The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
As junior considers mining the 20-million-ounce gold resource at Livengood, founder Pontius makes room for operations leadership
The Money Knob deposit at International Tower Hill Mines Ltd.'s Livengood Project ranks among the top 2 percent of gold discoveries made globally during the past 20 years - a far cry from the prospect a newly-formed junior inherited from AngloGold Ashanti Exploration Inc. in late 2006.
"The Livengood Project from 'Day One' really felt to me like we were on top of a very large gold system, so I was very committed to the project," Tower Hill CEO Jeff Pontius told Mining News during a May 10 interview.
"When Anglo decided they were going to redirect their exploration funding to different areas of the world in 2006, to me it looked like a great opportunity to do two things: One, to get my hands on Livengood and to start a junior gold exploration company, which is something I always had wanted to do; and two, to get to go through the experience of developing a major gold deposit again.
It is a very exhilarating experience to do that.
They don't make anything (else) that provides that kind of thrill and excitement."
It did not take Pontius and the team of AngloGold geologists that joined him to launch Tower Hill long to realize they were onto something big at the Interior Alaska gold prospect. Based on the first 39 holes tapped into the intrusion-related deposit, the young company put together an inaugural resource of 1.9 million ounces of gold at a grade of 0.71 grams per metric ton (at a 0.5 g/t cut-off grade) early in 2008.
Three years later, Tower Hill has expanded that initial gold resource estimate for the appropriately named Money Knob deposit by seven-fold. The aggressive junior is not only rapidly adding ounces, but is also moving gold up the value chain as it begins to consider building a mine at the Interior Alaska project.
"It worked out well for them (AngloGold) I think, so it was really a win-win situation for both of us. We got to go forward and do what we like to do best, myself and my exploration team that came with me from Anglo, and Anglo got exposure to a major new discovery," Pontius explained.
A resource released by Tower Hill in April outlines measured and indicated resources of 10.6 million ounces of gold at an average grade of 0.83 g/t, plus 2.7 million ounces of inferred gold resource at an average grade of 1.11 g/t (at a 0.5 g/t cut-off grade.)
At a 0.3 g/t gold cut-off - which is around the average grade considered in a 2009 preliminary economic assessment for a heap leach operation - the deposit tops 20 million ounces of gold.
"I have always had great faith in Livengood, so it was no surprise to me that we had a significant gold deposit there. I have got to say I am very pleased with how large it has become and the potential it still has within it to continue to grow," Pontius said.
Pontius steps aside
While the Tower Hill geological team continues to add gold to the resource at Livengood, the company is moving the project toward development. Toward this end Pontius is relinquishing his role as chief executive of the junior exploration company that he founded to make room for James Komadina, who has held senior management positions with major gold producers including Gold Fields, AngloGold and Newmont.
Pontius said the incoming CEO's 32 years of experience in project development, construction and operations will provide the leadership that the company needs as it moves Livengood towards becoming a major gold mine.
"The appointment of Jim Komadina as the new CEO of International Tower Hill Mines marks an historic transition for the company as we advance toward becoming a North American mid-tier gold producer. Jim's exceptional large project design and operations experience at multiple major gold projects, along with his corporate merger and acquisitions experience, ideally positions him to lead our company to its next level of growth," Pontius said of his successor.
Pontius and Komadina have a history that goes back more than a decade when the two worked together at AngloGold's Cripple Creek gold mine in Colorado. At the time Komadina was president and CEO, North America, for AngloGold, and Pontius was part of the exploration team at Cripple Creek.
"We worked together on this major project, which is Cripple Creek - a pretty amazing mine, pretty low-grade, and we developed it in (a) US$350 (per ounce) gold environment. He is very good at getting things on time and hopefully at the lowest possible cost," said Pontius.
He said Tower Hill's commitment to build a top-tier operation at Livengood and the financial wherewithal to pull it off were two key factors in attracting Komadina to the company. The real clincher was the team that the junior has assembled to develop the project.
"Really the thing he wanted to see is the team that we had in place up in Alaska - he is very impressed with the guys that we have. It is certainly not everybody we need, but it is a great start, and he has a lot of respect for those guys," Pontius explained.
Tower Hill began assembling the operations team for Livengood early in 2010 by hiring Carl Brechtel as its chief operating officer and later elevating him to president of the company.
Brechtel, who spent the previous 12 years working for AngloGold in various mining project development roles around the globe, brings mine development and operations team-building expertise to the Livengood project.
Karl Hanneman, who holds a mine engineering degree from the University of Alaska Fairbanks, joined Tower Hill in May 2010, as the Livengood project manager.
From 1998 to 2004 he served as Teck's Alaska Regional Manager during the exploration, development, and permitting of the Pogo Gold Mine. In a more recent role as director of corporate affairs for Teck, he was the senior corporate representative in Alaska, providing strategic guidance on governmental, regulatory, permitting and community issues related to the Red Dog Mine.
Hanneman's vast Alaska-based mining experience is proving to be valuable as the company moves the project toward permitting.
In March of this year, Tower Hill added to its management's breadth of Alaska and mine building experience by hiring former Alaska Department of Natural Resources Commissioner Tom Irwin as Livengood construction manager.
Prior to his public service, Irwin spent more than 35 years, optimizing, operating and permitting major mining projects - including the engineering and design of Kinross Gold Corp.'s Fort Knox Mine located about 60 miles, or 100 kilometers, southeast of Livengood.
The company also hired Richard Moses and Keith Malone, both with extensive backgrounds in Alaska mining, to the operations team.
"I am very pleased to be joining such a dynamic and well-positioned team at ITH with a truly world-class gold project at Livengood," said Komadina of his appointment. "I look forward to developing a major new North American gold project as well as leading the company to its next level of success. I see a number of opportunities to grow and develop both the Livengood project and the company as a whole, and will be focused on building value for ITH shareholders."
Continued growth
Though Tower Hill has delineated a world-class deposit at Livengood, the junior has continued to pursue an aggressive drill program, budgeting C$10 million for its 2011 exploration program.
About 45,000 meters of this year's C$10 million exploration program is focused on expanding and upgrading the Money Knob deposit's resource;, the balance of the budget, about C$2.4 million, will be spent on geophysical work and a 10,000-meter drill campaign to investigate the district-scale potential of the entire 145-square-kilometer, or 56-square-mile, Livengood property.
Much of Tower Hill's early season resource expansion program is focused on upgrading the resource in and below the Core Zone, the highest grade area of Money Knob. This drilling is highlighted by hole MK-RC-504, which cut 33.5 meters averaging 8.07 g/t gold starting at a depth of 80.8 meters.
While hole 504 is the best intercept to date at Livengood, many of the Core zone infill holes returned intercepts well above the average grade at Money Knob, including:
MK-RC-0477, which cut 94.5 meters averaging 1.94 g/t gold;
MK-RC-0480, which cut 45.7 meters averaging 2.07 g/t gold;
MK-RC-0481, which cut 68.6 meters averaging 1.36 g/t gold; and,
MK-RC-0485, which cut 93 meters averaging 1.24 g/t gold.
Many of the reversed circulation holes drilled in Money Knob's Core and Southwest zones have bottomed out in gold mineralization with higher grades than the deposit's average. This high-grade zone below the approximate 300-meter reach of the RC rigs is one of the targets of the 2011 program.
"We have a very exciting exploration program going on this year - looking for new deposits along trend to the northeast as well as looking at what is happening deeper in the deposit, which is certainly something that is looking pretty exciting to us," said Pontius.
Due to the characteristics of the rock at Money Knob drill crews have had a hard time reaching this promising zone, but Pontius said about five holes have reached the targeted depth and assay results are expected soon.
"From a geologist's perspective, they look interesting and they look like they have a shot to be in the zone," he said.
The district-scale program at Livengood is looking for additional targets along trend. These include some promising targets to the northeast and west of Money Knob.
Surface exploration is ongoing as new targets are being developed to the northeast and west of the known deposit.
"The exciting thing, I think, is we are going to step out to the east-northeast along trend and start to look for other mineralized zones out there. It is wide open in my mind, and it is a great opportunity to find something new. So that will be really exciting," Pontius said.
"We will be starting geophysical programs here very shortly. It will be mapping the subsurface geology out in that direction and then we will shoot to start drilling in early June on some of the first targets," he added.
Livengood Chief Geologist Chris Puchner is excited about an area about 500 meters west of Money Knob.
"Chris and the guys have got an interesting target that is a bit further over, maybe about another half-kilometer to the west, and we will be addressing that target this summer. It is basically defined by a linear zone of quite good soils that trend up there. It is about halfway between the Southwest Zone and the highway," said Pontius.
Mining options
While Tower Hill geologists continue to expand and increase the confidence level of Money Knob and look for new deposits, the operations team is working on a prefeasibility study due out by the end of 2011.
A preliminary economic assessment completed in August envisions a heap leach pad and mill operation similar in scale to those at Fort Knox Mine. Processing 81,000 metric tons of ore per day, this size operation would produce about 504,000 ounces of gold annually over a 21-year mine life.
According to the PEA, building a Fort Knox-size mine at Livengood would cost around US$1.385 billion, with an additional US$450 million in life-of-mine sustaining capital costs. The figures used in the assessment include a 25 percent contingency on capital costs, a number that should decrease as the mine plan becomes more certain.
Though the PEA demonstrates that a clone of the Fort Knox mill and heap leach operation at Livengood is economical, this will likely not be the operation that Tower Hill ultimately builds to mine the gold deposit. The company has kicked around a few alternatives, including starting with a heap leach-only operation and later building a mill or scaling up the size of the mill.
"The base-case we put in there was basically cloning the current Fort Knox operation and sticking it at Livengood. One of the drawbacks that we saw is that Livengood is considerably bigger than Fort Knox and so it had such a long mine-life, it didn't produce as good financial results as it could have if (we) would have increased mill production to compress that 21-year life," Pontius explained late in 2010.
Indications are that a hybrid of these two scenarios is emerging as a preferred option at Livengood.
The emerging plan would be to develop the project in four stages. Starting with a 50,000-metric-ton-per-day oxide mill, projected to churn out some 500,000 ounces of gold annually, the company would then add a heap leach component and then bring online a second 50,000 tpd mill for processing sulfide ore. The final stage of the plan would be to up the sulfide milling capacity to 100,000 tpd by converting the oxide mill. The company estimates at peak performance the Livengood Mine would be producing some 800,000 ounce of gold per year for more than five years based on current resources.
One of the key drivers for building a mill first is the zones of near-surface, high-grade oxidized mineralization.
"We get quite good recovery, particularly in the oxide zone, if we can utilize a mill process," Pontius explained. "The last thing we want to do is pile that on a heap leach (pad) and get penalized 25 percent."
Livengood is particularly suited for the larger scale operation under consideration. Not only is it an enormous orebody, it has a low ore-to-strip ratio and large mineralized units.
"The strip ratio is approximately 1-to-1 in the deposit and affords us with a great opportunity to scale this operation up and compress the mine-life, which should improve the overall economics of the project," Pontius said.
He said it is still too early to speculate on when the Tower Hill operational team will have a project ready for permitting, but it is speculated that it could happen as early as 2012.
"Let us see what comes out of the prefeasibility, but we are expecting that the study will give us a configuration of a project we would like to build, and so once we have that we will have a footprint and once we have a footprint of the impact the project will have then we can start to put together the plan we will have for permitting. It should come in fairly short order," he said.
Adding, "We will definitely want to get input on our plan from all of the stakeholders in the area - the communities, the state, regulatory agencies - before we kick off our permitting. We will want to get everybody's input on that and come up with the best possible project plan that we can, and then take that forward through the permitting process as efficiently as possible.
Seeking the next Livengood
"This move with bringing Jim on is an evolution that companies have to go through. I am not the guy you want to build your mine. I am the guy you should have go out and look for the new one," said Pontius.
With Komadina taking over the executive leadership of Tower Hill, the outgoing Tower Hill leader will turn his attention to Corvus Gold Corp., a junior formed in 2010 to explore Tower Hill's non-Livengood assets.
"My real day-to-day focus will be on taking Corvus forward and hopefully building the next ITH out of Corvus," Pontius explained.
He currently serves as CEO of this new explorer and former Tower Vice President of Exploration Russell Myers is Corvus' president.
Corvus has a portfolio - the Terra, Chisna, LMS and West Pogo projects in Alaska and the North Bullfrog property in Nevada - that provides it with an array of gold and copper-gold properties from early stage to near development. This assortment will help the company meet its mandate to become a leading exploration and development company and ultimately develop into a non-operating gold producer with significant carried interest and royalty exposure.
As the Tower Hill protégé advances its current exploration assets, it is on the lookout for quality projects to add to the collection.
"The way forward for Corvus is finding good prospects, joint venturing them or discovering them ourselves. And we are very actively evaluating projects in Alaska, Nevada and other places to see if we can find the right upscale potential," Myers said.
Pontius said that Corvus is seeking out new gold targets in under-appreciated regions of North America, but did not divulge any details.
If Livengood is any indication, Pontius and Myers will not waste any time in their search for another globally significant gold deposit.
"I am excited to be able to go and put more time and effort into Corvus and hopefully be able to do this again," Pontius said.
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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