New analysis of Livengood underway with improving markets
The Livengood gold project has renewed life amid rock-bottom oil prices and vastly improved expectations for gold.
Marcelo Kim, chairman of Vancouver-based International Tower Hill Mines Ltd., which owns the Interior Alaska prospect, stressed that company leaders and many outside analysts believe the economic stimulus efforts being employed by governments worldwide to mitigate the impact of the COVID-19 pandemic will bring about a resurgence in gold markets.
The Federal Reserve’s recent moves to cut interest rates in combination with widespread credit backstops and the loosening of banking requirements all add up to a very favorable outlook for gold producers and sellers, according to Kim.
Kim said in a May 12 conference call that expectations for rising inflation following the federal stimulus package of the Great Recession in 2009 largely didn’t materialize because banks didn’t expand their credit offerings following the financial crisis.
This time, however, much of the $2.2 trillion Congress approved under the CARES Act is intended to be quickly spent on businesses and individuals instead of keeping banks afloat.
“We believe that these are signs that we are in the early innings of a new market for gold,” Kim said.
He cited a late April report from Bank of America analysts that forecasts gold prices will rise to upwards of $3,000 per ounce over the next 18 months. Gold is currently trading for about $1,700 per ounce following a steady climb in price that started last year and hasn’t stopped.
Gold prices peaked in late 2011 at nearly $1,900 per ounce but spent much of the intervening years fluctuating between $1,100 and $1,300 per ounce before starting to climb again last year.
International Tower Hill Mines is sanctioning an updated pre-feasibility study that will build off of a similar study published in late 2016 and incorporate the metallurgical and optimized engineering work done since then, according to Kim.
The junior mining firm, which holds 100 percent of Livengood, downsized its operational plans by nearly half following the 2016 study. That work concluded that a mine capable of milling 52,000 tons of ore per day over a 23-year life would cost approximately $1.8 billion to develop and have significantly reduced operating costs versus the company’s original plan from 2013 for a $2.8 billion, 14-year mine processing about 100,000 tons per day.
The current mine plan calls for producing 6.8 million ounces over the 23-year mine life with an all-in cost of $1,247 per ounce.
The Livengood prospect holds nearly 9 million ounces of proven and probable gold reserves at a market price of $1,250 per ounce and approximately 11.5 million ounces of measured and indicated resources, according to International Tower Hill.
Kim said he expects much of the gold resources to become reserves as prices rise.
As proposed, Livengood would be a conventional, open-pit mine near the Dalton Highway about 70 miles north of Fairbanks. International Tower Hill expects the mine will generate about 1,000 jobs during construction and 350 long-term jobs during operation if it is developed as currently planned.
CEO Karl Hanneman said drilling has shown significant resource potential immediately beneath the pit deposit as well as elsewhere on the property. Historical placer deposits to the northeast of the pit resource reflect the need for additional drilling as well, Hanneman said.
“Over the last several years, we have quietly remained laser-focused on improving our geological and metallurgical understanding of the Livengood gold deposit,” he said.
That work will be incorporated into the new pre-feasibility study and a timeline for that work should be available in the coming weeks, according to Hanneman.
ITH director Stephen Lang said during the call that Livengood is a deposit requiring an average of 140 tons of ore to recover an ounce of gold, which is a good “strip ratio” for a mine of its size.
“The mine and the mill are both large enough to give a considerable economy of scale but not in the very, very large range, which adds quite a bit of complexity in the operations and scheduling,” Lang said.
The relatively low mining requirement helps relieve cost pressures on the project and is “particularly helpful in offsetting any long-term oil price increases,” Lang added.
While being on the road system limits some of the development and logistics costs incurred by more remote mines in Alaska, Livengood and other mines in the state are susceptible to changes in oil prices because diesel is used to power mine operations.
Elwood Brehmer can be reached at [email protected].