Precious Metals Production and Development
Nevada and Alaska are the precious metals bastions
Precious metals production results in the US present opposite trends, with gold production declining while silver production rose. In 2022, domestic gold production was estimated to be 170 t, 9% less than in 2021, a trend that goes back to 2018, when US gold production peaked at 245 t/y. The opposite happened with silver. In 2022, the US produced 1,100 t, slightly above the 2017 production of 1,020 t. Nevertheless, thanks to robust gold prices, producers in the Western US have experienced a positive year. Not only does it seem that the gold price is in their favor, but global geopolitical turmoil has prompted investors to seek safe havens. Like gold, mining jurisdictions like the Western US are considered as safe havens when it comes to investments.
“We are closely watching early projects and are intrigued by Hercules, hitting 0.84% copper over 185.29 meters in Idaho. As a major US miner, we are keen on investing early in promising opportunities for substantial value creation, leveraging our extensive exploration budget in mining-friendly States.”
Mark Bristow, President and CEO, Barrick Gold
Nevada, the leading gold-producing state in the US, is home to Nevada Gold Mines (NGM), the world's largest gold-producing complex. NGM, a Joint Venture between Barrick (65.1%) and Newmont (38.5%), yields an annual gold production of approximately 3 million oz, encompassing 10 underground and 12 open-pit mines. Additionally, NGM's infrastructure includes two roasting facilities, two autoclave facilities, four oxide mills, and five heap leach facilities.
According to Peter Richardson, executive managing director of NGM, the first half of 2023 experienced a temporary dip in production due to planned processing restrictions, with expectations for a stronger second half. The decline in NGM's production was anticipated as they implemented planned outages at the Carlin processing facilities, including the roasters and autoclave. At the same time, maintenance activities took place at the Goldstrike and Gold Quarry roaster and, in the first operation, NGM completed the conversion of the Goldstrike autoclave processing facility to conventional carbon-in-leach. Additionally, it completed the first phase of the Gold Quarry roaster to increase throughput by 15% to 20%, with improvements in the grinding and roaster circuits.
NGM is investing not only in infrastructure but also in its fleet to improve efficiency and safety. "In our underground operations, we utilize remote mucking, where operators control loaders from the surface using joysticks and cameras. This method proves to be efficient, safe and highly productive. The absence of operators on the equipment allows us to extend operating hours, even during activities like blasts and shift changes," commented Richardson.
Komatsu is set to supply Nevada Gold Mines (NGM) with 62 Komatsu 930E-5 haul trucks between 2023 and 2025: 40 trucks assigned to the Carlin Complex and the remaining 22 designated for use at the Cortez mine.
As per S&P Global data, majors and gold producers have taken the forefront in driving drilling activities within the gold segment. In alignment with this trend, the JV between Barrick and Newmont is actively pursuing growth opportunities by drilling near existing targets and extending exploration efforts further. "Noteworthy projects include the 100% Barrick-owned Fourmile project adjacent to Cortez’s Goldrush, which is considered the best-underdeveloped asset in its class. Additional focus areas include drilling around Robertson to uncover potential mergers of small pits and expansion to the West at Distal. Turquoise Ridge is a key site for drilling to expand the Cricket Corridor and close gaps in the south zone (BBT Corridor). The Greater Leeville area is also a priority, with active drilling in targets such as Little Boulder Basin, Western Spur, and North Leeville,” continued Richardson.
“Some good news is that investors are increasingly supporting large mining companies, and we believe this positive sentiment will filter down to junior companies once the recognition of the disconnect between intrinsic values and current market capitalizations becomes clear.”
Tim J. Swendseid, CEO, Elevation Gold Mining
For Tim Swendsaid, Elevation Gold Mining’s CEO, the “re-shoring” sentiment among investors is significant. Like many others, he believes investors are increasingly favoring large mining companies. This sentiment will eventually extend to junior companies as the disconnect between intrinsic values and current market capitalization becomes more apparent: "I believe there has never been a better time to invest in American producing gold assets. We are experiencing the most turbulent geopolitical situation in a generation," he said.
The company produced 31,094 oz/y of gold at its Moss mine in Arizona: "An improvement over the 29,107 ounces produced in 2021," stated Swendseid. “Because of our efficiency improvements and mine plan optimizations this year, we expect to produce between 34,000 and 36,000 oz/y of gold," he added.
Elevation has spent around US$9.5 million to construct a new 3A-Ph2 leach pad, finalized on November 2023, which will provide the company with sufficient leach pad capacity until the end of 2025.
On the other side, Elevation Gold has been focusing exploration on the Reynolds Pit and the Mordor area adjacent to the Moss mine. Both targets, situated on the fully permitted ground, would enable Elevation to commence mining operations promptly, a relevant fact considering how challenging the permitting landscape can be.
Another company that plans to invest in infrastructure is Idaho Strategic Resources, which operates the Golden Chest gold mine in the Murray Gold belt area of the Coeur d'Alene mining district in Idaho. The company shifted to underground operations at the beginning of 2023, producing 5,000 to 10,000 oz/y. "Our focus lies in building a new mill at our mine, which would not only open up exploration opportunities but also give us control over the entire gold district and would be highly beneficial to our bottom line, leading to cost saving, increased revenue, and higher production capacity," explained John Swallow, president, and CEO of the company.
Despite being a gold producer, Idaho Strategic Resources has an RRE story coming to light with three projects spanning the southern to the northern regions of the underrecognized Idaho Rare Earth Element-Thorium trend: "On the REE side, our upcoming work includes trenching, which is set to commence in July 2023. We have also obtained permits for drill plans, with drilling expected to occur later in 2023. These activities form a crucial part of our exploration efforts to understand further and assess the potential of our REE projects," added Travis Swallow, stakeholder and corporate development of the company.
Gold development: The opportunity in the market
Alaska, the second gold producing US state, has seen plenty of activity in terms of gold, not only in production but also in the market. Contango Ore is a US-listed company developing and constructing the Manh Choh project in Alaska through the Peak Gold Joint Venture, an association with Kinross. Contango is 30% owner, with Kinross managing and owning the remaining 70%. The Manh Choh project boasts a 1 million oz gold deposit with grade ore averaging 8 g/t. To process Manh Choh’s ore, the company will leverage Kinross’ underutilized mill at the Fort Know mine in Fairbanks. According to Rick Van Nieuwenhuyse, president and CEO of Contango Ore: “Our decision not to build another mill and tailings facility has significantly expedited the project’s progress, reduced capital requirements, and shortened the permitting timeline.” The company announced on August 30, 2023, that mining operations started at Manh Choh.
Despite the perception of unfavorable market conditions in the precious metal segment, Hycroft Mining is a Nevada-based company with a solid financial status with US$117 million in cash. According to Diane Garret, president and CEO: “With a robust treasury and the ability to raise additional capital, we are actively exploring potential M&A to expand our portfolio.” Hycroft has been actively drilling its Hycroft mine to determine higher-grade intercepts and better define the starter pit of its ultimate mine plan. Hycroft is a past producing mine and is transitioning from heap leach operations to milling operations to process the sulfides: “We have a large amount of infrastructure already in place, from crushers to a refinery and on-site laboratory, which puts us well ahead of any other development company in that regard. We will need to install mills and autoclave for processing the sulfide ore,” explained Garret.
Much like Hycroft, but in Idaho, Revival Gold has recently updated a resource estimate and completed a PFS for the first stage of restarting operations at its Beartrack-Arnett gold project. The company is pursuing a two-phase strategy, commencing with heap leach production and exploring the possibility of transitioning to a milling scenario for sulfides: “Resulting in an increased resource of 4.6 million oz and a strong 25% after-tax internal rate of return (IRR) on a modest US$109 million Capex for the first phase of development, it is important to note that this project represents the largest past-producing gold mine in Idaho, with existing infrastructure that saves us considerable time and money,” commented Hugh Agro, president and CEO of Revival Gold.
Amidst market challenges where new investment is not flowing, companies find substantial support in understanding shareholders. That is the case of i-80 Gold, which, according to Ewan Downie, CEO of the company, has received strong support from Orion Mine Finance.
i-80 has been able to navigate current market conditions while moving forward with three different projects in Nevada: Granite Creek, the most advanced, where it recently completed mining on the first four levels and started shipping to Nevada Gold Mines for processing; McCoy-Cove project, where it established underground access for depth drilling; and Ruby Hill, the most drilling-active project, were it plans to develop both gold and base metal deposits. Besides the support of Orion Mine Finance, the company has extended its prepay facility, allowing it to sell gold forward instead of issuing shares: “We will continue to explore this approach with our assets and may even consider pre-sales on silver or base metals. We plan to utilize what I refer to as mezzanine financing methods to continue growing our business. Given that we expect to produce multiple metals, including gold, silver, lead, zinc and copper, we could consider streaming or royalty initiatives,” explained Downie.
“Over the past two years, while inflation is up, metals prices remain at stable levels. Still, they have not risen enough to offset the impact of inflation, so you must be ruthless regarding your cost structure and efficiency to try and maintain or expand your margins.”
Mitchell Krebs, President and CEO, Coeur Mining
Silver production: The unsung hero of the electricity transition
According to the Silver Institute's figures, 2022 saw a deficit of 237.7 million oz of silver. This is the most significant deficit recorded, and even though the Silver Institute forecast that in 2023 global silver demand is predicted to fall, lower output from Mexico and Peru are expected to ensure that the global market is set to see another deficit for the third year in a row.
In 2022, the US produced 1,100 t, slightly above the 2017 peak production of 1,020 t. Nevada, known as the ‘Silver State,’ is no longer the leading state for silver production since Alaska overhauled it in 2022. Coeur Mining is a company that has assets in both jurisdictions. Mitchell Krebs, Coeur Mining’s president and CEO, stated that the company is on track to produce between 10 and 12 million oz of silver and 300,000 to 350,000 oz of gold in 2023. During the last few years, Coeur has been in the spotlight because of the expansion at Rochester mine, where it allocated between US$710-730 million. By the end of August 2023, the expansion at Rochester was 99% complete, comprising a stage VI leach pad, a Merrill-Crowe processing plant, and a three-stage crushing circuit. “We expect to reach a run rate processing rate of approximately 32 million t/y in the first quarter of 2024, which will drive production levels up and costs down and is expected to generate free cash flow, not only at Rochester but for the company, which we can then use to reduce the debt we have incurred to partly fund this expansion,” explained Krebs.
Another company with links to Alaska is Hecla Mining. The company operates the Greens Creek underground mine, which has operated since 1987. According to Phil Baker, CEO of Hecla, the company anticipates a significant ramp-up, targeting a production of 10 million oz for 2023. This marks a notable increase compared to the average output of 7 million oz/y in the preceding years.
The other producing asset of Hecla in the Western US is the Lucky Friday underground silver-lead-zinc mine, located in the Coeur d’Alene mining district in northern Idaho. Baker explained that the Lucky Friday mine, situated two miles below the surface (approximately 3.21 km), is subjected to considerable geological stress. This stress has historically constrained mining speed, resulting in the mine being shut down approximately 25% of the time. To overcome this limitation and enhance operational efficiency, Hecla has introduced a novel underground mining technique known as the Underhand Closed Bench (UCB) mining method. This method enables the simultaneous destressing of a significant area through advanced blasting technology, ultimately facilitating faster and more efficient mining operations: “We have consistently increased production, thanks to the adoption of a new mining method for which we recently obtained a patent. This transformation is propelling the mine toward becoming a five-million-ounce producer, doubling its traditional output,” he explained.
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