The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
In an effort to raise money to pay debt, Teck offers to sell gold assets; acknowledges current discussions with potential buyers
Burdens of plummeting base metal prices, a restrictive credit market and the need to repay a multi-billion-dollar bridge loan have prompted Teck Cominco Ltd. to move ahead with sales of its gold assets, including its share of the Pogo underground gold mine in Interior Alaska.
During a presentation given at the Macquarie Global Base Metals Outlook Conference 2008 in December, Teck President and CEO Don Lindsay said: "Sale of non-core assets provides another good source of raising cash to reduce our debt.
We have talked about the possibility of selling our gold assets for some time now, but one key factor in this in the past was that we really didn't have any immediate use for the cash.
Obviously that situation has now changed.
We kicked off this process by announcing the sale of our interest in the Lobo-Marte resource.
Although only $110 million for our share, I suspect many of you had not been very aware of this asset, or assigned much value to it.
We have a number of other attractive gold assets, and we are currently in discussions with several interested parties."
Strong interest in gold assets
During a Feb. 17 teleconference Lindsay said Teck has received indicative offers for Pogo as well as its other gold assets and the Canada-based miner is in discussions with potential buyers.
"We have strong interest in all of these assets and indicative offers have been received," Lindsay explained. "We are advancing discussions with potential purchasers but these things take time to complete. Unfortunately we won't be able to tell you much more until we complete the transactions and have something to announce."
The Teck CEO indicated that the sales will be completed sooner rather than later, telling investors the gold asset sales will likely be completed prior to the liquidation of other assets.
In addition to Pogo, Teck is looking for buyers for its Hemlo gold mine in Canada, its Morelos gold deposit in Mexico and its exploration projects in Turkey.
By the numbers
Pogo, Alaska's second-largest gold producer, recovered 347,219 ounces of gold in 2008. This was slightly more than the 340,000 ounces of gold projected by Teck, which owns 40 percent of the underground mine with the remaining 60 percent held by companies within the Sumitomo Group.
The high-grade gold mine, located about 110 miles southeast of Fairbanks, has largely overcome early setbacks that it suffered when it first came online in early 2007. In 2008 Teck had realized its first annual profit from Pogo, reporting a profit of C$23 million (after pricing adjustments) for 2008 compared to a C$1 million loss the year before.
Operating costs at Pogo decreased to US$464 per ounce during the final three months of 2008, compared with US$515 per ounce during the same quarter a year earlier. The company got US$798 per ounce for the 89,000 ounces it sold in the fourth quarter of 2008, raking in $5 million, up 150 percent from $2 million in operating profit during the same three months of 2007.
Higher grades, lower recoveries
In Teck's year-end report, the company said higher-grade ores that it ran through the mill at Pogo in the fourth quarter of 2008 were partly offset by lower mill recoveries primarily in the sulfide flotation circuit.
The mill recoveries in the last three months of the year were 81 percent down from 87.6 percent reported for the fourth quarter of 2007. The average recovery for 2008 was 83.8 percent. Teck said metallurgical test work is being completed to identify the problem.
The 2,500-metric-ton-per-day mill at Pogo ran at near its design capacity in 2008, processing more than 2,240 tons of ore per day or about 218,000 tons for the year.
The recovery rate for the year is reported to be 83.8 percent. About 60 percent of the gold is recovered with a gravity circuit. Overflow from the gravity plant feeds a flotation circuit; the concentrate is then reground and passed through a carbon-in-pulp circuit.
Drilling continues
The 41,250-acre, or 16,700-hectare, Pogo property has an estimated 10-year mine life based on current reserves. The high-grade gold deposit occurs as two stacked shallow-dipping quartz vein systems known as L1 and L2.
The layers of mineralization are generally 4 meters to 12 meters, or 13 to 39 feet, thick. A deeper third vein system known as L3 also has been encountered and further drilling is under way to determine its significance. Drilling continues to expand and define the high-grade gold deposit at Pogo.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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