EnviroGold ready to put environmentally friendly gold recovery technology to work by Richard Badauskas
EnviroGold (ASX:EVG) specializes in processing hard to treat refractory style gold ores using the patented Albion process.
The company is building a treatment plant to recover over half a billion dollars worth of gold and silver entrapped in the Las Lagunas tailings in the Dominican Republic, along with scoping studies on several other near term gold mining opportunities in South America.
EviroGold?s current market cap is around A$20 million should turn into a market re-rating when Las Lagunas goes into production at annualized rates of 65,000 ounces of gold and 600,000 ounces of silver. At current spot prices of $1,200 per ounce for gold and $18 per ounce for silver that represents annualized revenues of approximately $89 million for 6.5 years.
Las Lagunas Tailings Project, Dominican Republic
The company currently owns 92.5% of the Las Lagunas tailings project and has secured financing of $37.5 million and placed 7.88% of its shares with Macquarie Bank. The financing is subject to the settlement of the purchase of the remaining 7.5% interest in the project held by other investors who have agreed to terms but await formal closing of the transaction. Macquarie Bank is a substantial Australian resource investment house that has both invested in the stock and is undertaking debt for a total exceeding $40 million attests to their opinion of the financial soundness of the project and EnviroGold management headed by Brian Johnson as Chairman of the Board and James Tyers who is Executive Director and Senior Geologist.
The tailings at the site come from the nearby Pueblo Viejo open pit mine which operated between 1992 and 1999 and is now being re-developed by Barrick Corporation. These tailings are refractory and complex by nature resulting in very poor recoveries during the previous mining campaign. Gold in refractory ore is ?encased? with a hard layer of sulfides which is mostly impervious to traditional processing of oxides using cyanide to dissolve the gold for recovery. This type of traditional processing only recovered about one third of the precious metals content leaving behind a JORC resource of 5.137 million tonnes of tailings with a grade of 3.7 grams per tonne / 0.118 ounces gold and 38.6 grams per tonne / 1.241 ounces of silver which is high grade for tailings.
Utilizing the Albion technology EnviroGold completed successful engineering and feasibility studies that confirmed a capital cost on the project of $75 million to complete all due diligence and build an 800,000 tonnes per annum plant on the site. The operating costs of the process came in at a low $325 per ounce of gold mainly due to the fact that the ore is already mined and substantially crushed resulting in significant cost savings. The company is already in discussions with other parties to obtain further refractory ore resources which are found in the general area of the plant. Once all of the tailings are processed the plant will be able to switch over to fresh ore.
The foundations of the plant are already in place and release of funding will see completion take place in approximately nine months and plant commissioning and gold production start up is now set for March of 2011.
Azuay Mining Project, Ecuador
EnviroGold purchased a 65% interest in two small mining operations located at Azuay in Southern Ecuador. The properties had been previously examined by Place Dome who opined that potential existed for over a million ounces of gold within the claims. Small scale operations by local prospectors confirmed that 60% of the gold could be recovered by crushing and gravity separation with the balance reporting to a carbon in leach circuit for production of gold dore bars.
18,000 meters / 59,040 feet of underground workings are being computer mapped and assayed in preparation for a drill program to establish JORC compliant inferred resources and layout of proposed plant an associated infrastructure. A central process plant is envisioned connected to a slurry pipeline system feeding ore from a number of small underground mines to produce 100,000 ounces of gold per year. Completion of drilling programs, feasibility study and construction is anticipated in 2013.
Trujillo Project, Peru
The company has selected a site for an Albion process plant located at La Libertad, Northern Peru which is surrounded by mining areas containing substantial quantities of sulfide ores owned by third party operators and has excellent infrastructure for operations. Ore will be purchased and processed at the plant enabling an operating rate of 75,000 ounces of gold per year.
The Environmentally Friendly Albion Process
The process was developed in Australia by Mount Isa Mines - now Xstrata (LON:XTA) - and involves the ultra fine grind of sulfide ores to expose their gold content to oxidization and leaching processes. The patented mill uses a series of rotating discs inside a stationary shell that stirs small ceramic beads that crush the ore into a fine powder. There are over 70 mills located worldwide with a central research facility located in Brisbane, Australia where the technology is based and where EnviroGold carries out its research on difficult to treat ores.
The reprocessing of refractory tailings and sulfide ores has a significant environmental advantage in the removal of acid mine drainage from mine sites. The world is covered in old mines that contain large amounts of broken sulfidic rock abandoned on the surface. Over time the sulfides react with air and water to form acid that runs from the site and dissolves other metals that contaminate water ways and nearby lands, this can grow into very substantial environmental contamination.
Each project that EnviroGold establishes using the Albion process to remove sulfides contributes significantly to a cleaner environment around the mine site. Could be a win-win situation for both shareholders and the mining industry?
Financing
Delays in financing have resulted in construction completion being set back three months to March 2011. EnviroGold signed the finance documents with Macquarie Bank Limited on 12 March 2010.
Satisfaction of a number of conditions precedent was required prior to drawdown of the US$37.5 million loan.
The principal outstanding condition precedent is the registration of the Bank?s security in the Dominican Republic. The conditions are now expected to be finalised within one to three months, after which construction should be able to be accelerated.
The outstanding Conditions Precedent, registration of security over the EnviroGold Group?s assets in the Dominican Republic, has taken longer than the company anticipated.
To bridge the gap until funding is available and to maintain construction momentum EnviroGold will raise additional capital and will place 20 million shares with an overseas investor at 8 cents each under to raise $1,600,000.
EnviroGold has indicated it intends to place a further 40 million shares at 8 cents each, together with 20 million free attaching options exerciseable at 15 cents each on or before 31 December 2011, subject to ratification of recent share placements at a Meeting of Shareholders on 22 June 2010.
Part of the $3.2 million raised wil be applied to completing the Group?s commitment to Macquarie Bank Limited, to advance a total of US$30.0 million to the Las Lagunas Gold Tailings Project in the Dominican Republic, and part to the Company?s continuing exploration program on the Azuay Gold Project in Ecuador.
An application for a US$5 million facility with the Dominican Government-owned Bank, BanReservas, has been approved by the Bank?s credit committee. A formal offer for a US$2.5 million four year project loan, and a US$2.5 million overdraft facility is expected next month. These loans are being arranged to finance any project cost over-runs if such becomes necessary. No over-run is currently anticipated.
Any additional funds raised in the near term will be loaned to the Las Lagunas project on a short term basis and are expected to be recovered when the financing facility is drawn down, and then applied primarily to the planned drilling program on the Azuay gold project in Ecuador in the third quarter of 2010
EVG Price at posting:
5.5¢ Sentiment: Hold Disclosure: Held
