Allied Nevada hits record gold production with new facility

Record gold production in the third quarter helped Allied Nevada Gold Corp. of Reno to a modest profit in the third quarter, but the company based in South Meadows still is working to resolve problems with two heap leach pads that could significantly boost gold and silver production in 2014.

Allied Nevada earned $5 million in the third quarter on sales of 52,198 ounces of gold and 184,070 ounces of silver from its Hycroft mine 54 miles west of Winnemucca. A year earlier, however, the company brought in $13.4 million in the same quarter.

The record gold production was a result of bringing a new Merrill-Crowe processing facility online and higher throughputs of cyanide solution. Allied Nevada is running a steady rate of 14,000 gallons of solution per minute through its Merrill-Crowe processing facility, which separates gold from the cyanide solution used to leach gold from low-grade ore placed on heap leach pads.

Allied Nevada produced its first metals from the facility on Oct. 7 and remains on track to hit its target of 175,000 to 200,000 ounces of gold produced at Hycroft in 2013, said Randy Buffington, the firm’s president and chief executive officer, during a call with analysts and investors last week. With the new plant online, Allied doubled its silver production to more than 4,000 ounces per day.

“We understand that one quarter does not make a turnaround, and everyone is very focused on hitting our targets and objectives,” Buffington said.

Allied Nevada’s stock was pummeled in 2013 due to high capital expenditures as it developed a man camp and housing project in Winnemucca and advanced ambitious expansion plans for Hycroft. It also had significant problems with its two main heap leach pads — much of the ore placed on the pads was not being properly leached with cyanide solution. Its stock started the year above $30 but was trading under $4 last week on the New York Stock Exchange.

“The major issues were poor solution-to-ore ratio, poor leach pad management and poor planning and execution,” Buffington said.

The firm has completed a remediation plan and is introducing around 1,000 gallons a minute of cyanide solution to the pads. It expects to increase that rate to 1,500 gallons with installation of additional wells. Allied Nevada expects to begin recovering gold from problem areas on the leach pads beginning in 2014 — as much as 70,000 ounces, Buffington said.

Steve Jones, executive vice president and chief financial officer, said the firm made significant strides in the third quarter.

“The biggest thing we have got going for us is the new Merrill-Crowe,” Jones said. “It is much more efficient than the old plant. We have set ourselves up in the right direction to continue to deliver higher production of gold and silver and will see our costs coming down instead of rising as they have in the last few quarters.”

The company originally planned to build 39 single-family homes and 50 townhouses in Winnemucca to house its workforce. Last week, it said in a filing with the Securities and Exchange Commission that its plans to build 29 single-family homes and 34 townhouses.