HALIFAX, NS (MINEWEB) - Sabina Gold & Silver (TSX: SBB) made the case for a 300,000-ounce-per-year gold mine inNunavut, an emerging gold mining jurisdiction in Canada's North, inthe first scoping study of its Back River gold project. Two facetsof the project stand out above all others: high in-pit gold gradesand overall life of mine cash costs. In all, Sabina estimates it would mine 3.7 million ounces gold atBack River over a 12-year minelife, with pre-production capitalcosts coming in at C$450 million. Of that gold production about 43percent would come via open pit mining with the rest fromconcurrent underground operations. The open-pit, while suffering atotal strip ratio near 10:1, would deliver an enviable feed grading5.76 g/t gold to an onsite mill. |
That only falls a little belowestimated underground grades @ 6.44 g/t Au. Putting the twotogether you get an average grade of 6.13 g/t Au. Which leads to the second facet that stands out. Thanks in largepart to the high grades in the open pit, Sabina calculated a C$542operating cash cost after royalties and assuming, among otherinputs, $1.20 diesel delivered in bulk to generate all on-sitepower (per tonne Sabina said operating costs would be C$87.82). This treatment of cost is an especially key one in Canada's North.Agnico-Eagle has found out the hard way at its Meadowbank mine,also in Nunavut, that running a remote gold mine in an Arcticterritory, which has next to no culture or history of mining, isexpensive.
This year Agnico-Eagle was forced to write downMeadowbank to the tune of C$645 million as operations there haveproven more costly than expected. Among factors that have hurtAgnico are workforce issues - with punishing rates of turnover andabsenteeism. Operating costs are expected to run around C$1,040 perounce gold at Meadowbank in 2012. Sabina, however, is clearly not ignorant about such special issuesin the region. While not going so far as to single out Meadowbank,Sabina nonetheless explicitly stated its operating assumptionsincluded "actual results from comparable northern projects." And finally, Sabina made sure markets knew it has some non-dilutivefinancing options.
Rob Pease, Sabina Gold & Silver presidentand CEO, noted in a prepared statement that Sabina could monetizeall or part of a silver royalty it owns on the Hackett Riverproject, which it sold to Xstrata last year. As for the nearterm,Sabina said it would move ahead with a prefeasibility study andproject permitting. It has ample cash to do so following the saleof Hackett River for $50 million, which closed late last year. SUBSCRIBE to Mineweb.com's free daily newsletter now.
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