ELKO - Allied Nevada Gold Corp. on Thursday announced updated gold and silver estimates for the Hycroft Mine in Humboldt County and a new mill plan that leads the chief executive officer to predict Hycroft could become a major silver producer.
"With this plan in place, we believe Hycroft is in a position to quadruple 2011 annual gold production and has the potential to become one of the largest silver producing mines in the world," President and CEO Scott Caldwell said.
The new mill plan estimates annual gold production of 556,200 ounces of gold and 27 million ounces of silver, if the company goes ahead with mill construction and mine expansion.
Hycroft produced 102,000 ounces of gold in 2010 and forecast gold production of between 125,000 and 135,000 ounces this year.
Reno-based Allied Nevada's year-end reserve estimate includes 2.6 million ounces of gold and 49.3 million ounces of silver, which reflects a 7 percent increase in gold reserves and a 27 percent increase to total silver reserves.
The company also reported measured and indicated heap leach mineralization, which is the lower grade oxide and transitional material, is estimated to contain 4.8 million ounces of gold and 109.8 million ounces of silver.
Measured and indicated mill mineralization, which includes higher grade oxide, transitional and sulfide material, is estimated to contain 8.8 million ounces of gold and 439 million ounces of silver, according to Allied Nevada.
"This resource update provides strong support for the Hycroft mill scoping study and upcoming initial feasibility study and sustains the company's confidence in Hycroft as having significant potential for a long-term mine life," said Caldwell.
"We believe that the completion of the initial feasibility study will result in the conversion of a majority of these measured and indicated mineral resources to the proven and probable categories," he said in the announcement.
Allied stated the mineral resources were estimated using a gold price of $800 per ounce and a silver price of $14 per ounce.
A gold equivalent cutoff grade of 0.005 ounces per ton was applied to lower grade heap leach mineralization, and a gold equivalent cutoff grade of 0.014 opt was applied to material that would be processed through the mill, Allied Nevada stated.
The mill study shows that for the initial 10 years when there will be leaching and milling, annual production would average the 556,200 ounces of gold and 27 million ounces of silver at an average cost of sales of $304 an ounce of gold.
"We believe this revised milling plan represents a significant improvement to the scoping study presented in September 2010," Caldwell said. "This mill plan presents a much simpler, staged approach to the ramp-up in production."
He said the company has completed a significant amount of metallurgical work that improved the process flow sheet with the flexibility to manage the large resource base.
Allied Nevada estimated the initial capital cost for a mill at $894 million and stated that it is looking at financing options for the project.
The next step is completion of a milling feasibility study, expected to be completed in the third quarter, and this could lead to engineering contracts, if the Allied Nevada board approves the mill project, according to the announcement.
The company's early estimate is that construction of the mill could begin in 2013 and construction of a pressure oxidation vessel could start in late 2016 at a cost of $200 million.
The potential expansion at Hycroft will require a U.S. Bureau of Land Management environmental impact statement, and Allied Nevada notes that preliminary work for the EIS began in 2009.