U.S. REPORT Galactic pours first gold at Ivanhoe on modest scale

The Ivanhoe gold project sits at the northern end of the Carlin trend, a block of Nevada wilderness now famous in mining circles around the world. The trend is host to such large producers as Newmont Gold, which produced over 1.4 million oz. gold in 1989 from a cluster of operations on the trend. At an initial production rate of about 60,000 oz., Galactic Resources (TSE) is starting operations at Ivanhoe on a somewhat smaller scale than the Newmont’s pits some 12 miles to the south. Technically, the Ivanhoe project is a joint venture with Cornucopia Resources (TSE), but a proposed amalgamation of the two companies should result in the project being 100% owned by the surviving Galactic by year-end.

In explaining Galactic’s basic strategy in developing the Ivanhoe project, Ray Hughes, vice-president of corporate development, said the mine was developed on the premise that it would still be profitable if the price of gold dropped to US$300 per oz.

To this end, the mine’s capital cost was kept as low as possible, and financing expenditure to a minimum. Cash cost per ounce is estimated at US$247, not including interest or exploration costs.

To keep capital costs down, the company is developing the property in phases, beginning with the mining and heap leaching of the USX East and West zones. The two zones contain minable reserves of four million tons grading 0.047 oz. gold per ton with an overall stripping ratio of about 4.6-to-1.

Again, to keep capital costs at a minimum, a contract miner was hired to handle the pre-stripping, mining, crushing, agglomerating and stacking operations.

The contractor, Ledcor Industries, broke ground on March 26, completed the 5-million-ton pre- strip by July 23, and began crushing operations on Sept. 5.

Ivanhoe Gold, the operation subsidiary for the joint venture, handles down-stream operations from the stacking stage. This primarily involves running pregnant solution collected from the pads through carbon columns. Since a refinery was not built on site, the loaded carbon is shipped to a contract refiner.

The first bullion was poured on Oct. 17, resulting in a dore bar weighing 539.64 oz. and containing about 517 oz. gold.

The capital cost for the first phase of the project was about US$11.2 million, which included the pre- strip, construction of 1.3 million sq. ft. of pad (sufficient for phase one), plus the pond and plant facilities.

Gently rolling hills surround the mine site, so much of the pre-strip waste was used as fill material. A causeway was built between the pit and plant areas and as much as 30 ft. of fill was required for construction of the leach pad base.

The majority of the first-phase reserves are located in the USX East zone with 3.3 million tons grading 0.047 oz. gold per ton.

The mining fleet consists of a 13-cu.-yd. loader and 85-ton trucks.

At the time of The Northern Miner’s visit to the property, the pit area was inactive. This was due to a larger than expected amount of ore in the upper benches causing a bottle-neck in the crushing operation.

Since waste mining operations continued, a number of “ore islands” were left on the pit floor, each capped with numerous small colored flags. There is no visual differentiation between ore and waste, so Ivanhoe uses small colored flags to denote the two for the loader operator. Currently, samples are sent off-site for assay but the company is in the process of completing a full assay lab on site.

The Ivanhoe property encompasses 168 square miles of ground giving the exploration team, Donald Hruska and Rosalie (Rosie) Moore, enough prospective ground to last a lifetime.

Moore said the primary exploration method is geophysics since much of the area is covered with tertiary volcanics. The two are finding the use of E-scans, which measure resistivity on a grid rather than a line, to correlate well in identifying the known deposits on the property.

A number of targets have been drilled, resulting in some high- grade sulphide intercepts that, the company believes suggest, the presence of high-grade feeder zones.

The exploration budget for the coming year is US$1 million and will include further geophysics and target drilling.

Financing for the first phase of operations was arranged through a US$10-million loan at Libor plus 1.625% and convertible into gold at the joint venture’s option. The conversion price of the loan is to be based on the prevailing price of gold at the time of the conversion, as would the interest rate. The principal is repayable in 20 equal monthly instalments commencing July 31. Three payments on the loan have been made bringing the principal down to US$8.5 million.

Phase two of the mining plan has not yet been given the formal go-ahead by Galactic’s board, although Hughes believes it is a foregone conclusion.

The capital cost of the second phase is estimated at US$750,000, primarily involving the construction of an additional pad. The company may also build an electrowinning plant on site in conjunction with the second-phase expansion but no cost estimate was given.

Phase two includes the mining of the Velvet and the Butte No. 1 zones and the extension of the USX pits to the north into the Clementine zone.

The Clementine zone is divided into two phases. The first contains a minable reserve of 4.3 million tons grading 0.036 oz. gold per ton at a stripping ratio of 3.6-to-1 while the second phase includes a minable reserve of 2.7 million tons grading 0.040 oz. at a stripping ratio of 4.2-to-1.

The Velvet and Butte No. 1 zones add a further 3.1 million tons of reserves grading about 0.04 oz. gold to the total.

At the current mining rate of about 200,000 tons per month, first- phase mining will exhaust reserves in October, 1991. A decision on the next phase is therefore imminent.

If Galactic does elect to proceed with the second phase, there is one hurdle remaining — approval from government authorities.

The company must still satisfy archaeological agencies regarding a number of sites on the property where natives had ancient quarrying operations. The quarried stone was used to make tools and weapons. Archaeologists want to ensure that the sites do not represent a quarrying method previously not seen.

Hughes indicated that he would like to see government approval by February at the latest to ensure the second phase is operational by the time the first phase runs out of ore.