Approximately 240 workers at the 27- year-old mine owned by Vancouver, B.C., Canada-based Yukon-Nevada Gold Corp. were terminated on August 8. In a press release issued the same day, the company said: “In the face of continuing operating cost pressure in the mining industry worldwide Yukon-Nevada Gold Corp. has decided to suspend its underground operations at its Jerritt Canyon mines and focus solely on operating the profitable 4,000 plus tons per day mill that has been refurbished over the past six months. The company will make all efforts to minimize the impact of this decision on its employees, suppliers and the local community.”

The release contained a statement by Yukon-Nevada President and CEO Graham Dickson that “with our present mining plan the underground operations were not showing the profitability needed to continue or to expand the mining operations,” and also stated that “…in the meantime Yukon-Nevada Gold will continue to process its own stockpiled ore and the stockpiled ore of Newmont Mining under its existing agreement with which extends to the end of the year. Yukon- Nevada Gold is currently in negotiations with Newmont with regard to a further milling agreement on a cost plus basis at a rate of 3,000 tons per day.

“Yukon-Nevada Gold is additionally pursuing further milling contracts for ore generated in the Jerritt Canyon area which can be processed through either its roasting facility or its separate wet milling facility,” the release concluded.

However, a week later the company issued another statement that said it was considering “various plans to maximize the short term and long term value of its investment in the Jerritt Canyon mine, Nevada in light of current economic difficulties,” but in the same release also announced that it had shut down the mill, leaving as many as 150 more plant workers and other employees without a job. The company also said that Small Mine Development, the contractor it had hired to keep Jerritt Canyon’s Smith underground mine running, had upon company instructions removed its employees and equipment from the site.

The August 15 release further stated that, “The company is working hard to fulfill its statutory obligations to its employees, such as continuing health coverage and the payment of all suppliers. To address the liquidity problem at the Jerritt Canyon operation, the company is now focused on refinancing to ensure obligations are met and to move forward to regain positive cash flow. There can be no assurance that the financing or cash generating alternative chosen by the company will be available on acceptable terms, or at all. The failure to obtain this cash generation will likely have a material adverse effect on the company’s operations and financial condition.”

The suddenness of the shutdown was compounded by the lack of a clear explanation from the company’s upper management. As this issue of E&MJ went to press late in August, no official statement had been issued by Yukon-Nevada regarding the factors that prompted the closure. When contacted by the Elko Free Press newspaper following the second round of layoffs, Dickson said, “I'm not allowed to talk,” citing disclosure rules and board of directors bylaws.

Nevada state regulatory agencies were caught off-guard by the sudden closure, having apparently received no forewarning or notice of the company’s intentions. Allen Biaggi, director of the State Department of Conservation and Natural Resources, said the agency was concerned about security at the site and had dispatched personnel to examine conditions at the property. He also noted that the company had previously posted a $44.4-million bond for mine post-closure reclamation, and that the bond money was secure.

Gold was first discovered in the Jerritt Canyon District in 1972, with the first gold poured at the mine on July 4, 1981. Open-pit mining occurred between 1981 and 1999. Underground mining commenced in 1993 with the SSX-Steer Complex and the Smith mine. The Mahala deposit, located within the Smith mine, began commercial production in mid- 2005. Since mining began, Jerritt Canyon has produced more than 7 million oz of gold, according to company information listed on its Web site. The property was owned and operated by Queenstake Resources from June 30, 2003, when it was purchased from the previous owner, a joint venture between Anglo Gold and Meridian Gold. Yukon-Nevada Gold acquired Queenstake through a merger between Yukon Gold Corp. (YGC) and Queenstake Resources Ltd. (Queenstake Ltd). on June 20, 2007.

An NI 43-101 technical report on the mine, published in April 2008 by SRK Consulting, said mineral resources at Jerritt Canyon were contained within about 20 areas in the district. Measured and Indicated Resources, including reserves, as of December 31, 2007, totaled 8,196.9 million tons at 0.239 oz/t gold, containing 1,961.1 koz of gold. There is an additional Inferred Resource of 2,139.7 million tons at 0.224 oz/t gold, containing 520.4 koz of gold.

Mining is conducted by mechanized methods and equipment using backfill. The less refractory ores produced early in the production history were processed through a wet mill, which operated until 1997. As the ores became more carbonaceous and refractory, and higher grade with the introduction of underground ore, a dry mill with an ore roasting circuit was added in 1989, and is currently in operation.

Annual gold production from Jerritt Canyon has ranged from 125,000– 350,000 oz, at cash costs ranging from $240/oz to $554/oz. Queenstake reported that 2007 mill production from Jerritt Canyon ore as 125,140 oz recovered from 619,130 tons of ore processed, with a cash cost of $554/oz.

It’s possible that the mine’s ample milling and roasting capacity may have contributed to the company’s company difficulties; the 4,000-t/d mill was regarded by some industry observers as too large for average mine output. Yukon-Nevada had acquired a toll-milling contract from Newmont Mining Corp. that was considered extremely important in keeping the mill operating at an acceptable rate of throughput.