Blm Approves Nevada Project For Troubled Pegasus
Injecting a glimmer of hope into the otherwise gloomy financial picture at Pegasus Gold, the Bureau of Land Management has approved construction of a new heap leach pad for gold extraction at the company’s Florida Canyon gold mine near Winnemucca, Nev.
The decision marked the fastest turnaround in Nevada history for approval of a final environmental impact statement for such a project.
Spokane-based Pegasus filed notice of intent to prepare the environmental impact statement on Dec. 13, 1996. The final version was approved Nov. 26 and announced this week.
On Nov. 14, Pegasus announced a third-quarter write-down of $353 million and the suspension of operations at the Mt. Todd gold mine in Australia. The mine was closed due to high operating costs and gold production that fell well short of earlier projections.
According to John Pearson, vice president of investor and public relations for Pegasus, the company has asked lenders to allow it to draft a reorganization plan and continue operations at Florida Canyon and the Montana Tunnels and Diamond Hill projects in Montana.
“From a production standpoint, Florida Canyon and Montana Tunnels were smaller than Mt. Todd,” Pearson said, adding that the Australian mine had been scheduled to produce more than 260,000 ounces of gold annually and represented more than half the company’s reserves.
Gold production at Florida Canyon, which has been in operation since 1986, is expected to reach about 155,000 ounces per year with the new heap leach pad in place, Pearson said.
The open pit operations at Montana Tunnels and the underground Diamond Hill mine were also started in 1986.
“The combination of those two will produce anywhere from 110,000 to 120,000 ounces of gold annually,” Pearson said.
From an employment perspective, the domestic mines offer more than double the 200 jobs lost with the shutdown of the Mt. Todd mine. About 200 workers are employed in the Montana mines, with another 295 at the Nevada site.
The fate of Pegasus Gold hinges on whether lenders call for immediate payment of about $130 million left outstanding on a revolving line of credit. Pearson has asked creditors to factor production at the domestic mines into losses at Mt. Todd.
If Pegasus is allowed to reorganize and gold prices take a prolonged, upward turn, Mt. Todd could go back into production, Pearson said.
“By mothballing it, we preserved that resource - the gold’s not going anywhere,” he said, adding that gold would have to climb above $350 to offset the $330 per ounce cost of operations in the Australian mine. The metal closed Tuesday at $283.25, down $4.25.
“As long as the company was convinced the gold price was going to stay above that level, it might make sense to produce again,” Pearson said. “Otherwise, there would be no sense in reopening it and going through the same scenario.”
Pegasus stock reached a new low Tuesday, closing at 67 cents after drifting below the $1 mark last week. , DataTimes