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By Shane Lasley
Mining News 

Tower Hill eyes Livengood Bench placers

Recently acquired land includes some 355,000 ounces of alluvial gold that has eroded from Money Knob; placer mining PEA under way


Last updated 1/22/2012 at Noon

International Tower Hill Mines Ltd. has pushed back the publication of a prefeasibility study for its Livengood gold project to sometime later this year. While the PFS has been delayed by about six months, the company says it is still on track to begin recovering gold from the Interior Alaska project in 2018 … maybe earlier.

Tower Hill said that while the bulk of engineering studies have been completed, a review of the preliminary economic assessment revealed some areas of the metallurgical flow sheet that could be optimized.

"The publication date of the Livengood prefeasibility study is being extended to allow for the completion of additional laboratory testing and optimization work suggested by myself as well as ITH and third party metallurgists, that will enable us to move the project forward as rapidly and cost efficiently as possible to create wealth for our shareholders and jobs for a generation of Alaskans," Tower Hill President and CEO James Komadina explained.

"I strongly believe that shareholders expect and deserve the best from this team, and the decision to extend the publication date ensures that we will put our finest work forward," Komadina said during a Dec. 22 message to Tower Hill shareholders.

Tower Hill Government and Community Relations Manager Rick Solie told Mining News that the PFS is being completed to a level typically reserved for feasibility studies.

The completion of the Livengood feasibility study and the start of project permitting are scheduled for mid-2013. With about three years slated for permitting and two years for construction, Tower Hill anticipates firing up the mill in 2018. Meanwhile, the company is looking into the viability of mining nearly half a million ounces of placer gold that the enormous Money Knob deposit has shed over time.

Expanded lands

The first indication that engineers may need more time to design a mine at Livengood came when Tower Hill released a batch of 92 drill results in early November. While the results continued to confirm the robustness of the 20-million-ounce gold deposit, condemnation holes turned up significant gold in areas that Tower Hill had been considering for infrastructure.

MK-10-97, a condemnation hole drilled more than 2,000 meters southeast of the Money Knob deposit cut 4.82 g/t gold over 1.57 meters and favorable host rocks.

Tower Hill management had long envisioned an area to the northeast of the deposit as an ideal location for the mill and other mine infrastructure. The company had thought the deposit was closed off in this direction but the November assay results indicate that is not the case.

Holes MK-11-119 (1.68 meters at 5.72 g/t gold), MK-11-120 (1.22 meters at 5 g/t gold) and MK-123 (9.77 meters at 0.83 g/t gold) intersected mineralized dikes over a broad area north and east of the deposit indicating further mineralization potential.

Assay results for four additional holes in this area are pending. Tower Hill said that if further exploration is warranted in this area, it has already identified an alternative mill location.

In mid-December, Tower Hill reported that it had spent US$24.5 million to expand its land position at Livengood and to purchase land it held under lease. The company said the additional property provides alternative locations for site facilities.

Tower Hill paid US$13.5 million in cash for the newly acquired land. The company also agreed to pay the vendors an additional US$23,148 for every dollar that the average gold price exceeds US$720 per troy ounce. For example; if gold averaged US$1,720 per ounce over the next five years, this contingent payment would be about US$23.15 million.

The remaining US$11 million of the land purchase was to buy claims outright that the company held under a lease agreement.

Tower Hill, which paid for the properties and associated rights with cash it had in the bank, said it still has sufficient working capital to meet its budget requirements through 2012.

Livengood Bench

Not only does the newly acquired acreage provide Tower Hill with extra room to situate its facilities but the property includes the Livengood Bench, an alluvial deposit estimated to contain 12.8 million cubic yards of gravel with around 355,000 ounces of gold.

"The land transactions completed last week near the Livengood project not only improved our access to infrastructure and site facility locations but also gave us access to near surface placer gold deposits, portions of which were previously mined in a much lower gold price environment," Komadina informed shareholders Dec. 19. "This gives the company an opportunity to look into placer gold extraction that could generate positive cash flows in the near-term while permitting activities are underway for the large-scale Livengood mine."

The historical Livengood Bench gold resource is based on 2,370 drill holes. Tower Hill is currently investigating this resource and plans to produce a preliminary economic assessment for placer mining in the first half of 2012.

"While we are still in the early days, and there are no guarantees, we have received the necessary data to begin a full-scale investigation into the potential economics of the project. Towards this objective, we will be engaging an Alaska firm to complete a preliminary economic assessment on placer mining in the first quarter of 2012. The implications of early production are significant and we will do everything possible to analyze these opportunities," Komadina said in announcing the acquisition.

Leadership shift

In order to evaluate the viability of near-term gold production from the placers that have eroded from the enormous Money Knob deposit, Tower Hill has shifted the responsibilities of its management team in Alaska.

Karl Hanneman - whose résumé includes mining a portion of the Livengood Bench Placers in the 1990s - has relinquished his title of Livengood project manager to serve as Livengood placer manager.

Tom Irwin - who joined Tower Hill as Livengood construction manager in March 2011 - has stepped up to fill the void left by Hanneman.

In his new position as Alaska general manager, Irwin is responsible for the management and technical direction of permitting and development of the Livengood project.

"Tom's new role with the company is in recognition of the tremendous Alaska mining and permitting experience he brings to our team and the significant contributions he has been making to the company since his appointment last year," Komadina said. We are also grateful to Karl Hanneman for his contributions to date and, given his intimate knowledge and experience with placer operations in the Livengood district, we are excited to have him oversee our investigations on this matter."

Irwin brings a vast amount of experience to his new job.

For the six years leading up to going to work for Tower Hill he served as the commissioner of the Alaska Department of Natural Resources.

Prior to that he spent seven years working at Kinross Gold Corp.'s Fort Knox gold mine about 100 kilometers (60 miles) southeast of Livengood.

Irwin served as operations manager during the start-up and early operations at Fort Knox, transitioning to the role of general manager from 1999 to 2001.

From 2001 to 2003, he was the vice president, business development for Fairbanks Gold Mining Inc., a subsidiary of Kinross Gold, responsible for new project permitting, business development and governmental and public relations in Alaska.

Hanneman - who holds a bachelor of science (honors) degree in mining engineering from the University of Alaska and spent 12 years playing a senior role in Teck Resources Ltd's project development and permitting in Alaska - will continue to lend his expertise to the overall development of the Livengood project.

"Tom and Karl's combined expertise and experience will be invaluable to us in advancing the Livengood project towards development into a major new gold mine in North America," Komadina said.

Every opportunity

While placer mining may provide an initial cash-flow for Tower Hill and afford the company an opportunity to get a jump on site preparation at Livengood, the junior's primary goal remains beginning to mine the 20-million-ounce Money Knob hardrock gold deposit.

A preliminary economic assessment released by Tower Hill in August envisions a 91,000-metric-ton-per-day mill churning out more than half-a-million ounce of gold annually for more than two decades.

Though engineers and metallurgists are refining the details of the operation, indications are the size and scope of the operation to be detailed in the prefeasibility study will be similar to that outlined in the PEA.

Using a cut-off of 0.22 grams of gold per metric ton, which is seen as an economic cut-off for the operation, Tower Hill currently envisions the Money Knob deposit containing a measured and indicated resource of 933 million metric tons averaging 0.55 grams per metric ton gold (16.5 million ounces) plus an inferred resource of 257 million metric tons averaging 0.50 g/t gold (4.1 million ounces).

At a cut-off grade of 0.5 g/t gold, which has typically been reported for Money Knob, the deposit contains a measured and indicated resource of 394 million metric tons of ore averaging 0.83 g/t gold (10.5 million ounces); and an inferred resource of 102 million metric tons of ore averaging 0.79 g/t gold (2.6 million ounces).

As summarized in the August PEA, Livengood would produce 12.9 million ounces of gold over 23 years. This 562,000-ounce-per-year average is expected to be significantly higher at the onset of operations due to sourcing initial ore from the higher grade heart of Money Knob's Core zone.

With initial feedstock coming from higher grade regions of the deposit, annual production over the first five years is anticipated to be significantly higher, with year-two projected to top 740,000 ounces.

"Our findings so far have shown that Livengood can potentially produce an average of 664,000 ounces of gold in its first five years at a cash cost of US$557 per ounce, making it one of the largest new gold development projects in North America," Komadina informed investors.

The PEA estimates initial capital costs of building a mine of this scale at Livengood will run about US$1.6 billion and another US$585 million or so of sustaining capital will be needed over the current 23-year mine life.

"We remain confident of the Livengood project viability given its significant gold resource, exceptional infrastructure access and location in one of the best mining jurisdictions in the world," the Tower Hill CEO said.

Whether it is mining the 20 million ounces of gold outlined so far at Money Knob deposit or recovering the placer aurum that has eroded from this enormous lode, Tower Hill is investigating every prospect presented by the Livengood property.

"Given the robust gold price environment for the foreseeable future, we are actively looking at any and all opportunities to ensure the successful development of the Livengood gold project into one of North America's newest - and largest - gold mines," Komadina added.


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