North of 60 Mining News - The mining newspaper for Alaska and Canada's North

The Pogo Gold Mine Project near Delta Junction began gold production Feb. 12, nearly a month ahead of schedule, Sumitomo Metal Mining Co. Ltd. and Sumitomo Corp. jointly announced Feb. 13.

The companies said construction at Pogo progressed well enough to enable the project to advance production from an originally scheduled start in March.

Pogo is estimated to contain 7.7 million tons of gold ore that should yield just under a half-ounce of gold per ton. The mine employs about 240 permanent workers.

Sumitomo Metal is the majority owner of Pogo with nearly 51 percent equity in the venture, and Sumitomo Corp. owns roughly a 9 percent share. Pogo operator Teck Cominco Ltd. owns the remaining 41 percent interest in the mine.

Last fall, Sumitomo boosted its capital spending estimate for Pogo to $357 million, up 11 percent from a previous estimate of $321 million in March 2005, and nearly 17 percent higher than the project's originally projected cost of just under $300 million. Sumitomo attributed the additional spending to higher-than-expected costs for construction materials such as structure steels and fuels, contractor and labor costs in Alaska and unanticipated geotechnical conditions.

With gold prices hovering near 25-year highs of $574 per ounce, Pogo anticipates production costs of about $150 per ounce, its owners have said. Gold closed Feb. 20 in commodities markets at $556.20 per ounce.

Pogo's first gold product is a gold doré, processed at its surface mill from ore mined underground. The dorés, which will range in size from several hundred ounces to 1,000 ounces, are intermediate products that will require additional refining into gold bars at refineries outside Alaska.

Sumitomo said Pogo will proceed to ramp up production toward full capacity, expected within several months. The mine is projected to produce 400,000 to 500,000 ounces of gold a year.

Sumitomo said Pogo is regarded as the first overseas investment into gold mine development for Japanese companies. Sumitomo discovered the Pogo ore body in 1994, and since joined with Teck Cominco to take the project from ore reserve confirmation through to development of the underground mine.