Revised production plan improves prospects for Interior gold mine

Years of fieldwork and a wholesale review of prior efforts have helped the owners of the large Livengood gold prospect draft a plan that should yield slightly less gold but at a lower cost, according to the latest analysis of the Interior Alaska development project.

Sustained strong gold prices aren’t hurting, either.

Leaders of Vancouver-based International Tower Hill Mines Ltd. released the results of a pre-feasibility study earlier this month for an open-pit mine that would produce more than 6.4 million ounces of gold from the deposit. The plan for less overall gold production at Livengood improves the project’s economics by actually scaling up production, but doing it over a shorter mine life.

The revised operational strategy calls for mining approximately 316,000 ounces per year over 21 years, compared to a 2016 plan that called for producing 294,000 ounces per year over 23 years for nearly 6.8 million ounces of gold overall.

The 2016 study, conducted when gold prices were at a near-term low point in the $1,100-per-ounce range, concluded with an all-in cost of $1,247 per ounce. Figures in the most recent study compute to an all-in cost of $1,171 per ounce of gold from Livengood. Gold is currently trading at around $1,800-per-ounce range after nearly hitting $2,000 per ounce early in the pandemic.

International Tower Hill CEO Karl Hanneman said the mine has “modest value” at current prices.

The Livengood gold prospect is located on Alaska Mental Health Trust Authority land about 70 miles north of Fairbanks along the Elliott Highway. The amount of royalty revenue from the mine to the trust would largely dependent on gold prices during production, but officials for the Trust Land Office estimated in 2016 the mine could be worth as much as $430 million to the trust.

International Tower Hill estimates Livengood would support roughly 1,000 jobs during several years of construction and 350 permanent operations positions.

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 of the amount of diesel fuel used in mine operations. International Tower Hill leaders have previously acknowledged the project’s exposure to oil prices.

Hanneman said in an investor call the company has greatly increased its understanding of the Livengood ore body since the last evaluation. Once it was determined the deposit could handle increased mining in the early years of development, the company settled on larger milling equipment “to maximize throughput at optimum grind,” Hanneman said.

The larger equipment results in initial capital expenses that would likely be just more than $1.9 billion, according to the study, which is nearly 5% greater than the 2016 plan. However, expectations for lower sustaining capital costs over the life of the project contribute to the lower total cost per ounce.

The pre-feasibility study marks the second time International Tower Hill leaders have scaled back their overall mine plan to improve its viability since a similar effort in 2013 concluded a much larger Livengood mine likely isn’t worth it.

At one point, the company hoped to produce more than 560,000 ounces of gold per year for total production of nearly 7.9 million ounces over 14 years.

Additional metallurgical testing has also helped assure International Tower Hill leaders the company will be able to hit its production targets, according to Hanneman.

“We are now confident that we can achieve repeatable and predictable results from our ore body,” he said.

The company expects to recover 71.4% of the gold in the mined ore.

The current plan for mining the ore minimizes the amount of material that is ultimately moved, thus cutting costs, Hanneman added.

“The deposit has an exceptionally low strip ratio, meaning we need to move only 1.2 tonnes of waste to access a tonne of ore,” he said.

Overall, slightly more than 100 tons of material will need to be mined to produce an ounce of gold from Livengood, according to Hanneman.

With approximately 13.6 million ounces of measured and indicated gold in place, there is ample room for further exploration.

“In a rising gold environment, a lot of these resources could fall into reserves, thereby further increasing the (net present value) and mine life of our project,” Hanneman said.

Roughly 500,000 ounces of gold has been produced from the Livengood area over the years by placer operations as well.

Elwood Brehmer can be reached at [email protected].

11/17/2021 - 12:28pm