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By Shane Lasley
Mining News 

2010 Mining Explorers: Brisk pace continues at Livengood

Tower Hill begins prefeasibility study at multimillion-ounce Alaska gold deposit

 

Last updated 10/31/2010 at Noon



Since International Tower Hill Mines Ltd. began exploring Livengood in 2007, it has outlined nearly 20 million ounces of gold resources. The junior continues this brisk pace as it contemplates building a mine at the Interior Alaska project.

In order to focus its attention on developing the rapidly advancing project, Tower Hill has transferred its non-Livengood exploration assets into Corvus Gold Inc., a new company under the direction of Tower Hill Vice President of Exploration Russell Myers (see Corvus Gold Inc.)

An early sign of the transition from junior explorer to potential mid-tier producer was the January appointment of former AngloGold Ashanti Ltd. Prefeasibility Manager Carl Bretchel as Tower Hill's chief operating officer. The junior continued to build its operational team by hiring Karl Hanneman, former senior corporate representative in Alaska for Teck Resources Ltd., as the project manager for Livengood. The company also added Richard Moses and Keith Malone, both with long backgrounds in Alaska mining, to the operational team.

While an aggressive drill program continues to expand the Money Knob deposit, the junior is completing the metallurgical, geotechnical and baseline studies needed to move the project into permitting and development.

"Our operational team is making excellent progress in advancing the project down the development and permitting path, a process which we will continue to accelerate," Tower Hill President and CEO Jeff Pontius said.

Fort Knox clone unlikely

A preliminary economic assessment completed in August envisions a heap leach pad and mill operation similar in scale to those at Kinross Gold Corp.'s Fort Knox Mine about 60 miles, or 100 kilometers, southeast. Processing 81,000 metric tons of ore per day, this size operation would produce around 504,000 ounces of gold annually over a 21-year mine life.

According to the PEA, building a Fort Knox-sized mine at Livengood would cost around US$1.385 billion, with an additional US$450 million in life-of-mine sustaining capital costs. The figures used in the assessment include a 25 percent contingency on capital costs, a number that should decrease as the mine plan becomes more certain.

Though the PEA demonstrates that a clone of the Fort Knox mill and heap leach operation at Livengood is economical, this will likely not be the operation that Tower Hill ultimately builds to mine the gold deposit.

Two alternatives under consideration would begin production with a heap leach-only operation or a larger mill.

"The base-case we put in there was basically cloning the current Fort Knox operation and sticking it at Livengood. One of the drawbacks that we saw is that Livengood is considerably bigger than Fort Knox and so it had such a long mine-life, it didn't produce as good financial results as it could have if (we) would have increased mill production to compress that 21-year life," Pontius explained to Mining News.

With capital costs at about half of constructing a combined mill-heap leach operation, the initial heap leach-only option is an attractive alternative if Tower Hill puts Livengood into operation on its own.

"That is a real option for us because bringing the heap on would lower the initial capex (capital expenditure), and it allows ITH to look at a way financially it can take the project forward," Pontius said.

The Money Knob deposit at Livengood contains some 300 million metric tons of heap-leachable oxidized mineralization, a number the company expects to increase as drilling expands the deposit to the west.

With cash coming in, the company could later opt to build a mill to mine the deeper unoxidized ore.

The other option under consideration is ratcheting up the size of the operation.

Livengood is particularly suited for a larger scale operation. Not only is it an enormous orebody, it has a low ore-to-strip ratio and large mineralized units.

"The strip ratio is approximately 1-to-1 in the deposit and affords us with a great opportunity to scale this operation up and compress the mine-life, which should improve the overall economics of the project," Pontius said.

A larger operation comes with a larger price tag. If the scaled-up option is pursued, it is likely that a major would join Tower Hill to build the mine.

"Of course we will be continuing on, putting both scenarios out there; one where we bring a heap leach on early and get it going and start to make cash out of the project so we can finance the mill construction, and the other one is to do it all at once - bring the mill, the heap leach push it forward on a very large-scale basis like a big company would do, that isn't capital constrained," Pontius explained.

Working out the pros and cons of the various scenarios will be part of the prefeasibility analysis currently under way.

"Our plan is to complete the prefeasibility study for the heap leaching plan by the middle of 2011 and then immediately after that we will be moving on to look at the mill operation and that PFS is scheduled to by completed by the end of 2011," Bretchel told Mining News.

Denser, deeper drilling

The infill portion of the summer's 50,000-meter drill campaign is a key component of the Livengood prefeasibility study. The primary goals of the four rigs engaged in density drilling is to convert the bulk of the resource included in the mine-plan to measured and indicated classifications, better define the higher grade areas of the deposit and extend the mineralization at depth.

Tower Hill believes the infill drilling carried out during the summer will provide enough density to upgrade the bulk of Livengood's 10.9-million-ounce indicated and 2.4-million-ounce inferred gold resource (based on a 0.5 g/t cut off) up to the measured and indicated categories. According to assays released through September, the gold grades are not only holding up to increased scrutiny but are expected to rise.

One reason for the increased gold content is the delineation of high-grade zones within the Money Knob deposit. A 500-meter-long mineralized trend with grades topping six grams per metric ton is being outlined within the deposit's Core zone. Though high-grade gold intersections have been encountered in various regions of the deposit, the infill drilling is proving this near-surface trend to be a continuous body that could provide rich ore early in the mine's life.

In September, Tower Hill released assay results from hole MK-RC-405, which cut 6 meters averaging 18.2 g/t gold and MK 10-47 which intersected 4.6 meters at 7.1 g/t gold along this northwest-trending zone.

Many of the holes drilled into the Money Knob have bottomed out in mineralization, indicating that the deposit has room to grow at depth. Two holes drilled into the Sunshine zone this summer highlight this potential. At a depth of 353 meters, hole MK- RC-0373 cut 49 meters grading 1.9 of gold per metric ton. From 363 meters hole MK-RC-0376 drilled 15 meters averaging 1.2 g/t gold.

Expansion continues

While the summer program continues to improve the confidence of the known resource, drills continue to expand the footprint of the Money Knob deposit. Olive, a new zone to the south of the deposit, is one such area.

Hole MK-RC-0380 cut 21.3 meters averaging 1.7 g/t gold and included 6.1 meters grading 4.5 g/t gold. MK-RC-391, drilled about 75 meters to the north cut 45.7 meters at 1.1 g/t gold and MK-RC 396, drilled about the same distance to the south hit 13.7 meters grading 2.1 g/t gold.

Continued drilling at Olive is outlining a core of high-grade mineralization surrounded by a broad area of low grade. This area remains open to the south.

The Southwest zone is an area Tower Hill geologists believe to be a major expansion area. Soil anomalies indicate this zone could extend Money Knob several hundred meters to the southwest.

When Tower Hill first drilled this zone during its winter 2009 program, the explorer was pleasantly surprised to encounter gold intervals that rivaled those found in the higher grade Core Zone.

MK-RC-0345, drilled early in 2010, cut 9 meters of 1.9 g/t gold and 17 meters of 2.1 g/t gold near the surface before making a deeper intersect of 128 meters at 1.3 g/t gold. MK-RC-0342 cut 7.6 meters at 6 g/t gold in the Southwest zone.

Livengood Chief Geologist Chris Puchner told Mining News that Tower Hill plans to resume drilling in this permafrost-laden region during the winter drill program.

Beyond Money Knob

An aggressive districtwide surface exploration campaign to define new deposits similar to Money Knob across the 35,000-acre land package at Livengood has turned up some promising targets

"We have got a big regional soil program going on within the large land-block we've got and we have defined a lot of targets out there," Pontius said.

Adding a helicopter-supportable drill to the fleet of five rigs already at Livengood, Tower Hill began drilling a geochemical anomaly to the northeast of Money Knob in August.

In addition to exploring for new deposits, the company is seeking gold-poor regions of the property suitable for building the heap leach pad, mill and other facilities. This condemnation drilling will provide the engineers with information needed to complete the feasibility study.

"Right now we have half a dozen or so facility alternatives on the property package and we are going to need to evaluate those, because some of them have some very interesting gold anomalies associated with them," Pontius explained.

Over the past two years crews at Livengood had taken a hiatus between the summer and winter drill programs. Tower Hill said it is implementing a year-round work plan and added a seventh drill to increase the work pace at the project.

 

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