Hycroft Gold Sales Projected At 100,000 Ounces In 2010

 

RENO, NV - Allied Nevada Gold Corp. reported preliminary operating results for the year ended December 31, 2009 and an outlook for 2010. Cost of sales per ounce of gold sold is expected to be approximately $385 for the fourth quarter of 2009 with full year costs expected to be approximately $392 per ounce, better than the full-year guidance of $460-$480 per ounce previously reported. Costs were well below expectation due to lower than expected commodity prices, the mining of more ounces due to higher than anticipated grades and treatment of silver as a byproduct credit. The Company mined 24.5 million tonnes of material including 8.7 million tonnes of ore at an average grade of 0.75 g/t gold and 7.58 g/t silver. The mine placed approximately 214,200 ounces of gold on the pad and approximately 2,161,800 ounces of silver (or 121,200 ounces of recoverable gold and 216,200 ounces of recoverable silver), which is 25,500 ounces of gold higher than planned, primarily as a result of the higher than anticipated grades.

Allied Nevada sold 14,395 ounces of gold in the fourth quarter of 2009 and full year 2009 sales totaled 42,358 ounces of gold at Hycroft. In addition to the short-term operating challenges at Hycroft previously discussed, it was discovered in the fourth quarter that cyanide consumption was much higher than anticipated. The acid leach material mined in 2009, for which the company has only limited historical operating data, had relatively high sulphur and silver grades requiring a higher cyanide concentration be used. This, along with challenges previously discussed throughout the year, has resulted in the shortfall in ounces sold in the fourth quarter and for the full year 2009. These issues have been corrected and production levels and leach pad performance are meeting expectation. For the month of January 2010, the mine produced approximately 8,200 ounces of gold and approximately 17,000 ounces of silver, indicating the mine has now achieved nominal production rates. Current production from the new areas of pad under leach is performing as expected with recoveries and gold release within planned levels. Management believes past commissioning challenges have been resolved and it is on track to meet the 2010 gold sales guidance of 100,000 ounces.

"With the planned crusher expansion, analysis of an optimal mining rate for oxide material, the anticipated resource update in Q2 and ongoing drilling, we believe 2010 will be an exciting and productive year," commented Scott Caldwell, President & CEO. "While we did run into some operational challenges in our start-up year, our performance in December 2009 and January 2010 indicates that these issues have been resolved. The mine is operating at planned production rates and we are on track to meet targeted production levels for 2010. Looking forward, we are shifting our focus to near and long-term expansion opportunities such as an accelerated oxide mining rate, sulphide resource development and follow-up drilling on the newly discovered silver high-grade zones."

Notable Achievements in 2009:

      In March, 2009, a resource update was announced indicating a 244%

    increase to measured and indicated gold resource, inclusive of reserves,

    to 5.9 million ounces and a 298% increase to silver measured and

    indicated resource to 117.5 million ounces.

      In April 2009, we announced positive initial metallurgical results on

    sulphide mineralization which indicated that the mineralization is

    amenable to concentration using simple, conventional flotation

    technology. Rougher flotation results revealed recovery of gold and

    silver in the high 80% range using a coarse grind with cleaner

    flotation results indicating an overall flotation concentration in

    excess of 20:1. This has been confirmed with subsequent

    testing and ongoing work will continue to identify the most cost

    effective extraction methods and optimal processing plan for the

    sulphide mineralization.

      In August 2009, we completed a $100 million cross-border financing

    providing a much stronger balance sheet and allowing the Company more

    flexibility to accelerate the exploration program to aid in expansion

    and optimization studies for oxide material and development of sulphide

    material.

      Allied Nevada reported its first positive quarterly earnings in the

    third quarter of 2009.

      In November 2009, we completed the second phase of the Brimstone leach

    pad expansion, a 2.5 million square foot expansion on-time and on-

    budget. All cells of the expansion are now under leach and performing as

    expected.

      We drilled 123 holes in 2009, representing approximately 28,500 metres,

    with an encouraging discovery in the Vortex zone to the south of the

    Brimstone pit of high-grade silver mineralization. As announced in 2010,

    this drilling indicates that we may have discovered the mineralizing

    feeder system.

      In July 2009, Hycroft celebrated its grand opening with a well-attended

    ceremony at site and inaugural gold pour from the newly constructed

    refinery.

With operations at Hycroft at steady-state production rates, Allied Nevada is expecting to mine approximately 19 million tonnes of material including approximately 11 million tonnes of ore at an average grade of 0.56 g/t gold and 9.7 g/t silver. Gold sales are expected to be approximately 100,000 ounces at a cost of sales per ounce of gold sold(1) of between $400-$450 in 2010. Projected cost of sales per ounce of gold sold for 2010 was determined assuming a gold price of $900/ounce, a fuel price of $90/barrel and takes into account revenue from silver production as a byproduct credit based on a 2:1 production ratio of silver to gold and a $15/ounce silver price. Projected costs for 2010 are expected to be higher than 2009 actual costs due to anticipated lower grades mined, higher fuel prices (representing approximately $20/ounce) and increased cyanide consumption (representing approximately $19/ounce) in 2010. Based on current life of mine plans, a $10 per barrel movement in the price of WTI oil will impact the annual operating costs for fuel and lubricants at the Hycroft mine by approximately $1 million (or $10 per ounce).

A 30,500 meter exploration program has been designed for 2010 with a focus on expanding oxide and sulphide resources, improving the confidence level of oxide resources to the reserve categories, and testing the extent of high-grade silver anomalies encountered at the end of the 2009 drill season. Exploration spending at Hycroft is success-driven and is expected to be approximately $16 million in 2010. In addition, the Company intends to conduct targeted surface exploration and drilling on certain of its advanced and exploration properties where the Company believes encouraging exploration opportunities exist.

Caldwell said, Capital expenditures in 2010 are expected to be approximately $20 million. At Hycroft, we expect to begin construction in the second quarter of 2010 of phase three of the expansion plans for the Brimstone leach pad, increasing the available pad space by a further 3.5 million square feet at a capital cost of approximately $10 million. Construction of this third phase of expansion is expected to be completed by the end of the third quarter of 2010. In addition, we announced our intention to begin crushing ore at Hycroft in 2010 with the purchase of a mobile crushing system, expected in the first half of the year. Crushing ore is expected to improve gold recovery from current run of mine performance of 56.6% to 78% and silver recovery from current run of mine performance of 10% to 30%. Hycroft will also expand the mining fleet with the addition of a second production drill, a D-11 dozer, primarily to be used for the reclamation of the historic Crofoot leach pad, and other ancillary mining and production equipment.

Metallurgical test work is escalating with the significant number of samples of oxide and sulphide mineralization attained during the 2009 drill season, and we expect to be releasing results of this testwork over the course of the year.

The company’s address is 9790 Gateway Drive, Suite 200, Reno, NV 89521, (775) 358-4455, fax: (775) 358 4458, email: [email protected].