VANCOUVER — For US$660 million Alacer Gold (TSX: ASR; US-OTC: ALIAF) could add a sulphide circuit to its heap-leach Copler (“Çöpler” in Turkish) gold mine in Turkey, an expansion that should pay for itself in the first two years of a 20-year mine life.
Alacer has been producing gold from oxide ores at Copler since 2012. The property also hosts a large sulphide resource, but the ore is refractory. That means its gold cannot be recovered via conventional flotation.
There are proven methods to liberate gold from refractory mineralization, but several such operations have suffered spectacular failures. This is why Alacer took great care in developing the sulphide expansion plans for Copler, which it has just laid out in a feasibility study.
“The definitive feasibility study confirms that pressure oxidation is not only the best solution for processing the sulphides at Copler, but that it is also robust and financially attractive,” Rodney Antal, Alacer’s CEO, said in a conference call. “We have completed exhaustive studies over the last three years, including a number of technical peer reviews. It is worth emphasizing that we’ve really taken the time to make sure we’ve gotten this right.”
The plan is to use whole-ore pressure oxidation (POX), which Alacer’s metallurgical work has shown recovers 94% of the gold from Copler‘s sulphide ore.
The planned sulphide circuit would churn through 5,000 tonnes of ore per day. For the first two years the heap leach will continue operating, though tonnages will slide over time from the current 17,000-tonne-per-day throughput.
Together, the heap-leach and POX circuits would produce 3.2 million oz. gold over a 20-year mine life, or an average of 160,000 oz. a year. The all-in cost to produce each ounce would average US$801.
Three open pits are being mined at Copler. Over the life of the sulphide projects these three pits would merge into a single pit, with an average strip ratio of 3.1 tonnes of waste to 1 tonne of ore.
The POX plant would process 5,000 tonnes per day. The process sees ore crushed and milled to a slurry with water and treated with acid to reduce carbonate levels. From there the slurry enters an autoclave circuit made of seven pressure vessels.
In the vessels the sulphide minerals react with oxygen at high temperature and pressure. The gold remains on the solids, which are processed via conventional cyanide leach and carbon-in-pulp recovery. The copper stays in the liquids, which is treated with a reagent to produce a smelter-ready concentrate.
Steam from the process is recycled to preheat the slurry. In fact, the entire process is autogenous, with the exothermic oxidation reaction providing all the energy required to maintain the process.
“There is nothing new to this technology — the critical point is that it’s been used by a number of operators and has been in use for twenty years,” Antal said.
Expanding the mine into the sulphide resource also boosts life-of-mine oxide gold production by 24% or 134,000 oz. by providing access to otherwise inaccessible oxide mineralization.
To build the sulphide system is expected to cost US$660 million. Using a US$1,300 per oz. gold price and a 5% discount rate, the incremental cash flow from the sulphide expansion versus the oxide-only operation carries a US$627-million after-tax net present value (NPV) and should generate a 20% after-tax internal rate of return (IRR). The expanded oxide-sulphide Copler mine offers a US$926-million after-tax NPV.
This healthy anticipated IRR means the expansion would pay for itself in 1.7 years.
One reason for the strong returns is that Alacer is already stockpiling sulphide ore at Copler. In March the suphide stockpile stood at 2 million tonnes grading 4.9 grams gold. By the time the sulphide circuit starts up in late 2017, Alacer expects to have 9 million tonnes grading 3 grams gold on the sulphide stockpile ready for processing.
“The feasibility study has proven the viability of the sulphide project, and with our current cash position . . . we could start construction tomorrow without the need for any additional funding,” Antal said. “However, our work is not done. As the project moves into basic engineering we will continue to pursue ways to derisk and optimize the project.”
At the end of March Alacer had $294 million cash-on-hand.
Alacer aims to start construction on the expansion in the second quarter of 2015.
Meanwhile the company must earn environmental approval and secure a range of permits. Having been through the Turkish regulatory process once already to permit the oxide operation at Copler, and given that the expansion would be a brownfields situation, Alacer does not foresee permitting challenges.
Alacer also updated the Copler resource and reserve estimates. Gold grades rose across both oxide and sulphide tonnages, with the average oxide grade climbing 34% and the average sulphide grade rising 14%. The increases were expected, as Alacer has been encountering higher-than-expected grades since it started mining at Copler.
Overall, the deposit contains 7.8 million measured and indicated oz. gold resource, of which 3.84 million oz. transfer into the reserve category.
Oxide resources stand at 69.5 million measured and indicated tonnes grading 1.08 grams gold, 2.78 grams silver and 0.15% copper, plus 28.9 million inferred tonnes averaging 0.97 gram gold, 4.58 grams silver and 0.11% copper. The sulphide resource totals 83.4 million measured and indicated tonnes grading 2 grams gold, 5.71 grams silver and 0.11% copper, plus 22.9 million inferred tonnes averaging 1.92 grams gold, 10.85 grams silver and 0.15% copper.
As for reserves, Copler is home to 26.2 million proven and probable oxide tonnes grading 1.32 grams gold, 2.88 grams silver and 0.13% copper; and 31.7 million proven and probable sulphide tonnes at 2.67 grams gold, 7.02 grams silver and 0.12% copper.
Antal stressed that the sulphide expansion plan has been part of Alacer’s transformation this past year.
“Back in September I laid out an action plan with five key elements, and I’m glad to say that we’ve already delivered on four of those,” Antal said. “We’ve continued our solid oxide production profile through 2017, and we sold our Australian business unit. It had been confirmed that the pressure oxidation was the preferred processing solution for the sulphide ore at Copler, and last year we achieved record oxide production of over 217,000 oz. We did all of this while focusing on overhead costs, which were reduced by over $16 million.
“Today’s announcement is about the fifth of those five key elements — the release of the definite feasibility study.”
Copler is in east-central Turkey, 120 km southwest of the city of Erzincan. In 2013, its second year of operation, Copler’s production jumped 44% to 216,850 oz. gold, produced at an all-in average cash cost of US$864 per oz. The mine generated a US$112-million net profit.
Alacer owns 80% of Copler, in partnership with Lidya Mining. Lidya is a subsidiary of Çalik Holding, a large Turkish conglomerate with interests in mining, textiles, energy, construction, finance and telecommunications.
On news of the Copler sulphide expansion study, Alacer’s share price lost 3¢ to close at $2.64. The company has a 52-week share price range of $1.95 to $3.65, and 290 million shares outstanding.
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