Vaughn, with respect to Discovery
Let's see how the math works:
You said that Miramar's Con Mine reports a cash cost of production at US$269 per ounce. Their post-strike costs are expected to result in cash costs of US$300 per ounce.
Excluding recoveries (mine and mill) and dilution (other than already incorporated into the figures) we have the following:
From Miramar's website www.miramarmining.com we see that the Con Mine reports 1,250,000 tons of proven and probable ore at 11.66 grams per ton. These are mixed units, but can be considered equivalent to approximately 1,140,000 tonnes grading 12.83 grams per tonne.
One troy ounce weighs 31.103 grams, so Miramar would have to mine 2.424 tonnes to have 1 troy ounce of contained gold. That costs US$269 per troy ounce, so it would seem that cash operating costs are approximately US$111 per tonne. Supporting figures can be found in the costs reported at the Ptarmigan Mine (a smaller mine just outside of Yellowknife, operated by Treminco Resources Ltd prior to 1996) averaged somewhere between US$80 and US$100 per tonne, and Echo Bay Mines' Lupin Mine (winter road access through Yellowknife) at around US$90 per tonne.
A simple calculation (not truly valid, but an interesting exercise) at Discovery would say that if one tonne of "ore" can be excavated and processed for US$111 per tonne, and each tonne contains 19.97 grams of gold, then the cash operating costs (excluding recoveries (mine and mill) and dilution (other than already incorporated into the figures) would be (31.103 gms per ounce /19.97 gms per tonne * 111 dollars per tonne) US$173 per ounce. Not a bad figure.
Normally, the true calculation would include actual cost figures. I would presume that the costs at Discovery would be adjusted from US$173 per ounce as the grade and tonnage figures would have to be consider "mineable" or "recoverable" ore, shallower mineralization, ramp access, free-milling nature, and no infrastructure. The figures though are in line with the costs at Ptarmigan (smaller operation) and at Lupin (winter road, "remote").
As you correctly point out, there has to be enough mineralization to pay back the capital costs in a reasonable timeframe. The smaller the tonnage, the more difficult it becomes. Currently, Discovery is likely too small to support the capital costs required to construct a mine and mill. But then, so too was the Con Mine when it commenced operations in 1938, reporting less than 100,000 tonnes of ore at a grade of around 29 gpt in ore reserves in its first year. It has since produced more than 5.4 million ounces of gold. One would typically look at the lower class or resources, the inferred to get a sense of the "potential" of a deposit to be expanded.
As you point out, all of the capital costs at the Con Mine have been recovered. Yellowknife is a major mining center with abundant related off-site services, and an entire community that can support the mine. Other figures to consider include (with some conversions):
Miramar Con Mine
Mines ore from depths in excess of 2,000 meters
Mills up to 1,250 tonnes per day
Ore is mixed, free-milling and refractory, uses an autoclave on some refractory ores
Owns own power plant
Discovery
Resource calculation includes mineralization from surface to 300 meter depth
Essentially no infrastructure on site
Preliminary metallurgical work shows mineralization to be free-milling
Dave |
