Mining ended and 109 people were laid off Wednesday at the Hycroft Mine 55 miles west of Winnemucca as Hycroft Mining Holding Corp. plans for the mine’s future, including constructing a mill to process gold and silver sulfide ore.
“We are ceasing mining operations effective immediately, however, we will continue to process ore until it is no longer financially feasible,” said the company’s president and chief executive officer, Diane Garrett, in business update call.
The 109 people laid off are out of a workforce of 209 at Hycroft, according to Tracey Thom, vice president of investor relations and corporate communications. She said the company will be working with other mines in Nevada to find positions for those laid off.
The Denver-based company has decided milling is the best bet for Hycroft, after looking at a patented process for sulfide ores that has too many challenges, Garrett said.
“I don’t want people to think we are shutting down. We are absolutely moving forward with a milling operation,” she said in a phone interview, estimating that it could be two to three years before a mill could be built so continuing to mine at this time was “bleeding cash.”
Garrett said the high cost of consumables, including cyanide and fuels, “really skyrocketed” and had a big impact on the cost of mining for the run-of-mine, heap leaching operation for oxide ores that had been under way at Hycroft, which was another key reason for the decision to stop mining.
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The company has $30 million to $40 million losses from operating without a process in place for the sulfide ores.
Garrett said a prefeasibility study that is expected to be completed early in the new year will consider and predict the cost of constructing a mill that would include an autoclave and will also look at alternatives such as toll milling at a third-party autoclave or roaster facility in Nevada.
“We’re looking at different options,” she said. “The way we are designing it, we would have our own autoclave.”
The U.S. Bureau of Land Management already permitted mill construction and expansion at Hycroft under prior owners. Allied Nevada had planned the project but went into bankruptcy in 2015 when gold and silver prices dropped.
The mine reopened in mid-2019, and the holding company’s Nov. 10 announcement states that mining oxide and transition ore allowed the company to pre-strip overburden with some revenue offset to gain access to commercial scale sulfide ore.
Garrett said Hycroft has the largest silver deposit in the United States, and there would be a mine life of 34 years once mining resumes and sulfide ore is processed by milling. Currently, ore leached at Hycroft is processed in a Merrill Crowe plant.
“There is a lot of great potential …. It just needs to be operated in a thoughtful manner,” she said, adding that shareholders have been supportive of the decisions to do studies and determine the best way to mine and process ore.
There would need to be roughly 40 million tons of overburden stripping to get to the sulfide, which would mean mining would start again before the planned mill is finished, Garrett said.
Hycroft has often been talked about as a low-grade, oxide ore mine, but she said there is potential for higher grades, and drilling has found “some really compelling grades.”
In the company’s announcement on the decision to stop mining and pursue mill construction, Garrett stated that the acid pressure oxidation process “generates significantly higher economic value at Hycroft with substantial leverage to even modest increases in precious metals prices.”
Hycroft reported third-quarter gold production of 14,831 ounce, up 240% over the 2020 quarter, and silver production of 91,437 ounces, up 295% over third quarter of last year, and the average realized gold price was $1,781 per ounce and for silver, $24.15 per ounce.
A $10 million drilling program for 2021 and early 2022 continues, with $5.6 million of the total spent by Sept. 30, the company also stated.
Hycroft Holding’s unrestricted cash position was $19.8 million at the end of the third quarter, compared with $54.4 million at the end of last year, and the report stated that while the company will continue to generate revenue from heap leaching ore, it does not expect to generate net positive cash for the foreseeable future.
The Hycroft Mine has a 71,000-acre land position, and it has been in operation since 1983, with a couple of shutdowns through the years.
After Allied Nevada’s bankruptcy, the company emerged from the bankruptcy in October of the same year and changed its name to Hycroft Mining Corp. Hycroft Mining Holding Corp. then took over after Mudrick Capital Acquisition Corp. acquired the operation in May of 2020. The holding company is publicly traded.