Resurrecting mining in Silverton
San Juan County signs off on Pride of the West Mill

The San Juan Mountains surrounding Silverton may once again be seeing a mining boom. With gold at $1,200 an ounce, modern-day prospectors are looking to make a buck off the area’s mineral deposits. Last week, San Juan County gave its blessing to the reopening of the Pride of the West Mill, in Howardsville. If approved, the mill could process up to 700 tons of ore per day./Photo by Stephen Eginoire

by Missy Votel

With gold prices skyrocketing, interest in mining around Silverton is once again heating up. However, doubts remain as to whether a local ore processing operation can strike it rich before going bust.

Last week, San Juan County commissioners unanimously endorsed Colorado Goldfields’ plans to reopen the Pride of the West Mill in Howardsville, a few miles north of Silverton. In a letter dated April 28 to the Colorado Division of Reclamation, Mining and Safety, San Juan County chairman Ernie Kuhlman expressed support for approval of the mill’s permit, stating, “Having the Pride of the West Mill properly permitted and operating will be very beneficial to the local and state economy … (and) encourage additional mining in the area.”

The Lakewood-based Colorado Goldfields bought the 120-acre property in 2007 from Tusco. The Pride of the West, which has operated intermittently since a major renovation in the 1980s, would have a capacity to refine up to 700 tons of ore per day, according to Goldfields. The mill would be the only ore-processing plant in Southwest Colorado and the Four Corners region.

Although no mining would be done directly on site, Colorado Goldfields says it has interest from dozens of small mines in the region looking for processing. According to the company, there are more than 1,000 mines within a 50-mile radius of the mill. “There are several permitted mines around the area that don’t have anywhere to go with their ore,” said Goldfields Director of Operations John Ferguson. “We’ve been talking to them for some time and there are some mines in San Juan County we will be doing processing for.”

Colorado Goldfields is also involved in mineral exploration of its own throughout the region, Ferguson said. Last November, it signed a lease with option to buy on the Brooklyn Mine. When fully functional, Pride of the West could employ 15 to 20 people, with dozens more working in nearby mines, according to Ferguson.

San Juan County commissioner Peter McKay said county officials and residents are in favor of reopening the mill, provided it is in keeping with proper environmental protection and safety measures.

“I think everyone is open to the possibility of mining coming back, but it would have to be done in an environmentally correct and sensitive way,” said McKay. “It will be much cheaper to have ore processed here than having it shipped.”

The most recent major mine in operation in Silverton was the Sunnyside, which closed in 1991.

Colorado Goldfields submitted a 500-plus application to the DRMS in February for a 60-day review. A final verdict could be delivered as soon as May 20. “It could be finalized next week, but we may be another 30 days out,” said Ferguson.

Among the state’s primary requirements was a new, double liner for the mill’s tailings pond; a tailings pond leak-detection system; a new, impermeable pad for the raw ore; and upgrades to mill buildings to contain all fluids in the event of a tank failure. Ferguson said the property, which came with water rights, will use a gravity concentration method of extraction. Although the mill also has a cyanide leach plant, he said Goldfields does not anticipate using it. “Heap leach cyanide is not in our vocabulary,” he said. “We’ll probably do a little with the high-grade concentrate, but for the most part, it doesn’t work on our type of ore.”

Upgrades are expected to cost about $700,000, and Ferguson said the goal is to start work on activities that do not require state approval, such as clean up and mechanical fixes, this summer. “We can’t do milling until we get construction approval, then we’ll have to do the construction and pass inspection of our environmental protection facilities.”

The tailings pond alone will require several weeks of work, he said.

However, the permitting process could be a moot point if Colorado Goldfields fails to secure capital for the project. In a Jan. 11 filling with the Securities and Exchange Commission, the company said it was looking to raise additional capital in the near term. “We were formed in 2004 and have primarily had limited activity,” the filing stated. “Since we have received no revenue from the production of gold or other metals, we have not generated cash flow from operations.” Since going into business, the company has yet to make a profit, with the majority of income coming from stockholders, personal loans and equity financing. Last November, Colorado Goldfields’ auditor expressed doubt that the company could continue “as a going concern,” i.e. continue to operate into the foreseeable future. Furthermore, the company is mired in a lawsuit with former president Todd Hennis over ownership of the Mogul and Gold King mines, and a promissory note in excess of $700,000 for Pride of the West is due June 29.

San Juan County commissioner McKay admitted that the company will need to be in good financial shape before proceeding. “Right now, everything is on hold. We sent the letter and are waiting on the permitting process.”

Ferguson said Colorado’s stringent environmental regulations, combined with the bad economy and shortage of staff at the DRMS, have slowed down the approval process. However, he is hopeful once regulatory compliance is complete, cash will start flowing. “I’m confident that once we have approval, financing will follow.”

According to the company’s website, a “U.S.-based investor group” is intending to begin mining north of Ouray this summer and visited the mill site in late April. The investor group is currently in negotiations with Goldfields about putting $500,000 and $700,000 for facilities improvements, tailings ponds, electrical upgrades and new drainage that will “greatly accelerate” the project.

Colorado Goldfields stock was trading at a little more than one-tenth of a cent this week while gold was going for $1,200 and ounce.

“If ever there was a time to start mining gold, this would be the time,” said McKay. “Nobody’s feeling there’s a downside.”

 

 

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