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Fort Knox Plans for Pay Dirt

Tue January 24, 2006 - West Edition
CEG



Even though its name is synonymous with one of the world’s largest caches of gold, the path to profitability has not been an easy one.

Fairbanks Gold Mining Inc. has faced challenges ever since its start of commercial production in 1997 in order to maintain a profit. But a new game plan, instituted in 2002, upgraded equipment and integrated Construction Machinery Industrial LLC (CMI) and other suppliers into proactive involvement.

This new strategy includes three Hitachi shovels — two EX3600s and one EX3500 — to load the harder materials, while three wheel loaders provide secondary loading of softer materials and clean-up.

Gold Rush Fever

Alaska’s gold rush began in 1896-97 when gold was discovered in the Klondike in Canada’s Yukon Territory. Lured by the hope of quick riches, thousands of prospectors poured into the Pacific Northwest and Alaska. With the best gold fields in the Klondike claimed by 1898, many began searching in Alaska.

Italian immigrant Felix Pedro discovered gold in 1902, triggering the Fairbanks Gold Rush. Between 1897 and 1907, prospectors founded more than 50 gold-mining camps in various parts of Alaska. Most went bust. Some, such as Nome and Fairbanks, grew into major towns.

Between 1902 and 1993, in the Fairbanks district alone, more than 8 million oz. of predominately placer gold were mined. In 1984, gold was found on what is now known as the Fort Knox Mine, approximately 25 mi. (40 km) northeast of Fairbanks. Commercial production began in 1997 and, today, Fort Knox is the largest gold mining operation in Alaska.

Gold by the Numbers

Since start-up, the mine has unearthed and sold more than 3 million oz. of gold. But the daily averages tell a little more about the real costs:

• 360 million tons of rock mined;

• 86 million tons of rock milled;

• $68,493 spent in wages;

• $60,273 in electricity; and

• $27,397 on fuel

… all for 64 lbs. of gold produced a day.

It’s a story common to most gold mines. The historical slump in gold prices caused many mines to shut down, and most gold producers to merge.

Global producer Amax started Fort Knox, then soon merged with Kinross, a Toronto-based producer with a knack for keeping mines open.

Kinross Strategy to Create More Pay Dirt

Kinross management’s proactive strategy meets challenges head-on. Such a plan for efficiency allows the mine to minimize costs.

So, borrowing from the secrets of some of the most successful trucking companies, the mine installed GPS technology in its haul trucks and loading equipment. This dramatically improved dispatching efficiencies.

The purchase of three Hitachi excavators helped ensure the mine had the most productive equipment. Then, it decided to make key suppliers — like its local equipment dealers — its strategic partners.

Cade Smith was hired as the mine’s mobile equipment manager and charged with the crucial task of making the company’s trucks, loaders, and drills operate more efficiently while achieving higher availability at a lower overall cost.

CMI and Hitachi Become ’Partners’

CMI, Hitachi’s Alaskan dealer, had been involved with the mine since initial site development. It had aggressively worked to provide the mine with a variety of equipment, services, and consumables. Now, with the mine’s purchase of the Hitachi excavators, it jumped at the chance to become more integrally involved.

“In order to be ’proactive,’ the philosophy I’ve instituted is: plan your downtime, work with key suppliers who commit to making us successful, and then work the plan,” explained Smith.

“Out of a 50-man shop, I’ve assigned two mechanics and service trucks to be on-call to fix whatever’s possible on a daily emergency basis. The rest of our crew is focused on aggressively servicing each piece of mobile equipment every 14 days, which for us amounts to about every 300 hours. Not only do we perform normal maintenance, we do necessary repair work noted at the previous inspection 14 days ago.”

“I’m here to provide premium on-site representation of CMI at Fort Knox,” said John Cole, CMI’s product support salesman. “I spend two or three days a week at the mine making sure we’re in lockstep with Cade.

“Our goal is to have the parts and CMI service personnel they need — hoses to engines — on-hand, ready for their next service interval. Our CMI mechanics are an integral part of our success at the mine.

“They set record assembly times for the giant Hitachi shovels, completing them in just five to six days. And they spend an average of four days a week on site, performing service and support duties. At the same time, we count on Hitachi to provide the expertise when we need it, quality parts on time, and fairness in their treatment of warranty issues.”

The Final Report

Since Smith has taken over the reins, availability has indeed dramatically increased. And costs are better planned.

As 2005 came to a close, Kinross reports show its Fort Knox subsidiary will make a significant contribution to the bottom line.

John Wild of Kinross puts it this way, “Improvement is an ongoing process that is never complete. Yes, the current price of gold is significantly up. But so are our consumables. Planning our efforts so that we are the most efficient producer of gold possible ensures the future of Fort Knox.”

Fort Knox Gold is serviced by CMI, Fairbanks, AK.

(This article appears courtesy of “Americas’ Mines & Quarries.)