Yukon-Nevada restarts production at Jerritt Canyon

Vancouver – Yukon-Nevada Gold (YNG-T) has released a slew of drill results as it continues to advance its Jerritt Canyon gold mining project in Nevada.

To move the project forward, the company is busy drilling numerous targets on the 285-sq.-km Jerritt Canyon project to upgrade resources, while it also recently completed an upgrade of its roasting and processing infrastructure, and continues to ramp up production.

Resource conversion drilling at the Starvation target, located in the southwest region of the property, continues to confirm the high-grade nature of the deposit. Highlights from the most recent infill drilling included 29 metres carrying 18.86 grams gold per tonne, 9.2 metres averaging 7.68 grams gold, and 7.6 metres grading 6.31 grams gold.  Measured and indicated resources at Starvation stand at 455,000 tonnes grading 9.77 grams gold, while reserves stand at 329,000 proven and probable tonnes grading 9.05 grams gold.

The company is looking to get the Starvation deposit into production around September.

“It’s a pretty short development requirement to get it going,” said Randy Reichert, COO of Yukon-Nevada by phone, of the Starvation target. “There’s not much in the way of underground development.”

The company has also hit high-grade gold at its Mahala targets, sitting between and adjacent to the company’s SSX Steer and Smith mines in the centre of the property. The company drilled roughly 21,700 metres of diamond and reverse circulation drilling at the three Mahala zones in 2011.

At the West Mahala zone the company hit 64.1 metres grading 6.38 grams gold from 323 metres depth in hole 457, and 41.2 metres averaging 3.67 grams gold from 276 metres depth in hole 468. At the Mahala zone, results included 32 metres carrying 4.63 grams gold from 279 metres depth in hole 454, and 15.2 metres averaging 5.69 grams gold from 242 metres in hole 452. At East Mahala results included hole 121 that hit 15.3 metres carrying 4.77 grams gold from 291 metres depth.

“We’ve had some really good luck in West Mahala…and East Mahala,” Reichert said.

Overall the company drilled roughly 40,000 metres in 2011 that it will be incorporating into resource and reserve updates in April. Yukon-Nevada is also working to get in place a dewatering plan to incorporate even more reserves. As of a January 6 update, proven and probable reserves for the Smith, SSX/Steer, Saval, Starvation, Wright Window and general stockpiles totalled 4 million tonnes grading 5.62 grams gold for 717,000 oz. gold.

At the company’s mill and roaster, located in the northeast corner of its property package, Yukon-Nevada shut down production on January 6 to make upgrades to the dryer, fine-crushing conveying system and distributed control system. The company restarted production with both roasters active on February 3, with production for the month estimated at 9,000 oz. gold with a 3,000-tonne-per-day capacity. By March the company expects to have throughput up to roughly 3,500 tonnes per day and production up to 12,500 oz. gold.

“Production is looking good and we’re looking to have pretty decent month this month, and then a really good month next month,” Reichert said.

From there, the company will continue to ramp capacity up through the year to roughly 4,200 tonnes per day, pending permitting approval. The plant actually has about 5,400 tonnes per day of capacity but emissions limitations mean further infrastructure investments would be required to move past the 4,200-tonne limit.

Yukon-Nevada is paying for the upgrades thanks largely to a forward gold purchase agreements with Deutsche Bank. In August 2011 Yukon-Nevada closed a US$120-million prepaid deal for the delivery of 173,880 oz. gold over four years, and on February 8 the company announced a US$20-million deal to forward-sell a further 27,950 oz. gold over 43 months.  The US$20-million deal has Deutsche Bank paying what amounts to roughly US$716 per oz. upfront, and then paying the market price of gold over US$850 per oz. to a maximum of US$1,750 per oz. when the gold is delivered. The US$120-million deal is similarly structured but has a maximum gold price of US$1,950 per oz. Deutsche Bank also owns roughly 11% of Yukon-Nevada.

Reichert said the deals avoided issuing more equity, especially as the company’s share price was hurting during development, or dealing with a cumbersome bank loan.

“The [US$120-million deal], we feel, was one of the better mine financing deals completed last year,” Reichert says. “Our feeling was it was fairly low cost compared to the alternatives.”

Gold in the Jerritt Canyon ore deposits occur as free particles of intergranular, native gold, on or within pyrite, or in association with sedimentary carbonaceous material. Because of the sulphide and carbonaceous affinities, most of the gold deposits at Jerritt Canyon require fine grinding and oxidation through roasting to allow the gold particles to be liberated by standard, carbon-in-leach cyanidation.

Last year the company was buying some ore from Newmont Mining (NMC-T, NEM-N) to process at its mill, which, combined with maintenance and development work, added significantly to its production costs. This year the company will be sourcing all of its ore from its own projects and expects more stable production.

Yukon-Nevada also owns the Ketza River historic mine in Yukon, where it is working through permitting to restart the mine and mill. The project hosts 2.4 million measured and indicated tonnes grading 5.46 grams gold for 418,000 contained oz. gold in combined open pit and underground resources.

On news of the mill restart the company’s share price climbed 13¢ over two days to close at 44¢, before sliding 3¢ to 41¢ on news of the latest Deutsche Bank deal. Over the three days roughly 11 million company shares were traded, while Yukon-Nevada has 930 million shares outstanding or 1.08 billion fully diluted.