Allied Nevada accelerates Hycroft mine plan

Allied Nevada Gold (ANV-T, ANV-X) is accelerating its oxide mining plan at the Hycroft mine near Winnemucca in Nevada.

The new rate would be phased in over the next two years, with production increasing from roughly 100,000 oz. gold in 2010 to over 250,000 oz. gold in 2012, and peaking at more than 300,000 oz. gold in each of 2013 and 2014. Average annual silver production is expected to surpass 1 million oz.

The accelerated oxide mine plan is designed to speed up the extraction of Hycroft’s updated oxide reserves of 2.4 million oz. gold and 32.3 million oz. silver (177.2 million tons grading 0.014 oz. per ton gold and 0.18 oz. per ton silver).

Average annual production from 2011 to 2015 is forecast to exceed 260,000 oz. gold and over 1 million oz. silver at an average cost of sales per oz. gold sold, assuming silver as a byproduct credit, of between US$425 and US$450per oz.

A sulfide scoping study developed by Scott E. Wilson Consulting suggests that a large-scale bulk tonnage open-pit mining operation is the most economic method to extract the sulfide resource while simultaneously mining the oxide ore reserve and outlines an initial development scenario for the large sulfide resource directly beneath the oxide resource.

On April 1 Allied Nevada announced measured and indicated sulfide resources of 2.5 million oz. gold and 103 million oz. silver (143.9 million tons grading 0.018 oz. per ton gold and 0.72 oz. per ton silver.) The scoping study was based on the measured and indicated sulfide resource and indicates that the sulfide project is economically viable.

Hycroft’s sulfide inferred resource was not included in the scoping study. But Allied Nevada’s management is confident that resources will continue to be upgraded through additional drilling and metallurgical work.

Life-of-mine production is expected to be 3.3 million oz. gold and 78.4 million oz. silver with average annual production of 275,000 oz. gold and 6.5 million oz. silver and a mine life of about 12 years.

The current oxide reserve is sufficient to support the accelerated mining rate until 2015, but management says it is confident that exploration will continue to convert oxide resources, extending the mine life. Additional optimization opportunities, such as in-pit backfilling and a conveying system, also may be implemented.

The life-of-mine average strip ratio has declined to 1.15:1 compared with 1.27:1 in the life-of-mine case presented in the May 2009 technical report.

This accelerated plan assumes that by 2012, an average mining rate of 80 million tons per year can be achieved, and includes 37 million tons of ore and 43 million tons of waste with roughly 30% of the ore being crushed.

The total capital needed for the accelerated mining plan is estimated at roughly US$212 million. “This is favorable in comparison with the US$221 million in capital required over the current life of the mine,” if it was to continue mining the 2.4 million oz. of oxide reserves at the current rate, the company notes in a press release.

Initial capital of about US$180 million, spent over the first three years, is for the inclusion of a larger capacity mining fleet (US$130 million), leach pad expansions (US$20 million), mobile crushing units (US$14 million) and modifications to existing infrastructure such as the process plant and refinery (US$12 million).

The ore would be processed at either the oxide (heap leach) processing facility or at the sulfide/oxide milling facility. Allied Nevada prefers a 30,000 ton per day milling and flotation process facility at an estimated capital cost of US$260 million, which would be comprised of a primary crusher, semi-autogenous grinding mill, two ball mills and a flotation circuit.

On average roughly 1,500 tons of concentrate per day would be produced and shipped off-site for final processing. The annualized mining rate is expected to be about 76 million tons, including about 29 million tons of ore and roughly 47 million tons of waste.

A feasibility study related to the sulfide measured and indicated resources can be completed in the first half of 2011. The estimated cost to complete the feasibility study is US$10 million and will be spent over the next 12 to 18 months.

At presstime in Toronto, Allied Nevada was trading at $16.80 per share. The company has traded in a 52-week range of $6.34-17.12 per share and has 73.9 million shares outstanding.




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