U.S. REPORT (December 02, 1991)

The magnitude of the gold mining operations currently taking place on the Carlin Trend properties owned by Newmont Gold (NYSE) northwest of here probably outstrip even the wildest dreams of the geologists who staked the original claims in 1961.

Newmont Gold’s growth profile can only be described as phenomenal and the company has truly become a giant, producing the highest yearly gold output of any operator in North America.

The find is attributed to two Newmont geologists, John Livermore and Alan Coope, as well as Dr. Ralph Roberts, a geologist with the United States Geological Survey.

It was Roberts’ theories of the existence of a mineralized belt extending through the north-central part of Nevada which led the two Newmont geologist to the area of Popovich Hill, the top of the Carlin deposit. Roberts believed a regional low-angle thrust fault pushed siliceous rocks from the west over carbonaceous rocks in the east, creating a zone of weakness which allowed intrusives and mineral-bearing solutions to rise closer to the surface. He later traced the fault through northern Nevada into southern Idaho.

Roberts postulated that these “windows” — areas where the siliceous material has eroded away leaving the carbonaceous rocks exposed — would be good areas to search for orebodies.

Sampling on Popovich Hill returned elevated gold values leading Livermore and Coope to cut three trenches. One of the trenches returned 80 ft. grading 0.2 oz. gold per ton, and subsequent drilling in the summer of 1962 intersected 85 ft. in the third drill hole grading about one oz. gold. Subsequent drilling outlined over eight million tons grading in the order of 0.3 oz. gold.

Newmont Mining (NYSE), the parent of Newmont Gold and the owner of the property at the time, brought the deposit into production in April of 1965 at an operating rate of 1,800 tons per day and a cost of about US$10 million. Production for the year totalled 128,500 oz., netting the company a US$892,000 profit despite the fixed price of gold at only US$35 per oz. By 1967, production had jumped to 337,000 oz., netting the company over US$4.8 million. But reserves were declining, dropping to 2.2 million oz. by year-end. At the time Newmont was attempting to come up with a process to recover gold from carbonaceous ore. This would allow the company to mine an additional 500,000 tons of ore from the Carlin deposit.

In 1968 the free market for gold developed, boosting its price to US$40 per oz. from US$35 where it had been stuck since President Roosevelt fixed the price in 1934.

Newmont began testing the treatment of low-carbon ore in 1969 using an internally-developed process which utilized chlorine to oxidize the carbon ore after which it could be processed in the conventional cyanide plant. In 1970, the construction of a 500-ton-per-day plant in conjunction with an expansion of the existing mill in 1970 brought the capacity of the Carlin mill up to 2,700 tons per day. At this point production had dropped to 201,000 oz. and the price of gold had fallen to US$37 per oz., pushing net income down to US$2 million for fiscal 1970. By the end of 1970 reserves had dropped to 4.3 million tons grading 0.29 oz. gold.

Production continued to decline, reaching a low of 150,000 oz. in 1973 while reserves fell to 2.4 million tons grading 0.32 oz. gold by the end of the year.

The increase in the price of gold to US$70 per oz. in 1972 from US$42 per oz. the previous year turned the company’s interest to lower grade gold mineralization.

Earlier drilling in two areas northwest of the mine, the Bootstrap and Blue Star, had outlined about 1.1 million tons grading 0.14 oz. gold. Newmont decided to go ahead with production, increasing reserves in the two deposits to 1.9 million tons grading 0.14 oz. gold. Newmont also identified about 500,000 tons of low grade material grading 0.02-0.04 oz. gold for possible heap-leaching.

The price of gold continued to rise, averaging US$100 in 1973 and US$165 in 1974 when the two deposits were brought on stream, marking the end of the company’s declining reserve base.

The jump in the price of gold proved to be a boon for the company’s bottom line with net income jumping to US$5.7 million in 1973 and US$10.9 million in 1974 on only 161,000 oz. of production.

Newmont had indications that there was a large tonnage of high-carbon ore below the Carlin pit. The jump in the price of gold prompted the company to begin searching for a way to treat the material which was not amenable to conventional cyanidation or the chlorination technique used on the lower-carbon ores.

By mid-1977, Newmont had developed the double oxidation cyanide process for the high-carbon ore and began modifying the Carlin mill to treat the ore at capital cost of US$1 million. High-carbon reserves below the Carlin pit were estimated at 1.3 million tons of ore grading 0.22 oz. gold.

In 1979 Newmont discovered the Maggie Creek deposit (then called the Les) about 14 miles south of the Carlin mill. Reserves were estimated at about 2.3 million tons grading 0.16 oz. gold, plus a low grade reserve of 2.5 million tons grading 0.038.

The find gave a big boost to the company’s reserves with mill-grade material increasing to 8.2 million tons grading 0.17 oz. gold from 6.1 million tons in 1978.

With the price of gold touching US$850 per oz., the company’s earnings peaked at US$29.8 million for 1980. Newmont also started construction of a heap leach facility at Maggie Creek but the discovery of the Gold Quarry deposit was the highlight of the year.

At the time, the Gold Quarry was estimated to contain in the order of 10 million tons grading 0.05 oz. gold plus an additional high-grade reserve totaling 2.5 million tons grading 0.17 oz. gold.

The following year the Gold Quarry mill-grade reserve had jumped to 25.1 million tons grading 0.11 oz. gold, while its heap-leach reserve was estimated at 150 million tons grading 0.036 oz. gold.

Another deposit to the south, the Rain, had also been drilled off. It was estimated to contain about 8.3 million tons grading 0.083 oz. gold, including a higher grade portion measuring 3.4 million tons grading 0.15 oz. gold. Engineering studies on Gold Quarry continued through to 1984 when construction was started on the 7,000-ton-per-day Mill Number 2. The new mill was commissioned in the following year and two additional deposits were discovered; the Genesis, about six miles north of the Carlin mill (now call Mill Number 1); and the Post, about seven miles north of Mill Number 1.

By the end of 1986, through-put at Mill Number 2 had been boosted to 8,300 tons per day for gold production of 229,100 oz. The heap leach facilities at Gold Quarry were also in production, turning out 61,900 oz. to year-end. Mill Number 1 was expanded to 3,200 tons per day during the year and produced 164,100 oz. of gold. The Maggie Creek leach facility added 18,700 oz. for a total production in 1986 of 474,000 oz., double the year-earlier period. The year was not only a watershed for production, but for earnings, which jumped to US$40.6 million from US$14.6 million in 1985.

Expansion continued in 1987 with gold sales jumping 24% to 589,000 oz. and earnings more than doubling to US$85.8 million. The increase was largely due to an expansion of leaching operations at Gold Quarry.

Gold Quarry’s leach facilities handled over 8.7 million tons of ore to produce 139,300 oz. of gold, compared with only 2.9 million tons in 1986 for leach production of 61,900 oz.

In the third quarter of 1987, Newmont announced a US$420-million expansion plan to boost production to 1.6 million oz. by 1991.

The expansion included the construction of three new mills bringing the mill-sequence up to Mill Number 5 for a total milling capacity of 35,000 tons per day, up from 12,000 tons per day in 1987.

In addition to the expansion in milling capacity, new leaching facilities were constructed in the northern area of the property to treat low-grade ore from Genesis, Blue Star, North Star, Post and Bootstrap/Capstone. The northern facility was expanded
to process nine million tons per year by 1989, while leaching capacity at the southern facility (Gold Quarry) was more than doubled to 18 million tons per year. In addition, a one-million-ton leach facility was constructed at the Rain deposit to the south to treat low grade ore.

By 1989, production had reached 1.47 million oz., pushing net income to US$188 million. At the end of the year reserves totaled 381 million tons grading 0.054 oz. gold, not including a new discovery called the Deep Star. Net income in 1990 reached US$141.7 million on production of 1.7 million oz. gold, slightly higher than the target Newmont set for itself when it instituted its expansion program only three years earlier.

Newmont had indications that there was a large tonnage of high-carbon ore below the Carlin pit. The jump in the price of gold prompted the company to begin searching for a way to treat the material which was not amenable to conventional cyanidation or the chlorination technique used on the lower-carbon ores.

By mid-1977, Newmont had developed the double oxidation cyanide process for the high-carbon ore and began modifying the Carlin mill to treat the ore at capital cost of US$1 million. High-carbon reserves below the Carlin pit were estimated at 1.3 million tons of ore grading 0.22 oz. gold.

In 1979 Newmont discovered the Maggie Creek deposit (then called the Les) about 14 miles south of the Carlin mill. Reserves were estimated at about 2.3 million tons grading 0.16 oz. gold, plus a low-grade reserve of 2.5 million tons grading 0.038 oz. gold.

The find gave a big boost to the company’s reserves with mill-grade material increasing to 8.2 million tons grading 0.17 oz. gold from 6.1 million tons in 1978.

With the price of gold touching US$850 per oz., the company’s earnings peaked at US$29.8 million for 1980. Newmont also started construction of a heap leach facility at Maggie Creek but the discovery of the Gold Quarry deposit was the highlight of the year.

At the time, the Gold Quarry was estimated to contain in the order of 10 million tons grading 0.05 oz. gold plus an additional high-grade reserve totaling 2.5 million tons grading 0.17 oz. gold.

The following year the Gold Quarry mill-grade reserve had jumped to 25.1 million tons grading 0.11 oz. gold, while its heap-leach reserve was estimated at 150 million tons grading 0.036 oz. gold.

Another deposit to the south, the Rain, had also been drilled off. It was estimated to contain about 8.3 million tons grading 0.083 oz. gold, including a higher grade portion measuring 3.4 million tons grading 0.15 oz. gold. Engineering studies on Gold Quarry continued through to 1984 when construction was started on the 7,000-ton-per-day Mill Number 2. The new mill was commissioned in the following year and two additional deposits were discovered; the Genesis, about six miles north of the Carlin mill (now called Mill Number 1); and the Post, about seven miles north of Mill Number 1.

By the end of 1986, through-put at Mill Number 2 had been boosted to 8,300 tons per day for gold production of 229,100 oz. The heap leach facilities at Gold Quarry were also in production, turning out 61,900 oz. to year-end. Mill Number 1 was expanded to 3,200 tons per day during the year and produced 164,100 oz. of gold. The Maggie Creek leach facility added 18,700 oz. for a total production in 1986 of 474,000 oz., double the year-earlier period. The year was not only a watershed for production, but for earnings, which jumped to US$40.6 million from US$14.6 million in 1985.

Expansion continued in 1987 with gold sales jumping 24% to 589,000 oz. and earnings more than doubling to US$85.8 million. The increase was largely due to an expansion of leaching operations at Gold Quarry.

Gold Quarry’s leach facilities handled over 8.7 million tons of ore to produce 139,300 oz. of gold, compared with only 2.9 million tons in 1986 for leach production of 61,900 oz.

In the third quarter of 1987, Newmont announced a US$420-million expansion plan to boost production to 1.6 million oz. by 1991.

The expansion included the construction of three new mills bringing the mill-sequence up to Mill Number 5 for a total milling capacity of 35,000 tons per day, up from 12,000 tons per day in 1987.

In addition to the expansion in milling capacity, new leaching facilities were constructed in the northern area of the property to treat low-grade ore from Genesis, Blue Star, North Star, Post and Bootstrap/Capstone. The northern facility was expanded to process nine million tons per year by 1989, while leaching capacity at the southern facility (Gold Quarry) was more than doubled to 18 million tons per year. In addition, a one-million-ton leach facility was constructed at the Rain deposit to the south to treat low grade ore.

By 1989, production had reached 1.47 million oz., pushing net income to US$188 million. At the end of the year reserves totaled 381 million tons grading 0.054 oz. gold, not including a new discovery called the Deep Star. Net income in 1990 reached US$141.7 million on production of 1.7 million oz. gold, slightly higher than the target Newmont set for itself when it instituted its expansion program only three years earlier.

If Newmont Gold (NYSE) could come up with an economic method to treat its low-grade refractory gold reserves (those below the 0.07-oz. cutoff), its future production would be significantly increased.

A number of companies have attempted to use bioleaching technology on refractory ores with little success.

The process uses naturally occurring bacteria to break down sulphide compounds which in theory, should leave the gold free and leachable with cyanide.

Tests at Newmont’s research laboratory in Salt Lake City, Utah, were successful in treating sulphide refractory ore with recoveries between 45% and 80%. Tests on the carbonaceous refractory material, however, have not returned satisfactory results.

The organic carbon in the material tends to pull the dissolved gold out of the cyanide solution. Either the organic carbon must be deactivated to prevent it from adsorbing the gold, or a leaching agent must be developed which does not release the gold to carbon.

Two 600-ton heaps were started in mid-1990 at the Gold Quarry operation to test bioleaching on the two types of ore. The tests used a 3-4 month sulphide oxidation cycle followed by 1-2 months for leaching.

Oxidation of the sulphides in both leach piles was successful, although contamination from organic carbon in the sulphide material reduced cyanide recoveries.

Newmont is in the process of patenting the method of introducing bacteria to the leach pile.

Recovery from the carbonaceous refractory material was poor. The company used thiourea as the leaching agent (lixiviant) instead of cyanide; it found it tends to break-down and has a slow reaction (leach) time.

The Castle Mountain gold project is on budget and on schedule for mine startup in early 1992, according to 75% owner and operator Viceroy Resource (TSE).

The fully permitted and financed gold project is situated in San Bernardino Cty., Calif., and is expected to produce on average 100,000 oz. gold per year. Construction of the US$50-million, 8,000-ton-per-day open pit heap leach facility is reported to be progressing well. Viceroy’s joint venture partner is MK Gold, a contract miner which provided US$17.5 million for its 25% participating interest in the project.

The project has proven and probable reserves of 24.6 million tons grading 0.047 oz. gold per ton on a cut assay basis, and possible reserves of an additional 13.5 million tons grading 0.046 oz.

Reserves are expected to be upgraded, once results are in from a US$1.25 million, 100-hole program funded by MK Gold. This program was designed to expand the project’s gold reserves.

A separate US$1.8 million exploration program was approved to seek new discoveries inside the joint venture area; Viceroy will contribute 75% of this cost and MK Gold the remainder. The targets being drilled this fall include areas of known mineralization, geochemical and geophysical anomalies, as well as zones of hydrothermal alteration.

In addition to the joint venture, Viceroy intends to proceed with a program to pursue the discovery of new mineralized zones on claims surrounding the joint venture in which it has a 100% interest.

Newmont Gold’s (NYSE) stated reserves on its Nevada properties at the end of 1990 — 334.9 million tons grading 0.056 oz. gold per ton — do not include the Deep Star deposit which was discovered in 1989. The deposit was last reported to contain about one million tons grading in the order of one ounce gold per ton.

The deposit, which is refractory in nature, is a structurally controlled, roughly circular lens measuring 250×300 ft. laterally. The mineralization starts at a depth of about 900 ft. below surface and extends to at least 1,600 ft. in depth at a dip of about 70 degrees to the north. The company does not have any immediate plans to bring the deposit into production and is currently studying the deposit’s feasibility.

In order to gain full ownership of four Nevada properties in the AltaBay Venture, Alta Gold (NASDAQ) recently traded its 40.2% interest in the Sunnyside mine near Silverton, Colo., to Echo Bay Mines (TSE). The “property swap” transaction gives Echo Bay a 100% interest in the underground gold-silver-lead-zinc-copper mine. In return, Echo Bay relinquished its 40% interest in the Easy Junior, Golden Butte and Illipah gold mines around Ely, Nev., as well as the undeveloped Pan gold property about 60 miles west of Ely.

These properties will now be exclusively owned by Alta Gold. Echo Bay wrote off its interest in all the properties in 1990.

Burdett Resources Ltd. (BDT:VSE) has changed its name to AFF Automated Fast Foods Ltd. with a consolidation of capital on a 1-new-for-3-old-share basis. The transfer agent is Pacific Corporate Trust.

Low gold prices prompted Inland Gold and Silver (NASDAQ) to inventory all its gold production during this year’s third quarter.

The company produced a total of 2,734 oz. during the period at its Toiyabe mine in Nevada. Gold production for the year amounts to more than 8,000 oz. from the mine.

Inland reported a loss of US$168,000 for the three months ended Sept. 30, compared with a loss of US$1.09 million in the same period last year. Loss for the 9-month period was US$231,000, compared with a loss of US$338,000 last year.

When The Northern Miner recently toured Newmont Gold’s (NYSE) mine and mill operation a short drive northwest of this thriving community, their sprawling size made it quickly obvious that far more than a 6-hour afternoon would be required to get the full picture.

The size of the Gold Quarry operation alone, albeit the largest of a number of pits, had one visitor attempting a description but only managing: “The size is just …,” before trailing off and giving up.

If the size is not enough to impress, the company’s financial statements certainly are. With an average realized gold price of US$384 per oz. for 1990, Newmont Gold reported net income of US$142 million on revenue of US$644 million. Cash flow from operating activities was over US$238 million and the company’s current assets outstrip total debt by more than US$64 million. Gold production is expected to increase marginally to 1.7 million oz. in 1993 from a projected 1.6 million oz. in 1992 and 1.55 million oz. this year. The company is currently reviewing plans for its sizable refractory reserves with current plans calling for the construction of an 8,000-ton-per-day refractory mill using roasting technology.

Newmont considered using pressure oxidation but concluded that significant savings could be realized through roasting. Based on industry-averages the company estimated operating costs for pressure oxidation at US$16-24 per ton compared with costs of US$10-16 per ton for roasting.

Capital cost of the plant is estimated at US$190 million and is anticipated to come on stream in 1994.

The plant will be suitable for processing both sulphide and carbon ores at an estimated cut-off grade of about 0.07 oz. gold per ton.

Newmont Gold’s future production profile would be significantly affected by the development of a process capable of treating the company’s low-grade refractory reserves (those below the 0.07-oz. cutoff).

There is no known technology for the economic treatment of low-grade refractory ore comparable, on a cost-basis, with conventional heap-leaching. A number of companies, including U.S. Gold and Giant Bay Resources, have attempted to use bioleaching technology on refractory ores but have met with little success.

Future bioleach test work includes a proposed large-scale 20,000-ton leach test on sulphide material in 1992 and further testing of alternative leaching agents for the high organic carbon material.

In the meantime, Newmont plans to concentrate on developing further oxide reserves to ensure production can remain at over 1.5 million oz. per year while strategies are developed for refractory material. Exploration drilling in a number of areas is stalled however, while the company awaits environmental permits.

At the end of 1990, total proven and probable reserves were 334.9 million tons grading 0.056 oz. gold. Broken down into ounces, the reserve includes 7.7 million oz. in oxide mill ore, 4.4 million oz. in oxide leach ore, and 6.8 million oz. in refractory mill ore.

Jim Komadina, vice-president of operations and planning, noted that reserves are expected to increase by over two million contained ounces as a result of pit remodelling and infill drilling currently under way.

Refractory leach reserves are estimated at 110 million tons grading about 0.03 oz. gold. In ounces, the figure breaks down to about 1.4 million oz. sulphide and 1.9 million oz. carbonaceous.

Open pit mining in the Post area covers ground 100% owned by either Newmont Gold or American Barrick Resources (TSE). American Barrick is the operator and is currently mining Newmont ore at no cost to Newmont in order to access its own ore.

In addition to surface reserves, the Post deposit contains significant deep reserves. Negotiations are continuing for the development of the deep deposit following the collapse this summer of a proposed merger between the two mining giants.