New equipment rolls at Fort Knox

One of six new 190-ton Caterpillar haul trucks hit the dirt at the open pit Fort Knox gold mine near Fairbanks, Alaska, on Sept. 1, part of a $15 million-plus capital investment in the mine's dirt-moving fleet this year.

Fairbanks Gold Mining Inc., a subsidiary of Toronto-based Kinross Gold, has gone on a $24 million-plus equipment shopping spree this year and last, increasing capacity of the Fort Knox dirt-moving fleet by 30 percent each year.

The new equipment additions will help mine crews remove 55 million tons of waste rock in order to reach Phase-6 ore, a capital project estimated to take about two and a half years to complete, at the planned rate of 60,000 tons per day.

All six new 789 truck beds have been delivered to the mine site about 25 miles northeast of Fairbanks and are being assembled, according to Fort Knox spokeswoman Lorna Shaw. "All six trucks are scheduled to be in operation by late September/early October," she said. Fairbanks Gold Mining has ordered two more 789 haul trucks, part of the mine's equipment replacement schedule, Shaw said. Those two trucks will cost $3.5 million.

The company purchased the new Caterpillar trucks through NC Machinery, of Fairbanks.

New shovel, loader working

In addition to the large haul trucks, the company earlier this spring purchased a new Caterpillar 992G loader, capable of moving 15 cubic yards, spending $1.2 million. A rebuilt 994 loader was also purchased this year for $1.9 million, which should arrive at the Fairbanks-area mine later this month, Shaw said.

A new Hitachi EX3600 shovel, capable of moving 27.5 cubic yards of material with a single bite, was also purchased this year, for a cost of $3.8 million. Assembly of the new shovel is complete, Shaw said on Sept. 3.

"The final fire safety suppression systems are being installed," she said. "We anticipate it to be in service by tomorrow."

It's the second such large shovel recently purchased by Kinross for use at Fort Knox. In 2003, Fairbanks Gold spent $3.7 million on an identical piece of equipment, purchasing it through CMI of Fairbanks.

Also in 2003, the company purchased four 205-ton diesel over electric haul trucks and seven rebuilt over-the-road semi-trucks and trailers, used to haul ore from a satellite deposit called True North, 10 miles west of Fort Knox.

Those purchases, which totaled more than $9 million, increased the dirt-moving production at Fort Knox by 30 percent in 2003, according to a former mine manager.

The new equipment purchased this year will also bump up dirt-moving capacity again, by an estimated 20 million tons per year or more than 30 percent, Shaw said.

"The new equipment for 2004 is not scheduled to replace any current equipment," she said. "All of the equipment will be used to supplement our current capacity."

That includes two existing 23-yard Caterpillar shovels and one 23-yard loader-the bulk of loading equipment used at Fort Knox since its start-up in late 1996.

Tailings lift complete

Mine crews completed a 25-foot lift on the Fort Knox tailings dam in early August, using equipment previously worked at the mine's satellite deposit, True North.

The tailings dam project was completed "... without any accidents or injuries, on schedule despite rain and smoke delays," according to Shaw. "This was a two-year dam raise and the next lift is planned for 2006."

True North mine operations shut down in early March, and personnel and equipment moved to Fort Knox to help construct the tailings dam raise. Using those assets minimized "contract costs for construction in 2004," Fairbanks Gold said in its March press release, announcing the satellite mining suspension.

Crews returned to True North in early August, restarting operations. "We mined 163,000 tons in August, focusing mainly on waste development," Shaw said. "Mining will continue in September."

Lower production in 2004

Using True North equipment for the tailings dam project came with a cost - lowering the mine's gold production. Gold production was 22 percent lower in the second quarter and 20 percent lower in the first half of 2004, compared to the same time periods in 2003, according to Kinross' second quarter report.

"The decrease in production resulted from the suspension of mining at True North and lower mill feed grades due to the mine sequence at Fort Knox," the company said in its report.

That trend should improve in the second half of the year, Kinross said, due to anticipated higher grades of mill feed and the resumption of mining at True North.

Fort Knox produced 79,007 ounces of gold in the second quarter of 2004, compared to 101,425 ounces in 2003. While the recent quarter's gold grade fell from one gram in 2003 to 0.89 grams per tonne in 2004, gold recovery increased to 89 percent from 83 percent reported in 2003.

Total cash costs also increased in 2004 for the second quarter, to $257 per ounce of gold, from $241 reported in 2003. When including depreciation, depletion and amortization, and accretion expenses, total production costs were $356 per ounce of gold in the second quarter, compared to $340 per ounce posted in 2003.

The new dirt-moving equipment should help drop total cash costs later this year, Kinross said.

"Larger tonnage mining equipment is to be in place at the mine in the third quarter, which will improve total cash costs and increase tonnage to the mill," Kinross said, in the report.

Jumps in fuel, energy costs

Increases in Fort Knox's total cash costs were also caused by increases in fuel and energy costs, according to Kinross.

Fuel costs have increased 32 percent from one year ago, Shaw said, and electric costs have increased 21.27 percent.

"Our July bill (for power used in June) for a 29-day billing cycle was approximately $92,000 more," Shaw said, in early August. "With a full month, it will probably be close to (an increase of) $100,000."

The increase comes thanks to a temporary rate hike approved for the region's electric provider, Golden Valley Electric Association. Golden Valley requested an 8.12 percent increase and the Regulatory Commission of Alaska is reviewing the request.

Fort Knox consumes roughly 31 megawatts of power, previously spending about $1.3 million a month for that supply of electricity. The company filed an intervention with the commission over the rate increase. "Electricity is our second highest cost, only behind labor, and an increase of 21.27 percent makes an enormous financial difference," Shaw said.

Fort Knox electric bills also went up due to the fuel surcharge Golden Valley includes as part of its monthly billing. "A year ago we received a $200,000 per month fuel credit, and in the past it has been as high as $400,000 monthly," Shaw said. "Now, in addition to the rate increase, we are also paying $30,000 per month as a fuel surcharge."