Allied Nevada Gold Corp. last week announced several key changes in its mill expansion plan for its Hycroft mine 54 miles west of Winnemucca, but the price tag of expanding the mill still is in the billion-dollar range.
The gold miner headquartered at South Meadows says it needs to raise as much as $1.23 billion in capital to build a mill capable of processing the three different types of ore mined at Hycroft. Allied Nevada expects to fund the expansion through equity or by finding a joint-venture partner, Vice President and Chief Financial Officer Steve Jones said last week during a conference call announcing the results of a prefeasibility study conducted by M3 Engineering and Technology of Tucson.
Allied Nevada needs about $900 million to complete the first phase of the project and an additional $422 million to complete the second phase. The expansion, expected to take 36 months to complete once ground is broken, significantly increases ore throughput to 60,000 tons per day initially and doubles it to 120,000 tons per day once the second phase is online. The initial phase would take about two years to complete, Allied Nevada President Randy Buffington says, because of the amount of infrastructure needed be built and tons of concrete to be poured.
The mine plan Allied Nevada had announced several years ago called for production of concentrates that would be shipped to an autoclave or roaster for further processing. The new Ambient Alkaline Oxidation mill instead would produce dore´ bars, which reduces the risk of the project, Buffington says.
“The biggest change was removing the autoclave from the plan. The project is really quite simple. The new flow sheet allows the project to run for a long time and gives us the flexibility to take advantage of the resource we have in front of us at a very low cost of operation. It’s a great project in today’s environment.”
Jones says that once Allied Nevada hits 60,000 tons of throughput it can produce 450,000 ounces of gold the first year, and in years two through six production increases to about 800,000 ounces of gold and 21 million ounces of silver — making Hycroft one of the largest silver mines in the world.
Jones acknowledged that the biggest question facing Allied Nevada is paying for the proposed expansion. Allied Nevada has engaged Credit Suisse Securities and is in the process of finalizing an engagement letter with Scotia Capital Inc. to assist with financing for the expansion project.
“We know we can’t finance this off our balance sheet alone, that is not lost on us, and that’s why we will be actively seeking investment partners to assist us,” Jones says. “We are just beginning the process, and will see where process takes us.”
Assuming it can secure financing for the project, Jones says there’s still about five months of detailed engineering work to be completed before Allied Nevada can break ground. The earliest the expansion project could begin is in January, Jones says.
Allied Nevada had a turbulent year in 2013. Its stock price plummeted from more than $31 a share to just over $3. Allied Nevada’s debt at the end of 2013 was $623 million — $400 million in senior notes and the rest in capital leases.
Despite the troubles of the past year, Buffington was confident about the economics of the new expansion plan.
“I have said over and over again this is a project that will be built — it is a long-life, low-cost, low-risk project located in Nevada, a great place to do business if you are in the gold business,” he says.
Allied Nevada recorded record production in 2013 of 181,941 ounces of gold and 858,073 ounces of silver at Hycroft.
Allied Nevada began mining at Hycroft in 2008. The site had been operated by Vista Gold, which had ceased operations at Hycroft in 2003.