More cost overruns at Golden Bear

“After all the project has been through, it’s great to be so close to production,” said Jack Thompson, president of North American. The mine project, a 50/50 joint venture with Chevron Resources, is managed by North American with help from its 73% parent, Homestake Mining (NYSE).

Sized at 360 tonnes per day, the plant will use the latest in extraction technology to recover over 90% of the high grade gold contained in the ore. The plant will use dry grinding, fluidized bed roasting and carbon-in-pulp leaching to produce an average of 60,000 oz of gold per year.

Some portions of the circuit are being tested prior to ore feed and sufficient ore has already been mined and hauled to the mill for this winter’s milling. Open pit mining by contractor Tahltan-Stewart (primarily staffed by Tahltan tribal members) has been in progress for most of the summer, and production is ahead of schedule at a higher grade than anticipated.

Although encouraged by the progress on site, Thompson was less positive about the latest capital cost projection which indicates an additional overrun of 12-15% over the $70-million budget.

“The project was already burdened by high capital costs,” he noted. “At this late stage our effort is directed at completing construction and reaching production as soon as possible.” The partners put construction on hold late in 1988 pending a re- evaluation of the project when it was l earned that capital and operating costs would be significantly higher than originally anticipated.

In April of this year the companies decided to proceed with construction of the mine which has proven reserves for five years of operation at a head grade of 0.543 oz gold per ton. At the time, Thompson stated that prospects for finding additional ore along strike and at depth “appear excellent.”

The latest overrun was attributed to a variety of reasons. North American said the project engineering firm underestimated the number of construction man hours required to complete the job, and road maintenance and repair costs were increased to correct deficiencies left by the road contractor.

Changes in scope such as the addition of a mine haul road added to costs, and site construction problems required additional control measures such as groundwater drainage systems at the mill building and tailings ponds.

The drop in gold prices reduced anticipated credits from gold production during construction and commissioning, and the time taken to re-evaluate the project affected project costs more than expected. Though the project schedule was unchanged, the company said construction was compressed and that led to higher manning levels and more overtime pay.

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