U.S. Report Homestake to explore new discoveries at Lead

The Homestake mine near Lead, S.D., has produced close to 36 million oz. gold from almost continuous operations since the start of production in the late 1870s. It is small wonder then that owner Homestake Mining (NYSE) will be spending US$23 million over the next five years on an underground exploration program to follow up what appear to be significant gold discoveries three miles north of the mine (T.N.M., April 2/90). The company said the gold mineralization was found more than a mile below surface during a deep drill program from surface that began in early 1989. Although specific results were not released, Chairman Harry Conger noted that Homestake was “excited and optimistic” about the potential of the discoveries.

“These are the first ore-grade intercepts that we have found in the Lead District outside of the mine in a favorable geological setting,” he stated. “We are dedicating the necessary resources to explore this new opportunity thoroughly.”

The Homestake deposit is hosted in iron formation. Current operations feature a deep underground mine and a smaller and more recent open pit mining operation on the site of the original Homestake gold strike.

As part of its new underground program, Homestake will drive an exploration drift from the 6800-ft. level in the mine more than three miles north to evaluate the new discoveries.

This work, including diamond drilling, is expected to take up to five years to complete. Because of the length of the drift, and the long completion time, drifting will be done on an around-the-clock basis with three shifts.

The company plans to test for additional gold mineralization north of the mine along the path of the drift. Deep drilling from surface will also continue.

Janet Bley of Homestake said the company traditionally spends about US$3-5 million each year on exploration at its Homestake mine property, including activity in the mine. Although the state has introduced legislation calling for a 2-year moratorium on new mine development and limits on expansion of existing mines, Bley said these are aimed at open pit situations and won’t affect the company’s plans for its new discoveries.

The Homestake mine is the single largest contributor to Homestake’s production. Last year the mine processed 2.5 million tons and turned out 381,788 oz. gold at an average cash production cost of US$301 per oz.

Underground reserves are currently reported as 19.8 million tons averaging 0.23 oz. gold per ton, while open pit reserves are reported as nine million tons averaging 0.12 oz. gold.