Big mine construction project in Humboldt stalls

Allied Nevada Gold Corp. is hitting the brakes — and hard — on its $1.2 billion expansion of the Hycroft gold and silver mine northwest of Winnemucca in Humboldt County.

The Reno-based company said last week it’s laid off about a quarter of the workers at the mine — observers in the Winnemucca area said the layoffs apparently totaled about 125 employees — and it’s reduced the number of contracted workers at the property as well.

The company said it also is delaying plans to build an ore-processing mill at the mine, one of the centerpieces of the expansion project at Hycroft and one of the largest single construction projects in northern Nevada.

Randy Buffington, Allied Nevada’s president and chief executive, said an outside company will take a fresh look at the plans to build the mill. It’s projected to process 130,000 tons of ore a day.

“We cannot estimate at this time a revised time frame, scope, or capital cost for different mill scenarios,” the publicly held company said in a filing with the Securities and Exchange Commission.

But Buffington said he’s confident the mill will be built — someday.

The decision is difficult because the mill is about 60 percent completed, Stephen Jones, Allied Nevada’s chief financial officer, told investors last week. The company doesn’t want to lose the $90 million it’s invested so far.

In the meantime, Allied Nevada Gold executives are rethinking the company’s plans to develop housing in Winnemucca for its workforce.

It planned to develop 39 single-family homes and 50 townhouse units, and it’s already completed six houses and 10 townhomes. Some of them have been sold to workers.

But those plans may be scaled back as the mill-construction plans are on hold. The company also is rethinking the size of a temporary housing complex — a “man-camp” — it’s building on the east side of Winnemucca to house workers.

The company is cinching its belt partly as the result of the sharp decline in gold and silver prices this summer. (Gold was selling last week for a smidgen less than $1,300 an ounce.)

But Buffington said recent problems at Hycroft are largely the result of operational difficulties with one of the heap-leaching pads in which chemicals are used to leach gold and silver from piles of ore.

“We have determined that a significant portion of the ore placed on the Lewis leach pad in late 2012 and early 2013, when the mining rate was increasing significantly, has not been properly leached due to insufficient solution application,” the company said in a statement.

That chewed into net income, which fell to $4.2 million in the second quarter compare with $6.1 million in the comparable quarter a year earlier.

Wall Street was disheartened by the news, and investors peeled about 35 percent off the stock’s price in trading last week.