Small mining projects still moving ahead

The Relief Canyon Mine in Pershing County hasn’t been in production since 1989. Pershing Gold hopes to change that starting next year.

Relief Canyon is one of several smaller northeastern Nevada mines nearing startup. Midway Gold in September began placing ore on leach pads and expects to pour dore´ bars before years end at its Pan Mine in White Pine County 50 miles west of Ely, and Klondex Mines of Sparks is sampling bulk ores at its high-grade Fire Creek mine in Lander County at the junctions of the Northern Nevada Rift/Battle Mountain Trend.

Junior miners such as Midway and Pershing Gold are having success bringing their new small- to mid-sized projects online because smaller mines don’t require hundreds of millions in startup capital for large-scale mining and processing equipment or ore-crushing facilities. Pershing Gold owns a fully permitted processing mill located a short mile from the main pit at Relief Canyon, and Midway Gold sought just $99 million in capital to develop Pan, a cost that was reduced when it brought contract miner Ledcor aboard this summer.

And the mines themselves typically follow well-designed roadmaps, says Stephen Alfers, president and chief executive officer of Pershing Gold.

Unlike the state’s older — and much, much bigger — mines on the Carlin or Battle Mountain trends, smaller startup mine sites on virgin ground pretty much follow a pre-engineered plan that can take a lot of the risk out of development.

“Projects like these generally can perform pretty much like they are planned because of the economic and engineering work you do ahead of startup,” Alfers says. “When planning for costs, production and recovery rates, these mines can outperform much bigger ones because new mines generally start out as they are designed.”

Many of the massive mines on the Carlin Trend, on the other hand, have been in production for several decades or more, and miners now are working with ores types that are much different than when the project started. When that’s the case, miners oftentimes must haul the different ore types to processing facilities located at different sites so the ores can be properly processed. Conversely, smaller mines can be optimally designed to capitalize on nearby resources, equipment and labor.

“If it’s not working efficiently, there is something wrong with us,” Alfers says. “It is a somewhat easier task to engineer a small mine than more larger projects that are creating operating challenges all the time.”

Commodities prices also can greatly affect the performance and economic viability of a new mine — but near-surface deposits such as the Relief Canyon mine and Midway’s Pan project benefit from easy access to revenue-producing ores since hundreds of feet of waste rock doesn’t have to be stripped off to reach paydirt. Stripping can dramatically change total mineral production costs.

Jamie Wells, vice president of investor relations with Midway Gold, says Pan’s lack of stripping to reach the ore is but one piece of the overall equation Midway had to put in place to attract financing.

“You have to look at the entire equation,” Wells says. “At Pan, yes it’s low grade but there’s no strip We look at how easy it is to recover the gold, and we won’t have to crush when we start.

“The deposit also is formed in ridge, so over 60 percent of our hauls are downhill, which cut costs. When you add up the pieces you have an equation that makes it work in this environment — it’s a low-capex, easy open-pit heap leach project.”

The Pan project also is located fairly close to Ely and Eureka, Wells adds, and the easy access to labor and infrastructure to serve the mine further reduces costs. Midway expects to employ about 50 to 60 employees, and as many as 120 total with its contract mining workforce.

Other challenges for exploration companies on track to become junior miners is the sheer length of time it takes to navigate the protracted permitting process and to continue accessing capital during a marked minerals downturn. That downturn, Wells notes, has been a bit of a blessing because there is more labor available today in the limited markets of White Pine and Eureka Counties.

The downturn in commodities prices also can affect the economic viability of small projects, says Pershing Gold’s Alfers says. Gold prices dropping to $1,200 could prove fatal to projects with high all-in production costs.

Pershing Gold recently received finally permitting to start mining within existing disturbance areas, and Alfers expects to announce a startup date in first quarter of 2015. Even though his company could begin mining anytime, it’s important to continue defining mineral reserves so that when mining does resume there’s a steady throughput of ore going through the mill to optimize production rates, he says.

Relief Canyon is a special project, Alfers notes, because of the fully permitted, fully constructed processing facility within a mile of the open pit mine. The facility is scalable to support much larger mining operations, and Pershing Gold plans to keep drilling at the site to expand reserves and resources to feed the mill.

“It is a special opportunity and a different kind of challenge,” he says. “I don’t need $120 to $150 million to build a facility; it gives us quite and edge.”