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Kensington Mine continues to grow

Local gold mine builds infrastructure, tightens ship

Posted: April 12, 2012 - 11:06pm

The president and CEO of Coeur d’Alene Mines Corp., along with the general manager of Kensington Mine, brought news of a growing gold mine to Juneau Chamber of Commerce business roundtable at the Hangar on the Wharf ballroom on Thursday.

“Kensington is really all about consistent sustainable production,” General Manager Wayne Zigarlick said. “We’re trying to transition out of this phase of construction … and really try to de-risk the property so that all of our systems work and we’re able to be predictable and sustainable in the future. We’re on the cusp of that now,” he said. “Kensington is going to be something we can count on.”

The mine is wrapping up its construction phase with a handful of recent infrastructure projects.

It is finishing work on an underground paste plant. The plant mixes the ground-up waste rock with concrete to fill the voids created when an area is mined, Zigarlick said.

Kensington employs 260 mine workers directly, with another 100 contractors. Of Kensington’s employees, 70 percent are Alaskan and half are from Southeast.

Mine workers now have a place to catch some sleep in a new bunkhouse that sleeps up to 200.

“This has helped a lot with employee morale,” Zigarlick said.

Miners can commute daily if they like, Zigarlick said. However, the commute is two hours each way. Many prefer to work four days on and three days out or two weeks on followed by a week off. These bunkhouses, with kitchen and amenities, are second homes for these workers. An expanded warehouse and administrative offices are expected to be completed during the first half of 2012.

This infrastructure development is expected to lower gold production in the first half of 2012. Output is expected to rise again once the projects are complete in the second half of the year.

The mine plans to achieve production of 125,000 ounces of gold a year.

Zigarlick said the mine expects it can produce gold for approximately $800 or $900 an ounce once the mine starts focusing on efficiencies, Zigarlick said. Gold on the New York Mercantile Exchange closed at $1,672.90 an ounce Thursday.

Chamber members asked about Kensington’s future reserves.

Coeur d’Alene president and CEO Mitchell Krebs said the mine’s current life is expected to be 12.5 years to 13 years. Exploration and efficiencies could extend this life.

Kensington does not plan to explore outside its footprint. However, it plans to spend $4 million on exploration drilling in 2012.

“A lot of the drilling this year is to develop a firmer mine plan around what we already know,” Zigarlick said. “We do believe that Kensington has outstanding exploration potential, and we’ve had some good indication of that. Right now we are focusing on the next three to four to five years to make sure we have a sustainable resource and then we’ll focus on growing the resource.”

The mine does not plan to build its own smelter, Zigarlick said.

“Not a piece of the puzzle that Kensington would want to get into,” Zigarlick said.

Gold-bearing concentrate from the mine is shipped in large bags to Germany and China for smelting. The concentrate is made in a flotation mill.

Kensington wouldn’t be interested in smelting even with low-cost hydroelectric power, Krebs said.

Krebs did touch on energy costs, a major concern for the mine.

“Diesel is one of our biggest costs,” Krebs said. “If there was an alternative source of power, we’d use it. And we’d use a lot.”

Coin collectors might see a Kensington coin in the future. To the question of a coin, Krebs said, “it’s something we’d certainly consider.”

Kensington underground gold mine is located about 45 miles northwest of Juneau on the east side of the Lynn Canal.

The mine produced 88,420 ounces of gold in its first full year of operation. Metal sales from the mine totaled $151 million, or 15 percent of Coeur’s total sales in 2011. It reported an operating cash flow of $36.1 million.

Kensington’s proven reserves totaled 326,000 ounces of gold with more than 1 million ounces of gold in probable reserves at year-end, 2011. Measured and indicated resources of gold totaled 587,320 ounces. Inferred resources levels totaled 169,680 ounces of gold.

Coeur d’Alene Mines Corp. trades under the stock name CDE. The company’s stock price, down 4.6 percent over the year, rose 5.4 percent to $23.02 Thursday.

Next week the Juneau Chamber of Commerce is hosting Gov. Sean Parnell at its business roundtable at the Westmark Baranof Hotel on April 19.

• Contact reporter Russell Stigall at 523-2276 or at russell.stigall@juneauempire.com.

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