The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Alaska precious metals mines find ways to drive down costs, bolster production
More gold and silver at lower costs is a common theme for the Greens Creek, Kensington and Fort Knox mines in 2015 and an important component of keeping these operations economically viable for their respective owners - Hecla Mining Co., Coeur Mining Inc. and Kinross Gold Corp.
"Cost control is always a priority and ensures that operating mines can succeed even during downtimes in commodities cycles," said Karen Mathias, managing consultant, Council of Alaska Producers.
This is especially critical for Alaska mines.
"In general terms, Alaska is still a very expensive place to develop and operate a mine," Mathias explained. "Average mine salaries are higher than in the remainder of the United States, and the logistics of operating in Alaska keep our energy and materials prices higher as well."
Despite the inherent high price to operate here, mines such as Greens Creek and Fort Knox rank among the lowest-cost precious metal producers in their owners' respective portfolios.
"It is the world-class quality of Alaska ore deposits that ensures our existing operations have the opportunity to compete on a global market," Mathias added.
Greens Creek improvements
Already considered one of the world's largest and lowest-cost primary silver producers, the Greens Creek Mine in Southeast Alaska continues to be a strong profit center for Hecla Mining - and it is getting better.
"Our assets, particularly Greens Creek with its recent improvements in recovery, have allowed us to weather the metals' price weakness, and we retain the ability to reduce costs and programs if prices remain weak or go lower," Hecla President and CEO Phil Baker Jr. told analysts Aug. 6.
Through the first half of 2015, Greens Creek produced 3.9 million ounces of silver at a cash cost of US$3.30/oz, when you factor in by-product credits for the gold, zinc and lead also recovered from the volcanogenic massive sulfide ore mined there.
Improvements to silver production at Greens Creek began late in 2014, when the company made modifications to the flotation circuit that scalps more of the lead concentrate. In April, the company further enhanced efficiencies of the flotation circuit through the use of carbon dioxide to control PH levels in the lead concentrate. All told, these upgrades resulted in an eight percent jump in silver recoveries.
"For a mine producing over seven million ounces of silver a year, an eight percent increase in silver recovery is a significant value driver, especially when coupled with the higher grades," Baker explained.
As a result of the improvement in recovery and grade, Hecla now expects Greens Creek to produce 7.7 million to 8 million oz of silver in 2015, significantly higher than the 7.3 million oz forecast at the beginning of the year.
With more than 90 million oz of silver in reserves and exploration continuing to augment these stores, Greens Creek will likely continue to be a key contributor to Hecla's success for decades to come.
Lower costs at Kensington
Roughly 55 miles northwest of Greens Creek, Coeur Mining's Kensington gold mine also is putting up strong numbers this year.
"At Kensington, a combination of higher mining and milling rates and higher grades has this operation on track for significant production gains at substantially lower cost this year and beyond," Coeur President and CEO Mitchell Krebs said during an Aug. 5 presentation.
Through the first six months of 2015, Kensington produced 63,754 oz of gold, roughly a 19 percent increase over the 53,517 oz recovered during the first half of last year. Expecting this heightened performance to carry into the second half of the year, Coeur now forecasts the Southeast Alaska Mine will produce 115,000-125,000 oz of gold in 2015, about seven percent more gold than the 110,000-115,000 oz the company anticipated at the beginning of the year.
More importantly, the company is recovering each ounce of gold at a lower cost.
During the second quarter of this year, the cost per ounce of gold sold at Kensington was US$745/oz, marking the third straight quarter that production costs at this operation have been held under US$800/oz.
Coeur is looking forward to even more gold at lower costs from the Southeast Alaska mine as it begins implementing a new plan that includes mining higher grade ore from the historic Jualin Mine area, which is situated about 8,250 feet from current activity in the Kensington Mine area.
At the end of 2014, Jualin had 289,000 tons of inferred resource, averaging 0.619 oz/t (179,000 oz) gold.
"We've now started the decline into the high-grade Jualin deposit, where grades are three times higher than the reserve grade at the main Kensington zone, and we plan to start underground drilling there next year," Krebs announced Aug. 5.
From the portal, which is adjacent to the mill, the decline only needs to ramp down about 2,400 feet before reaching the high-grade gold mineralization found at Jualin.
Mining is expected to begin at Jualin in mid-2017 at a rate of about 250 tons per day.
Krebs said, "Kensington's new mine plan is expected to be a key component of the company's overall strategic repositioning that is expected to increase overall production levels by about 30 percent, reduce overall unit costs by about 25 percent, and boost the company's free cash flow to US$190 million-US$200 million in 2017."
By 2018, the first full year of production after Jualin comes online, Kensington gold production is expected to reach 149,000 oz.
More Fort Knox gold
Kinross Gold's Fort Knox Mine in Interior Alaska produced 116,061 oz of gold during the second quarter of 2015, a 40 percent jump over the 82,673 oz recovered during the first three months of this year.
Kinross attributes the increased output to higher grade mill material and the seasonal impact of warmer weather on heap leach performance.
"At Fort Knox, production was up significantly year-over-year while costs declined as a result of an increase in ounces processed from the heap leach, higher grades and lower energy cost," Kinross CEO J. Paul Rollinson told shareholders and analysts.
Since the Walter Creek Heap Leach facility was added to Fort Knox, gold production at the mine tends to peak during the third quarter. If this trend holds, the Interior Alaska operation is on track to top 400,000 oz. of gold in 2015.
While gold production trends north, the costs of producing the aurum is heading south.
Kinross sold 113,938 oz of Fort Knox gold at a cost of US$606/oz during the second quarter of 2015, compared with 85,938 oz at US$834/oz during the same period last year.
The high-grade Kupol Mine in Russia is the only Kinross operation that posted lower production costs.
The strong performance at Fort Knox helped offset some of the production losses that resulted from a nearly two-month partial shutdown of operations at the Maricunga Mine following extremely heavy rains in northern Chile during March, which caused heavy damage to local infrastructure.
Thanks in part to some 400,000 oz anticipated from its Alaska mine, Kinross said it is tracking at the high end of 2015 production guidance of 2.4 million to 2.6-million gold-equivalent oz for the year.
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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