Special Report:There is a perception in Australia that producing gold through the process of heap leaching is an option taken only by companies with substandard deposits.

But that rudimentary assessment overlooks the fact that heap leach operations have underpinned some of the world’s most profitable gold mines and played a key role of the emergence of North American gold mining powerhouses such as Barrick Gold, Newmont Mining and Kinross Mining.

Whilst it is true the technology is better suited to treating lower grade orebodies, the low capital expenditure typically required to set up heap leach operations and subsequent low operating costs mean that the economics of these projects can be very impressive indeed.

For example, Victoria Gold Corporation’s Eagle gold mine in Canada’s Yukon Territory, one of the world’s newest heap leach operations, has a resource of 217.4 million tonnes grading 0.63 g/t for 4.3 million ounces of contained gold.

Eagle, which poured first gold in September last year and declared commercial production earlier this month, is expected to produce more than 210,000 ounces of gold a year at an all-in sustaining cost of US$750 an ounce over a 13-year mine life.

Using a gold price of US$1300 an ounce, well below the spot price of US$1772 an ounce, Victoria Gold determined Eagle would generate cumulative free cash flow after tax of US$1.35 billion or US$123 million a year over its life.

Part of the reason for the big difference in operating costs between heap leaching and conventional processing methods such as carbon-in-leach (CIL) milling is the comparatively low power requirements.

In heap leach operations, ore only needs to be crushed to about golf ball size before it is stacked on the leach pad. Agglomeration with cement is sometimes added to improve the permeability of the stacked ore; and then the heap is irrigated with a diluted cyanide solution to liberate the gold.

In conventional gold mills, ore is typically crushed and ground to the consistency of talcum powder, which requires a lot more power, before being processed further using other methods.

Whereas a conventional gold operation in Kalgoorlie might see processing costs of around US$30 a tonne, many of the North American heap leach operations (including Eagle) boast processing costs of less than US$6 a tonne.

Alaskan ambitions

Nova Minerals (ASX: NVA) is hoping to add its Estelle Gold Camp in Alaska, where it has defined a shallow inferred resource of 2.5 million ounces, to the list of highly profitable North America heap leach operations in the near future.

The company completed initial metallurgical testwork late last year that indicated the Korbel deposit, which hosts the inferred resource, would be amenable to heap leaching with recoveries of 76% reported.

At the time, Nova said the results from gold cyanidation analysis were “a very encouraging component in the technical matrix which continues to build in support of the economic viability of the Estelle Gold Project”.

Further metallurgical testing on composite samples taken from drill core from the current drilling program at Korbel is expected to start later this year, with Nova confident of improving recoveries.

The exact size of the operation at Estelle in terms of annual production will be dependent on how successful the company is with its exploration plans.

At the upper end of ambitions, Nova CEO Chris Gerteisen, a veteran of the Nevada mining complex where heap leaching is prevalent, has talked of the possibility of surpassing Barrick and NOVAGOLD’s Donlin Creek project in Alaska, which contains 39 million ounces in measured and indicated resources.

Barrick and NOVAGOLD ­­­­­have forecast annual production of 1.1 million ounces from Donlin Creek over its projected 27-year mine life, with production to average 1.5 million ounces a year in the first five years of operation.

Gold recovery is an area where conventional processing plants usually have an edge over heap leach operations: rates upwards of 80% are commonly seen in conventional plants, whereas heap leach can be around 50-60%.

If you can achieve higher recoveries, the economics of your heap leach are clearly going to improve.

Hog ties to Nevada

Another ASX-listed company that is pursuing a North American heap leach development is Rex Minerals (ASX: RXM), owner of the Hog Ranch project in the US state many consider the birthplace of modern heap leach technology, Nevada.

Like Nova, Rex has seen very high recoveries in metallurgical testwork and applied an average estimated recovery rate of 80% in the Hog Ranch scoping study published in early June.

Rex investors should have every confidence that the company can make the start-up opportunity at Hog Ranch a success, given the experience managing director Richard Laufmann has in heap leach projects.

Laufmann led the development of the St Ives heap leach in Western Australia in late 1999 and 2000 as general manager-operations of Western Mining Corporation’s gold business, helping to save the company tens of millions of dollars in capital.

The St Ives gold mine is still producing, but the St Ives lower-grade heap leach ceased operation in 2010. The mine itself is now owned by Gold Fields, and has produced more than half a million low cost ounces of gold since starting production.

“Heap leaching doesn’t work in a lot of places, it works ok in some places and in others it’s like a gift from heaven,” Laufmann told Stockhead.

North-eastern Nevada, where Hog Ranch is located, falls into the latter category. This part of the state hosts lots of near-surface oxidised gold, which is the type of material that typically lends itself well to heap leaching.

Hog Ranch itself is a former WMC asset that Laufmann knows well from his time with the company. It produced gold via a heap leach facility from 1985 to 1992.

The new project Rex has planned, which is based on the Bells deposit, would produce approximately 39,000 ounces of gold a year for an initial 8.5 years and would cost an estimated US$58 million to establish.

Bells represents only 30% of the 1.4 million ounces in resources the company has defined at Hog Ranch, with the wider project potentially supporting a bigger heap leach operation. Deeper exploration success could warrant the construction of a mill.


This story was developed in collaboration with Nova Minerals, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.