Dayton to close Andacollo mine

Slumping gold prices and low production have forced Dayton Mining (DAY-T) to shut down the Andacollo mine in central Chile. The operation is held by Compania Minera Dayton, a wholly owned subsidiary.

Mining, crushing and stacking operations at the mine have been suspended since late September.

Minera Dayton will begin to liquidate all the assets not needed for the ongoing leaching of the remaining stacked material, from which Dayton expects to produce about 25,000 oz. gold in 2001.

Minera Dayton will submit a creditors’ plan to the courts. The plan must be supported by the courts and two-thirds of the creditors, which represent more than 75% of Minera Dayton’s outstanding obligations.

At Nov. 30, Minera Dayton’s payables and lease obligations were $12.6 million. The parent company, as an unsecured creditor, is owed $1.3 million. Caterpillar Financing, which holds title to the open-pit mining equipment, is owed about US$5.7 million over the next three years and is secured by the equipment itself and a guarantee from Dayton. Dayton can elect to continue lease payments on the equipment, which is worth US$5.3 million, while it looks for a buyer.

“While preliminary agreements with a number of suppliers were reached on alternate repayment terms, it does not appear that Minera Dayton can meet these terms,” says Dayton President William Myckatyn. “The plan will determine the amount available for distribution to creditors after covering operating costs and reclamation needs and considering any asset sales.”

Andacollo’s failure is attributed to a weak reserve model at the Churrumata and Natalia open pits, which resulted in higher stripping ratios and a shortfall in the number of tonnes sent to the leach pad. Also, leaching rates for ore from the Natalia pit were significantly lower than expected.

Dayton had hoped to increase recovery rates to planned levels by installing an internal liner, but the plan proved unsatisfactory.

In the first half of the year, Andacollo produced 52,204 oz. gold at an average cash cost of US$253 per oz. — below the projected rate of 112,300 oz. for the year and above the projected cash cost of US$243 per oz. (T.N.M., Oct. 9/00).