TORONTO (Reuters) – Canadian gold exploration company Rainy River Resources (RR.TO: Quote) believes it has stumbled on a whole new gold district in northern Ontario, where it is developing its flagship Rainy River project, Chief Executive Raymond Threlkeld said.
The project, located about 400 kilometers (250 miles) south of Goldcorp Inc’s (G.TO: Quote) (GG.N: Quote) legendary Red Lake gold mine and roughly 200 kilometers west of Osisko Mining Corp’s (OSK.TO: Quote) Hammond Reef gold project, has a very promising future ahead of it, Threlkeld said on Thursday.
Toronto-based Rainy River expects a soon to be released study on its namesake project to outline stronger production and processing numbers, along with some increases in capital costs.
“The ore is a little bit softer than we originally designed for, so it will allow a little bit more throughput. We were looking at 32,000 metric tonnes (35,273 tons) per day, but it could be as high as 35,000 tonnes per day,” Threlkeld said.
“We think we might average (annually) closer to between 350,000 ounces and 375,000 ounces, versus the 329,000 ounces we are currently estimating, on average, over the life of mine.”
The updated output and processing numbers will be part of a revised preliminary economic assessment that is set to be completed around the end of the second quarter.
Threlkeld, who said he coveted the Rainy River project long before he joined the company, cautioned that the revised assessment will show higher capital costs, reflecting increases in labor and materials costs.
He expects capital costs to be closer to the C$800 million mark, up from a previous estimate of about C$680 million.
“There might be some capital increases and that is just to be expected,” he said. “We’d be foolish if we said otherwise.”
Cost concerns have weighed heavily on the minds of equity investors in the mining sector with dramatic cost increases seen on some large projects in recent months. These worries have also led to a pullback in Rainy River’s share price, Threlkeld said, as some shareholders fret about the amount of equity that might have to be issued to fund the project.
But in an industry in which a CEO’s reputation often overshadows the merits or demerits of projects, Threlkeld has enjoyed some big successes not only in identifying and building mines, but also in returning value to shareholders.
Threlkeld, an American, has developed mines for the likes of Barrick Gold (ABX.TO: Quote) and Coeur D’Alene Mines (CDE.N: Quote) during his 30-plus years in the sector. In his stint at Western Goldfields from 2006 to 2009, he led a team that developed and put into operation the Mesquite Gold mine in California three months ahead of schedule.
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