The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Komadina envisions a 562,000-ounce per year gold operation at Livengood
With some 20 million ounces of gold enveloped in a deposit that outcrops alongside a paved road in Interior Alaska, International Tower Hill Mines Ltd.'s Livengood project is ideally situated to become a top-tier gold operation - or, as the company's new CEO James Komadina put it, "A mine-builder's dream."
"Rarely in my career have I encountered a project that has so much going for it: the resource is one of the largest and ideally situated gold deposits in the world; it is being advanced by one of the most competent technical teams I have come across; and we have a great relationship established with the State and local communities," Komadina wrote upon returning from his inaugural visit to the gold project in June.
Having held senior management positions with major gold producers including Gold Fields, AngloGold and Newmont - Komadina brings 32 years in project development, construction and operations, to his executive position at Tower Hill.
Tower Hill-founder Jeff Pontius, who stepped down as CEO to make room for mine-builder Komadina, said the new CEO will provide the leadership the junior needs to track Livengood toward becoming amongst the world's largest gold mines.
"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.
Komadina's vision
An updated preliminary economic assessment released by Tower Hill in August - which outlines a 91,000-metric-ton-per-day mill churning out more than half-a-million ounce of gold per year for more than two decades - is beginning to bring the operation Komadina envisions into focus.
As summarized in the August PEA, Livengood would produce 12.9 million ounces of gold over 23 years. This 562,000-ounce-per-year average is expected to be significantly higher at the onset of operations due to sourcing initial ore from the higher grade heart of Money Knob's Core zone.
With initial feedstock coming from higher grade regions of the deposit, annual production over the first five years is anticipated to be significantly higher, with year-two projected to top 740,000 ounces.
"Our findings so far have shown that Livengood can potentially produce an average of 664,000 ounces of gold in its first five years at a cash cost of US$557 per ounce, making it one of the largest new gold development projects in North America," Komadina informed investors in September.
The PEA estimates initial capital costs of building a mine of this scale at Livengood will run about US$1.6 billion and another US$585 million or so of sustaining capital will be needed over the current 23-year mine life.
Using a base case gold price of US$1,100 per ounce, the mine would pay back the initial capital costs by the end of the first five years of production. At this price the proposed operation is forecast to generate US$3.1 billion in pre-tax cash flow, a US$1.2 billion net present value (at a 5 percent discount rate).
At US$1,400-per-ounce gold, the study's long-term case, the payback period drops to about 3.2 years and produces cumulative pre-tax cash flows of US$6.9 billion, NPV (at a 5 percent discount rate) of US$3.1 billion.
Komadina said, "The release of these positive PEA numbers confirms our long-standing belief that Livengood is truly a world-class deposit representing one of the largest new gold discoveries made in recent times. With sound project economics and tremendous leverage to current commodity prices, the timely development of the Livengood deposit will create significant value for our shareholders and provide well-paying jobs for generations of Alaskans."
Enormous ore body
Livengood - an enormous ore body with a low ore-to-strip ratio and large mineralized units - is particularly suited for the large-scale operation under consideration.
"There are not a lot of 20-million-ounce (gold) deposits being found globally, this is one of them," Komadina said Sept. 15 at the Precious Metals Summit in Colorado.
Using a cut-off of 0.22 grams of gold per metric ton, which is seen as an economic cut-off for the operation Tower Hill currently envisions, the Money Knob deposit contains a measured and indicated resource of 933 million metric tons averaging 0.55 grams per metric ton gold (16.5 million ounces) plus an inferred resource of 257 million metric tons averaging 0.50 g/t gold (4.1 million ounces).
At a cut-off grade of 0.5 g/t gold, which has typically been reported for Money Knob, the deposit contains a measured and indicated resource of 394 million metric tons of ore averaging 0.83 g/t gold (10.5 million ounces); and an inferred resource of 102 million metric tons of ore averaging 0.79 g/t gold (2.6 million ounces).
The size and grade of this resource is nearly identical to 2010 with the notable exception that 7.4 million ounces of gold have been transferred from the indicated to the measured category. This is the result of Tower Hill's focus on confirming the continuity and grade of Money Knob through a significant infill drill program.
Much of this work early in the 2011 targeted the higher grade heart of the Core zone. 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.
Tower Hill said the new resource data included with the PEA is also derived from a rigorous modeling effort which constrained the estimate to add confidence to higher grade areas of the deposit.
Exploration continues
Although Tower Hill has outlined a gold deposit capable of producing more than half-a-million ounces of gold per year for two decades, the company has not let up on exploration. For the 2011/2012 fiscal year, which began in June, the company has budgeted C$13.5 million for continued exploration across its 145-square-kilometer (56-square-mile) Livengood land package.
The largest portion of this budget, to the tune of C$7.5 million, is being spent on a 28,000 meters of drilling at Money Knob. While the deposit is open to expansion, the primary focus of this program will be on continuing to upgrade the confidence of the 23 years of resource already outlined.
The most prospective direction to expand Money Knob is down. Most of the drilling into the deposit has been completed to a depth of about 300 meters, much of which has bottomed out in mineralization. Some holes successfully drilled below the resource floor highlight the potential at depth.
Starting at a depth of 311 meters, Hole MK-RC-0458 cut 112 meters of 2.63 g/t gold in the southwest section of the Core zone. MK-RC-0470, which intersected 13.7 meters of 5.45 grams per metric ton gold starting at a depth of 395 meters, provides further evidence of the gold potential beneath the Money Knob deposit.
"The fact we have now linked near-surface mineralization with these deeper higher grade zones could make a positive impact on our overall plan, particularly in the proposed initial mining efforts. We will continue to explore these high-grade zones both at depth and along strike and incorporate these results into our ongoing prefeasibility study which will be completed in the fourth quarter of this year," Komadina said.
Livengood Manager Karl Hanneman told Mining News that the Money Knob deposit remains open to westward expansion. A linear zone of strong gold-in-soil anomalies about 500 meters west of the deposit's Southwest Zone is an area Chief Geologist Chris Puchner is excited about.
Drilling, though, has closed off the deposit along trend to the northeast. This is a bittersweet development for Tower Hill. Though the company wants to expand the deposit, it needs to find a gold-free zone to build the mill and other facilities and an area to the northeast of the deposit has long been considered an ideal location for this infrastructure.
Another 17,000 meters of drilling will include geotechnical and condemnation drilling in areas where the company plans to build the mill and other infrastructure, as well as district-scale exploration.
The property-wide drilling will be guided by an IP-resistivity survey recently flown over the Livengood property, including Money Knob. With a geophysical signature of the 20-million-ounce gold deposit, the company hopes to find other areas with a similar response. This is especially useful in targeting areas where soil sampling programs have been inhibited by thick blankets of wind-blown silt and permafrost.
"We have got 145 square kilometers and we have only tapped into about 2.5 kilometers. So, is there another big deposit out there? We have got some drilling we are doing on two targets called Lucky and Moose," Komadina said.
Coming milestones
While the geological team continues to upgrade and expand Money Knob, and seek other similar deposits across the Livengood property, Komadina and his growing staff of mine permitters, builders and operators will continue to hammer out the details for a world-class gold mine in Interior Alaska.
Komadina said that immediately following the mid-November release of the prefeasibility study, the Tower Hill technical team will launch into feasibility work.
"The essence of prefeasibility is, you find out what you don't know," he explained.
Addressing the unknowns presented in the prefeasibility study, Komadina anticipates entering the permitting process sometime in mid- to late-2012. The Tower Hill CEO said he expects it will take at least three years to complete the environmental impact study for the Livengood project.
Allowing a total of four years for permitting, Komadina foresees construction starting in 2016 and operations to begin two years later.
"The technical knowledge and skills now assembled at ITH will be crucial as we scale new heights going forward and, with focused attention to engineering and permitting details, overlain by a firm business hand, I believe ITH's Alaskan future is indeed, golden," said the Tower Hill CEO.
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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