Allied Nevada Gold Corp., in association with M3 Engineering and Technology, has developed an optimized approach to the planned construction sequence for the Hycroft mill expansion. With the completion of the Hycroft mill expansion feasibility study entitled "NI 43-101 Technical Report, Mill Expansion Feasibility Study, Winnemucca, Nevada, USA" and dated November 3, 2014 in October, 2014, we directed our focus on the first phase of the mill expansion with the goal of maintaining the throughput rate of the initial phase of the mill construction while minimizing upfront capital requirements.
The capital re-sequencing and optimization exercise indicates that we can begin operation of the first line of the mill for a capital outlay of approximately $768 million, a reduction of 18% from phase one costs that were shown in the feasibility study of approximately $934.5 million. The expected reduction in the first phase capital was achieved by re-sequencing construction of infrastructure and certain components that were previously scheduled to be built in the first phase, but would not deliver significant cash flow in the current market environment or were not being fully utilized until the full 120,000 tpd mill was operating. A detailed capital cost estimate of the optimized first phase is expected to be completed in early 2015.
The optimized case is based on the same parameters that were developed for the recently announced Hycroft Feasibility Study. The first phase of mill construction continues to be anticipated to have a nominal processing capacity of 60,000 tons per day ("tpd"), with a potential to process up to 70,000 tpd depending on ore hardness. Annual average sales for the combined heap leach and single line mill during the initial five years are anticipated to be 340,000 ounces of gold and 15.1 million ounces of silver at adjusted cash costs per ounce(1) of between $575 and $600. We would anticipate that this line would become operational in 2017, subject to our securing the necessary financing.
"We reviewed the construction sequence as presented in the feasibility study and determined that, in this gold price environment, we needed to identify which components delivered the maximum cash flow, while spending the minimum upfront capital. We believe this plan achieves that goal and also provides flexibility in our financing efforts while still delivering growth at Hycroft," commented Randy Buffington, President and CEO of Allied Nevada. "We believe this is a more intelligent approach to the construction sequence, which will reduce the financing and execution risks associated with a large expansion in this market."