Hello.

I am a investor in Galantas Gold and am trying to establish the likely capex required and operating costs of converting their open cast mine on the Kerney Vein in Omagh to an underground mine.

I contacted the CEO of Galantas recently and got the following response;

"There is a cost difference open pit to underground but not as much as one might think. This is because we are dealing with a steeply dipping vein deposit 1-2 metres thick. Thus stripping ratios are high. Underground mining is more selective and thus much less waste country rock has to be shifted. There are other open pit prospects that we will go for but I would like these satellite pits to add to an underground base load, increasing annual ounces. Looking at a small open pit on Joshua vein at the moment which will add to Kearney underground, plus underground on Joshua later too."

Can anyone with more knowledge of mining give me some idea of the likely inititial costs involved and additional ongoing operational costs per tonne of ore mined (vs. open pit) or at least point me in the right direction so I can increse my understanding?

I'm a mere accountant and any information would be fantastic.

Thanks.

[tweak]Duplicate threads deleted[/tweak]

---

http://www.minecost.com/sample.htm 

It's a mine model excel sheet giving opencast and underground extraction costs albeit in the Far East.

Good Luck.

Peter.

Thanks very much, should keep me busy this weekend.

Enjoy your day.

Dom

The other thing to consider is the underground mine design - due to the depth Galantas would be accessed by a decline - either from surface or from the bottom of the open pit. This has significant implications for lower costs compared to a shaft accessed underground mine - take care on comparing any costs.

I see so because the seam isn't partcularly deep they can use a decline and therefore use trucks for haulage to the surface which makes it more economical?

Very good point in that if they start the underground mine from the bottom of the pit there will be further cost savings.

I would imagaine the additional cost may be reduced to between 1.5 and 2 times the current cost of open pit mining (from 2.5 times in the example provided).

The other thing to consider is that the grades get higher deeper down so the extra cost will be somewhat offset by this.

How do you know the Grades get Higher ,the deeper they go?
What is the Pitch of the seam?

Hello.

"There is a cost difference open pit to underground but not as much as one might think. This is because we are dealing with a steeply dipping vein deposit 1-2 metres thick. Thus stripping ratios are high. Underground mining is more selective and thus much less waste country rock has to be shifted....

Can anyone with more knowledge of mining give me some idea of the likely inititial costs involved and additional ongoing operational costs per tonne of ore mined (vs. open pit) or at least point me in the right direction so I can increse my understanding?

I'm involved with UG mining and project development - without writing a giant treatise on the subject (because it's a very big subject with a multiplicity of inputs) I'd suggest that Galantas scale UG ore mining will cost at least 5 times more per tonne of ore than getting it out of an open pit. That figure may range up to 10 or 15 times more. The main difference is simply that underground mining costs a lot more to do than operating an open-pit, the amount of drilling you have to do, ground support, ventilation, pumping and so on. You'll necessarily minimise the amount of dirt you have to mine and haul thus all your costs are carried by a relatively small tonnage compared to an open-pit scenario. Remember also that what is ore in an open pit may not be ore in an underground operation if it can't cover the extra costs.

... and the capital costs of setting up a small decline operation on an existing site with second means of egress and pumping capacity ? I'll take a stab at anywhere between $10 and $20m Aussie dollars, much of that being specialised UG mining equipment. Pretty much 'how long is a piece of string' ? How much equipment, how much development is needed to get to the ore etc. etc. A rather complex question to be honest.

Cheers

---

I'm also in the gold mining business professionally and I would agree with Imageo that it is likely to be 5-10 times more expensive to go underground on a small vein.

In addition to matching up an underground fleet of drill-jumbos, LHD's and haul trucks the mining method is likely to be more complex with a great deal of waste drivage to establish the ramp, level and stope access not to mention other underground infrastructure such as sumps, pump rooms etc etc. Also the labour cost will increase substantially underground with far greater skill sets required for underground mining than a simple openpit. Also there is no basis for underground narrow vein mining personnel in Ireland as the existing major underground Zn-Pb mines such as Navan (3 million tonnes per annum) and Lisheen (1Mtpa) are totally trackless bulk tonnage operations. So skilled labour would have to be "imported".

Other costs will be that certain sections of the veins will not be payable by UG mining, and stope / pillar design will reduce the recoverability of the resource. To enhance this recoverability backfilling will be required which would be a significant additional cost. Add in grade dilution as minimum mining widths will be determined by legal equiurements as well as the capabilities of the drill and LHD fleet purchased.

Run of mine headgrade is also likely to change (both due to mining methods / dilution and due to geological variability such as increased sulphide content) which could also impact on the mill design and require changes to the circuits (additional flotation cells for example), so not an easy question.

As Minegeo says this is an equation with hundreds of variables but I would guess a cost muytplier of between 5 and 10 but it could be substantially higher.

Having used Minecost before I would urge considerable care when using their free models as they tend to be dated and generalized. Better to purchase a real mine model.

Thanks for your excellent responses. Just the kind of detail I was looking for. I guess I asked the wrong question though because as you say the costs will be at least 5 - 10 x higher per tonne of ore BUT significantly less ore will need to be mined for the reasons discussed (vs open pit strippping).

It's interesting that the CEO doesn't seem to think that the overall costs will be significantly higher. A better question I guess would be what will the costs be per ounce of gold extracted vs open pit?

I had a figure a figure of roughly twice the cost in my head but would you guys go higher?

The initital capes of about £6 - 12 million is the kind of figure i expected so thanks for confirming that. Galantas will no doubt be using revenues from their other open pit seams to fund the undeground mine on the Kearney when it's required.

FYI. There is a duplicate thread on this going on in the general chat section. I didn't realise that everone would be able to see this thread pop up so I also posted it in the general area. Some interesting debate going on there. :)

http://www.aditnow.co.uk/community/viewtopic.aspx?p=75838#msg75838 

Thanks again for your responses.

Apparently there is an Underground Gold mine starting in the Omagh area,its using drifts driven down 20yrs ago,and there is some production coming out.

Think you are somewhat premature -

I guess you are either referring to the reported gold discoveries in this area by Conroy Diamonds & Gold plc along the various ENE-trending shear zones cutting the Lower Palaeozoic greywackes in this area. Although the largest discovery reported thus far is around Clontibret in County Monaghan (not Armagh). These discoveries are low grade and only amenable to large production openpits, but they still require substantial drilling to define the aforementioned inferred resources. There are some old shafts sunk in the 1950's on one of the stronger veins.

Alternatively you could be referring to Curraghnalt in County Tyrone which was partially drilled in the 1980's prior to an exploratory access adit being drilled using a Dosco road-header as explosives cold not be permitted then. This is a vein swarm of mesothermal quartz-sulphide veins which are currently being drilled by Dalradian Minerals. A resource of approximately 600,000 contained ozs has been reported. Geologically these veins are similar to those being mined in the pits near Omagh by Galantas.

On both counts the rumour is not in Armagh.

Minegeo,
It was`nt a rumour,it came from a Mining Safety consultant who works regulary in the Salt mine in the north and the zinc mine,cannot think of the name,the one that was sold recently from Anglo -American,Lisheen,remembered.
I asked him if he knew anything about Galantas,he mentioned the 20yr old drifts,and some production coming out.
I`ll have to tell him that he`s wrong,according to you.

Have corrected my error,Omagh or Armagh

Ty, not sure about the pitch of the seam to be honest.

The grades are higher in the Kearney Vein, which is where they plan to build the underground mine. The grades of 4.5g/t - 9g/t are quoted in the Howe Report which can be found here:
(follow link at top of the page, see grades on page x)

http://www.galantas.com/corporate/s/SedarLink.html 

I`m sure Minegeo knows the pitch of the veins,
But i`m sure they must be fairly steep for them to consider underground mining,with its extra costs and problems.

Well quoting the CEO again:

""There is a cost difference open pit to underground but not as much as one might think. This is because we are dealing with a steeply dipping vein deposit 1-2 metres thick. Thus stripping ratios are high. Underground mining is more selective and thus much less waste country rock has to be shifted."

So they are "steeply dipping".

Exactly,maybe the Overburden is getting to much,

The reason for considering underground working

Page 5 may be of interest?

http://nora.nerc.ac.uk/11831/1/Gold_proof_11_7July2010.pdf 

Spoke to the MD of Dalradian at PDAC in Toronto today. Can definitely confirm NO plans for short term production from Curraghinalt.

Fraid you will have to tell your mate he is not correct.

There is a major drilling programme underway and this will be ongoing for at least another six months. Then resource estimate, then scoping and feasability studies before any thoughts of production.