, and the company hopes to produce 66,000 oz. gold per year over eight years at an operating cost of less than US$235 per oz. gold.

Rea also holds a half interest in, and operates, the South Comstock open-pit, heap-leach mine south of Virginia City, Nev. (Toronto-listed BMR Gold holds the other half.) The property began producing gold a year ago, and permitting is under way for a second phase of operation, during which an additional 47,000 oz. gold would be produced.

The company has 31.8 million shares outstanding or 39.9 million shares on a fully diluted basis.