TMAC tackles gold recovery issues at Hope Bay

VANCOUVER — TMAC Resources (TSX: TMR; US-OTC: TMMFF) has slashed annual production estimates and suspended cost guidance at its wholly owned Hope Bay gold project in Nunavut due to “processing issues” during ramp up.

The company is struggling with its daily throughput rates after “frequent stoppages” to optimize mill recoveries, which have also resulted in lower average head grades.

TMAC cut Hope Bay’s annual production guidance to between 50,000 and 60,000 oz. gold. The operation was scheduled to generate between 100,000 and 120,000 oz. gold this year.

“We were feeding low-grade material through for quite a bit of the second quarter. Now we’re feeding closer-to-normal, mine-grade stockpile material. I don’t think we’ll achieve nameplate on recoveries by year-end, but I expect improvements,” TMAC chief executive officer Catharine Farrow said during a conference call.

“We are sending both a gravity concentrate and flotation concentrate over to a treatment plant. So they both have to work efficiently. Water balance is something we have to work on to optimize our leaching, and the columns, as well,” Farrow said.

The Doris camp, as seen in 2014, at TMAC Resources’ Hope Bay gold project in Nunavut. Credit: TMAC Resources.

Gold recoveries at Hope Bay averaged 62% in the second quarter, and 67% in June. TMAC produced 12,300 oz. gold at an average grade of 10 grams gold per tonne. The company reported all-in sustaining costs (AISCs) of US$1,801 per ounce.

TMAC released a prefeasibility study in mid-2015 that envisioned sequential development and underground mining of the Doris, Madrid and Boston deposits to produce 160,000 oz. gold annually for 20 years, at AISCs of US$785 per ounce. The study also assumes 92% average gold recoveries.

TMAC has set aside 104,700 tonnes from the Doris deposit grading 15.2 grams gold. The stockpiles were intended to drive mill ramp-up to 1,000 tonnes per day in 2017, before increasing to 2,000 tonnes per day in early 2018.

The high-grade material would also help generate cash to pay back debt commitments until 2018. The company reported its mill was running at 666 tonnes per day during the second quarter.

TMAC reported commercial production at its Doris mine and mill complex in late May. Credit: TMAC Resources.

“The Doris orebody has been in line with geometallurgical expectations and test work, and that’s not the cause of any of the complications we’ve experienced with plant recoveries,” Farrow added.

“We’ve had several groups come in to confirm the work we’re doing on the plant. There haven’t really been any changes to the plan. We have to improve mechanical stability and recoveries. There haven’t been any surprises, and we’re tweaking around the gravity cyclones and flotation. The comminution side is actually going quite well.”

The company is fine-tuning two elements of the processing plant: the front end, which includes crushing, flotation and concentrate creation; and the concentrate-treatment plant at the back end.

Scotia Capital analyst Trevor Turnbull noted that the “front end is still only delivering about 80% of the contained gold to the concentrate at the end of June. For the Doris ore, this figure needs to be in the mid-90% range.”

Meanwhile, the major issues in the back end involve water balance and its impact on leach kinetics and resin performance.

TMAC reported it had $6.9 million in unrestricted cash — plus $52 million in restricted cash — at the end of June. It expects to spend around $30 million in additional capital expenses at Hope Bay this year.

Scotia Capital cut the company’s one-year price target by $3 to $13 per share. TMAC has dropped over 20%, or $2.38, since Aug. 15, en route to a 52-week low of $8.18 per share at press time. It has 84 million shares outstanding for a $687-million market capitalization.

Turnbull says the company has a “tight cash position” and “no room for error.