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Refractory ore trouble Russian gold miners


Nowhere is this problem of complex ore more prevalent than in Russia, where approximately 80% of gold reserves are refractory or partly so, according to figures from Petropavlovsk PLC.
As competitive and cutthroat as the junior gold mining sector is, there is a line most miners would never cross when wishing misfortune on the business interests of rivals.

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“I wouldn’t wish refractory gold on my own worst enemy,” one executive joked at a mining conference last year, referring to gold that is chemically embedded into sulfides or carbons, making it difficult and expensive to extract and process by the usual means employed by gold mining companies.

It is a worldwide problem in the gold industry that miners have, for the most part, dealt with by leaving hard-to-process complex gold lodes in the ground.

But as the world runs out of the easy-to-process deposits, the strategy of ignoring the complex ones is becoming less and less viable.

Nowhere is this problem of complex ore more prevalent than in Russia, where approximately 80% of gold reserves are refractory or partly so, according to figures from Petropavlovsk PLC.

As more and more of the easy-to-process ore bodies are exhausted, the pressure to tap more complex deposits is growing in Russia, and some of the big companies have done so already.

The country’s two biggest undeveloped deposits, Sukhoi Log and Nezhdaninskoye, are heavily refractory, but would-be investors are circling. Rights to develop Sukhoi Log are set to be auctioned soon, and there is no shortage of potential investors despite the complexity of the ore body.

At Nezhdaninskoye, Russia’s two biggest precious metals miners, PJSC Polyus Gold and Polymetal International Plc, are partnering to develop the project.

Both have experience in mining refractory ore: Polyus at its massive Olimpiada mine, which uses proprietary bio-oxidation techniques to process concentrate, while Polymetal deals with refractory ore at two producing mines and one mine in development.

For bigger companies willing to deal with tricky minerals, Russia has some rich pickings it seems.

For smaller miners operating in the tundra remotes of Russia’s “wild east,” however, finding a lode of refractory ore can often be the same as not finding any gold at all.

“We did have a deposit that was refractory … we sold it for US$40 million largely for that reason. It is simply too difficult and expensive to process,” said Simon Olsen, CFO at Trans-Siberian Gold Plc, a U.K.-listed gold producer focused on the Kamchatka region of Russia.

“There is a big capital cost associated with processing it,” he said.

Using Petropavlovsk’s proposed pressure oxidation facility as an example, the company said in 2012 it expected processing costs at its Pioneer mine of US$9.4 per tonne for non-refractory ore and US$12.3 per tonne for refractory ore. The company also budgeted US$500 million for the POX hub’s development.

Not using special processing for the complex ore lodes also doesn’t seem viable. Processing sulfide refractory ore using cyanide leaching, for example, may only recover 20% to 40% of the contained gold, a recovery rate that would render most projects uneconomical.

For miners in remote areas coping with crumbling winter roads and electricity prices sometimes three times higher than in more populated areas, those kinds of recovery rates are a big deterrent, said OJSC GV Gold CEO Sergey Vasilyev.

The company produces from its non-refractory oxide ore lode, but a large proportion of the company’s resources are refractory.

With competition for the rights to develop rich gold deposits on the increase, companies must find ways of tapping complex deposits, Vasilyev told a conference Sept. 2.

“Industrial reserves of easy-to-process ore has been practically used up,” he said.

GV Gold’s flagship project Tarynsky, in Yakutia, comprises about one-third refractory ore. But building additional dedicated circuits just to process that component of the body doesn’t make much sense.

Yakutia processing hub proposal

Vasilyev said the solution may be to construct a central hub capable of processing companies’ refractory ore, adding that he supported a proposal by the Corporation for Development of the Sakha Republic to construct such a central hub in Yakutia.

According to Gennady Aleekseev, general director of the corporation, the regional government administration is keen to attract mining investment and is proposing the hub as a way sparsely spread gold miners across the territory, one of Russia’s more isolated regions, could cooperate, reduce costs and make refractory projects more feasible.

The regional government-run corporation also wants more value-added processing done on its territory.

“We want to bring down the risks to ensure private companies and investors see them as manageable risks. We want to see deep processing of mineral resources on the territory of Russia,” he said during a presentation to the Eastern Economic Forum Sept. 2.

Speaking at the same forum, Vasilyev said Yakutia had some of the biggest resources of refractory gold in Russia. The three largest gold deposits in the province —Nezhdaninskoye, Kyutchus and Tarynsky — have estimated reserves of approximately 900 tonnes.

With no capacity currently present in Yakutia to process complex ore, building a central hub to service these three mines made the most sense.

“Establishing [three] separate processing capacities for these three projects is a huge expense and would be unprofitable,” he said.

The combined facility might solve this problem.

A spokeswoman for GV Gold told SNL Metals & Mining Sept. 20 that the company and the Corporation for Development of the Sakha Republic will discuss the proposal with government officials, with a view of gaining financial support and investment, but a decision or timeline had yet to be agreed.

POX hubs — Petropavlovsk, Polymetal, but mixed results

Other Russian companies have already long recognized the bitter-sweet difficulties of owning refractory ore; some have already moved to boost capacity in processing complex ore, with varying results.

At Petropavlovsk, about 4 million ounces, or slightly less than half its total gold reserves, are refractory, meaning the company has been sitting on ore it has been unable to fully process for years.

To solve the problem, the company began building a pressure-oxidation processing facility at its Pokrovskiy mine in 2011, but it later postponed the project. The fall in the price of gold from near US$1,800 per ounce in 2012 to as low as US$1,050 per ounce last year placed financial pressure on the group after it invested US$120 million of a planned US$500 million on the project.

Petropavlovsk narrowly avoided bankruptcy via an emergency rights issue and debt restructure last year.

However, it revived the project as a joint venture this year with GMD Gold, saying the hub could unlock an additional 200,000 ounces to 300,000 ounces of gold production per year.

The company’s brush with insolvency, however, showed the risks of spending millions on snazzy technology to deal with complex ore stockpiles and resources.

Petropavlovsk’s precious metals rival, Polymetal, seems to have had better results in its attempts.

According to information provided by a spokeswoman Sept. 21, the company digs up refractory ore at its Albazino and Mayskoye mines and sends it for processing either to its Amursk POX pressure oxidation hub in Khabarovsk territory or directly to China.

Sales of refractory concentrate to China, mainly from the Mayskoye mine, totaled about 100,000 tonnes last year, she said, while the company’s Amursk hub processed 143,000 tonnes of refractory concentrate in the same period, according to figures on the company’s website. The spokeswoman also said Polymetal is planning to boost the capacity of the POX hub by 50% via the construction of an additional oxygen plant by 2018.

At its newly acquired Kyzyl project in Kazakhstan, the company recently confirmed plans to send the refractory ore produced for processing in China.

Naysayers — Yakutia hub plan flawed

The proposal of the Yakutia regional government to construct a central processing facility in the remote territory also has its detractors.

Sergey Kashuba, head of the Russian Union of Gold Producers, said construction of the hub was unlikely to gain the necessary government support due to the expense of constructing the facilities needed and its difficult economics.

“From the point of view of energy, logistics, and the geographic spread of deposits, it is difficult. A processing hub in Yakutia would require an autoclave, but the CapEx on that type of project would be huge, and expenditures on transferring [ore from mines to the processing hub], on the operation of the processing hub itself, invalidates all economies of having a combined operation between the companies,” he told SNL Metals & Mining Sept. 9.

Alya Samokhvalova, head of group external communications at Petropavlovsk, agreed with Kashuba.

“In Yakutia there is not the same level of infrastructure as we have at our POX hub,” she told SNL Metals & Mining Sept. 21.

She pointed out that her company’s POX hub project was originally planned as a service for other gold producers as well, and was located in the region due to the presence of two rail tracks and other developed infrastructure, including cheap grid access.

Kashuba said the companies with the Yakutia refractory deposits — GV Gold, Polymetal and Polyus — would be better off mining the deposits, putting it through a basic gravitation and flotation circuit, and sending the resulting concentrate for further refining in China.

The only alternative is for a single large company to buy up all three projects and build a central hub.

Despite his skepticism over the merits of the Yakutia proposal, Kashuba agreed that processing hubs in other parts of the country made more sense.

Reinforcing his point, the Union of Gold Producers said Sept. 19 that it signed a cooperation agreement with China Gold Trade, a subsidiary of China National Gold Group Corp., which may facilitate Chinese investments into Russian gold assets, as well as smooth the way for sales of unrefined refractory ore and concentrate to China.

The two sides also agreed to cooperate in helping facilitate finance and supply of Chinese mining equipment to Russian miners, including processing equipment for refractory ore. This equipment could be used to set up pressure oxidation hubs in areas that make economic sense, he said.

China — Growing interest in Russian gold, despite ore complexity

With reserves and grades dwindling at its own domestic mines, Chinese miners, including state-owned China National Gold Group, have been looking for gold assets outside of China.

With gold prices high and the ruble low, and with the Russian federal and regional governments throwing in tax incentives, Russian gold assets are particularly attractive to Chinese producers right now, Kashuba said.

And even heavily refractory deposits don’t seem to be a barrier. Officials in Russia confirmed China National Gold Group is at the final stage of talks to acquire the Klyuchevskoye mine from SUN Mining, while other Chinese buyers are circling around at least two other major deposits, Kashuba said.

Regardless of whether Chinese companies end up committing to Russia, more and more refractory deposits are set to be mined in the former Soviet nation, especially by the bulge-bracket companies.

The only question is, can smaller miners get in on the same action? With Petropavlovsk now reviving its stalled POX hub program, the answer seems to be yes.

source: spcapitaliq.com

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