Placer Dome shows Cortez's potential

CRESCENT VALLEY - "I drive it like my pickup," Rob Reynolds of Spring Creek said as he helped show off the first 400-ton Liebherr haul truck in operation at Cortez Gold Mines.

The haul-truck operator for Cortez drove the electric truck Wednesday, and he pointed out the features in the cab during a tour for analysts and reporters, including a computer that can show any part of the truck.

"I'm ready to be signed off on it," Reynolds said, after his training on the more than $3 million truck that was assembled on site and completed this week.

Cortez has eight of the trucks on order and Liebherr provided the first one on an optional basis to allow crews to begin training on the truck in advance of the arrival of the others that are built in Virginia.

Cortez plans to expand its shop to handle the larger trucks, according to Tim Pruitt, the safety director and a tour guide Wednesday. The biggest trucks in the fleet up until now were 320-ton trucks.

While the haul truck is an amazing sight, analysts were focused on the Cortez Hills gold discovery that is still in exploration stages and is likely to become a major mine.

Placer Dome Inc., which owns 60 percent of the Cortez Joint Venture and is the operator, also is excited about the prospects at Gold Hill and the surrounding land. The other 40 percent is owned by Kennecott Minerals.

Cortez Hills

The potential for a mine at Cortez Hills also is important for the surrounding communities, according to Jim Chavis, who manages governmental affairs for Placer Dome America.

"What we see is it will be stabilizing employment for the next 10 to 12 years," he said during an evening at a gathering of the analysts in Elko.

Chavis said there may be a net gain of 70 employees with the development of Cortez Hills. The mine currently has 380 employees and expects to employ 400 by the end of the year.

A decision to go ahead with a mine at Cortez Hills also may mean an expansion of the mill to handle the ore from Cortez Hills and Pediment, the adjacent deposit.

Processing Manager Randy Powell said plans are to expand the mill by 50 percent to build the capacity to 15,000 tons per day, up from the current 10,000 tons processed each day.

"If we get into Cortez Hills, we will do the higher grades first," Powell said.

Those higher grades would be mill material. Lower grades go to heap leaching.

Cortez could be mining at Cortez Hills in less than three years.

"We hope for permits in mid-2006 and mining in mid-2007," Cortez General Manager Pete Neilans said.

Placer Dome estimates capital costs for developing Cortez Hills at roughly $170 million.

BLM study

Meanwhile, exploration continues in the vicinity of Cortez Hills, and the U.S. Bureau of Land Management issued an environmental assessment this week on proposed expansion of the ongoing exploration project.

The study is for the Horse Canyon/Cortez Unified Exploration Project II, which allows for 250 acres of disturbance, up from 50 acres.

"This allows us to drill in Cortez Hills, Pediment, Horse Canyon and ET Blue," said Jim Collord, the environmental and lands superintendent for Cortez. "We're shooting for November some time for approval."

Bob Hays, exploration and development superintendent for Cortez, said there is potential "not only at ET Blue and Horse Canyon but the areas in between."

BLM is seeking comments on the EA through Oct. 6, and they may be sent to Pam Jarnecke, Bureau of Land Management, 50 Bastian Road, Battle Mountain 89820.

Cortez currently has 7.5 million ounces of gold reserves in Cortez Hills and another 1.2 million ounces at Pediment, and there will be new estimates at the end of the year.

"Many thought the elephant was found with Pipeline and South Pipeline, but what we've found at Cortez Hills suggests they weren't the only elephants," Hays said.

Gold reserves

Cortez also has plenty of reserves to mine in the Pipeline and South Pipeline pit area, 5.6 million, and 420,000 ounces in reserves in the Gap area that is likely to be the last spot to be mined in the Pipeline area, according to Tom Dyer, senior mining engineer.

The mine sequencing chart Placer Dome provided shows that Pediment won't be mined until after 2010, while Pipeline and South Pipeline slow down in the years 2008-2010.

Dyer also said the current mining at Pipeline and South Pipeline is moving more into heap leaching than in the past, when higher grades were mined.

The average grade now is 0.11 ounces per ton.

Cortez is mining roughly 200,000 tons of material a day, Dyer said, and they will go up to as much as 300,000 tons a day when Cortez gets its another shovel and the rest of the new haul trucks.

Cash costs

Neilans told analysts Cortez's costs are higher for three main reasons, with the average this year expected to be $160 per ounce.

The costs are affected by royalties on the property, especially the sliding royalty that Royal Gold holds that increases with the price of gold.

The average royalty and production taxes slice of the cost pie is $53 per ounce, according to a Placer Dome chart.

Royal Gold's royalties are on Pipeline, South Pipeline and the company has a "very high" royalty on Crossroads, Neilans said.

Idaho Resources, which once held the claims for the Cortez site, receives a 1.5 percent royalty over the entire joint venture, while ECM has a royalty on South Pipeline alone, Neilans said.

High electricity and fuel costs also are having an impact on the operation, which is expected to produce at least 1 million ounces this year for the seventh year in a row.

Cortez's plans for expanding Pipeline and South Pipeline are in the hands of the BLM, which is preparing a final environmental impact statement on the project.

Dewatering is one of the controversial aspects of the proposal, and Bill Upton, director of sustainable development, said Cortez has 65 individual infiltration basins in 11 areas for continuous monitoring and mitigation of any dewatering concerns.

Great Basin Mine Watch complained to the Nevada Division of Environmental Protection this summer regarding water quality because of Cortez dewatering.

And Collord said the complaint is submitted as a public comment to the draft EIS on the Pipeline, South Pipeline expansion, which adds to the number of years Cortez dewaters to keep the pit dry.

Placer Dome estimates that the maximum average annual pumping rate for stages 8 and 9 of Pipeline will be 29,000 gallons per minute, while Gap won't require any dewatering beyond stages 8 and 9, and Cortez Hills and Pediment will require less than 3,000 gpm.

He also reported that 50 percent of the water pumped from the mine is going to irrigation at the joint venture's Dean Ranch, and that will continue until Nov. 1.

"We've cut 4,417 tons so far," Collord said of the alfalfa grown at the ranch that sells for as much as $100 a ton but averages $80 to $85.