Norm Tollinsky is editor of Sudbury Mining Solutions Journal, a magazine that showcases the mining expertise of North Bay, Timmins and Sudbury. This article is from the February 2014 issue.
Not for lack of quality projects
The good times couldn’t continue forever, and they haven’t. After three years in a row of feverish exploration activity in Ontario, 2013 turned in a dismal performance. Estimated exploration and deposit appraisal expenditures for Ontario fell approximately 30 per cent – from $961 million in 2012 to $688.5 million – but the reality is much worse, according to Garry Clark, executive director of the Ontario Prospectors Association.
The $688.5 million and the $961 million posted the year before include expenditures on mine development – not just exploration, he complained. Looking at exploration alone, “2013 was the worst year since I’ve been in the business,” said Clark. “I started as a consultant in 1987, and I’ve been through a lot of ups and downs, but this is probably the lowest I’ve seen.”
Risk capital dried up, many junior mining companies went dormant, drill rigs sat idle and geologists and prospectors were lucky to find a day or two of work here and there. Clark and others could see it coming despite three straight years of numbers just shy of or exceeding $1 billion.
“I remember meeting with (then mines minister Rick) Bartolucci at the PDAC. He was all pumped up about the fact that there was $1 billion in exploration and development in the province and I jumped all over him and said, ‘those numbers are wrong.’ I told him then we’re on a sinking ship and that was two years ago.
“I could see it because I also run a consulting business, so I’m in contact with all sides of the industry. You could see it was going to happen and it did.”
Numbers reported by Natural Resources Canada and Ontario’s Ministry of Northern Development and Mines also break down expenditures by junior and senior mining companies. The 2013 breakdown of the $688.5 million attributes $388 million to senior mining companies and $300.4 million to juniors, but even that number may be inflated.
“I think this year if we get $250 million in exploration, we’d be doing fairly well,” said Clark.
Mine development and expansion expenditures by companies such as Detour Gold and North American Palladium are great for the economy, for employment and mining suppliers, but it’s discoveries by the exploration industry that fuel mine development.
Mark Smyk, northwest regional manager with the Ontario Geological Survey, acknowledges that 2013 was a lot quieter than the previous few years. The money that is being spent is mostly on advanced exploration projects.
The northwest region has five producing mines: Goldcorp’s Red Lake and Musselwhite operations, Barrick’s Williams and David Bell mines in the Hemlo camp and North American Palladium’s Lac des Iles Mine.
Inching along towards mine development, however, are several advanced projects, foremost among them being Rubicon Minerals’ Phoenix project in the Red Lake camp.
Rubicon has completed the mill building, the SAG and ball mills have arrived onsite and the shaft is nearing completion at just over 720 metres, said Smyk.
Production is slated to begin in the first quarter of 2015 with life of mine annual gold production of 165,000 ounces.
Also in Red Lake, Goldcorp is close to completing a five-kilometre highspeed haulage drift linking its Red Lake Complex with the recently refurbished Cochenour shaft and the Bruce Channel deposit. Production from Bruce Channel/Cochenour is scheduled for the first half of 2015. Meanwhile, drilling stations set up along the drift are testing targets between Red Lake and Cochenour, including the Rahill-Bonanza property jointly owned by Goldcorp and Premier Gold.
Having recently completed an 825-metre shaft, North American Palladium is deferring a second phase of mine expansion and slashing capital investment and exploration spending to approximately $30 million and $4 million, respectively.
The company is targeting 170,000 ounces of palladium production this year and forecasts 5,000 tonnes per day of underground production by the end of the year.
One of the most promising advanced exploration projects in the northwest is New Gold’s Rainy River project, 418 kilometres west of Thunder Bay.
New Gold Inc. acquired the property in October for $310 million, and a released a feasibility study in January projecting annual gold production of 325,000 ounces, capital costs of $885 million and a 14- year mine life.
The company is looking at a combined open pit and underground operation with a surface fleet consisting of three 216 mm blast hole drills, two hydraulic shovels, one wheel loader and 22 210— tonne haul trucks. The underground mine will be accessed via a fourkilometre decline from a surface portal.
The targeted commissioning date is late 2016 with full production scheduled for 2017.
Also in the pipeline is Stillwater Canada’s Marathon PGM and Copper project, 10 kilometres north of Marathon.
The project is proceeding through an environmental assessment, but Stillwater is in no hurry to invest in mine construction.
The company is conducting a review of the project in line with its 2014 strategy of focusing on proven assets.
Assuming a best case scenario, mine construction could begin within three years, said Stillwater president and CEO Mike McMullen. The open pit and milling operation will produce 22,000 tonnes of ore per day over a mine life of 11.5 years and ship a concentrate product containing copper, palladium, platinum and gold.
Premier Gold was one of the few juniors in the northwest to be able to raise money and continue an aggressive exploration program, said Smyk.
The company did more than 130,000 metres of drilling on its Hardrock Project in the Beardmore-Geraldton area in 2103, produced an updated resource of close to seven million ounces of gold and released a positive preliminary economic assessment early this year.
Also promising is Treasury Metals’ Goliath Gold project. Located 15 kilometres east of Dryden, Goliath Gold has an indicated and inferred resource of 1.7 million ounces.
The company is currently advancing toward a bankable feasibility study and hopes to begin production of 2,500 tonnes per day from an open pit operation by 2015.
Treasury Metals estimates initial capital cost of $92 million with cash flow from the open pit operation funding underground development in subsequent years. A preliminary economic assessment was released in 2012 based on more than 160,000 metres of diamond drilling.
Projected life of mine average feed grade is 2.87-g/t gold and 9.3 g/t silver. In January, the company announced plans for a 10,000-metre infill drilling program and the release of an updated resource estimate.
In November, Australia-Based Chalice Gold Mines and Coventry Resources agreed to a merger, combining Chalice’s strong cash position of $55 million with Coventry’s 100 per cent owned Cameron Lake project, 80 kilometres southeast of Kenora. Cameron Lake has a NI 43-101 compliant measured and indicated resource of 567,000 ounces at 2.45 g/t.
A positive preliminary economic assessment projects capital costs of $110 million, average annual production of 61,000 ounces and an initial 10- year mine life.
Hopes for any near-term development of the much-hyped Ring of Fire were dashed in November when Cliffs Natural Resources announced an indefinite suspension of work at its Black Thor chromite deposit, 500 kilometres north of Thunder Bay.
Citing delays related to infrastructure development, negotiations with First Nations and electricity pricing, Cliffs closed its offices in Thunder Bay and Toronto, as well as its exploration camp in the Ring of Fire.
Cliffs’ senior vice-president Bill Boor said the company continues “to believe in the value of the mineral deposits and the potential of the Ring of Fire,” and is “supportive of the province’s intention to form a development corporation for the financing and development of infrastructure,” but offered no timeline for a resumption of work on an environmental assessment for the proposed multi-generational chromite mine.
Junior miner Noront Resources, which owns the nearby Eagle’s Nest nickel-copper-PGM project, fired off a press release claiming its projections are not dependent “on the development plans of other companies,” and pledged to work with the province and First Nations to advance infrastructure planning for the region.”
Noront released a positive feasibility study in September 2012 based on 11.1 million tonnes of proven and probable reserves grading 1.68 per cent nickel, .87 per cent copper and approximately 4 g/t platinum and palladium, and announced the completion of its environmental impact statement and assessment report December 20th.
Elsewhere in the Ring of Fire, KWG Resources agreed to fund a $2 million exploration program on the Black Horse chromite occurrence optioned by Bold Ventures Inc. from Fancamp Exploration, and MacDonald Mines continued to work on its copper-nickel-zinc Butler property 36 kilometres west of Cliffs’ chromite deposit.
Discovery Harbour Resources, a Vancouver-based company, has earned 51 per cent ownership of the Wabassi project, which straddles the proposed north-south transportation corridor approximately halfway between the CN railhead at Nakina and the site of the Eagle’s Nest and chromite deposits further north.
Discovery Harbour concluded an option to joint venture agreement with Northern Shield Resources in 2010 and has since discovered “a new, previously unrecognized VMSstyle mineral district.”
Extensive airborne and ground geophysics have revealed several significant targets, and drilling late last year resulted in one intersection of 14.22 metres grading 4.88 per cent zinc, 0.6 per cent copper, 18.9 g/t silver and 0.183 g/t gold.
One victim of the plunging gold price in the northwest is Osisko Mining’s Hammond Reef project 30 kilometres northeast of Atikokan. The Quebec-based company, currently the target of a hostile takeover bid by Goldcorp, completed 130,000 metres of drilling in 2012, reporting a measured and indicated resource of 5.43 million ounces of gold at an average grade of 0.86 g/t and an inferred resource of 1.75 million ounces at an average grade of 0.72 g/t based on a 0.50 g/t cutoff.
Osisko has ceased all exploration and development at the site and in August took a $487.8 million writedown on the property “based on preliminary feasibility results and current market conditions.”
Osisko paid $375 million for Hammond Reef in 2010 and spent $155.9 million on exploration.
Sault Ste. Marie
The Sault Ste. Marie district has two producing gold mines: Wesdome Gold Mines’ Eagle River Complex, consisting of the Eagle River Mine and the Mishi Pit, and Richmont Mines’ Island Gold Mine.
The Mishi pit was brought into production in January 2012, but was idled in June while mill upgrades were in progress.
At the Eagle River Mine, now the company’s main focus since the suspension of operations at its Kiena Mine in Val d’Or, Quebec, Wesdome has discovered several new zones as a result of ongoing exploration.
“With the price of gold in the $1,200 range, a lot of gold projects are stalled, so it’s nice to see Wesdome budgeting for exploration,” said Anthony Pace, district geologist for Sault Ste. Marie. Richmont’s Island Gold Mine near Dubreuiville has cut its exploration budget significantly.
In November, it terminated development work in its Island Gold Deep zone “due to the weak and volatile gold environment, lower than expected operating results and the corporation’s focus on cash conservation and sound capital deployment.”
However, the company said it would use its own equipment and personnel to continue ramp extension and development work to access the new zone, which boasts an inferred mineral resource of 2.3 million tonnes grading 10.53 g/t gold for a total of 771,000 ounces.
Also in the Sault St. Marie district, mid-tier miner Argonaut Gold is looking to bring the Magino property into production, said Pace.
A past-producing underground gold mine located 14 kilometres southeast of Dubreuilville, the Magino Gold project has an indicated and inferred resource of more than six million ounces.
In December, the company released the results of a prefeasibility study for an open pit mine projecting annual production of 127,000 ounces, an average grade of 0.90 g/t, cash costs of $693 per ounce and capex of $414 million.
Based in Reno, Nevada, Argonaut Gold has two operating gold mines and an advanced exploration project in Mexico.
Over the last few years, Argonaut Gold has done more than 80,000 metres of diamond drilling at its Magino Gold property, said Pace.
Also in the district is Pele Mountain Resources’ Eco Ridge Rare Earth and Uranium project in Elliot Lake.
In December, Pele Mountain released an updated economic review projecting a 9,000 tonne per day operation with life of mine production of 141.6 million pounds of rare earth oxides and 42.7 million pounds of uranium oxide. The economic update estimates capital costs of $563 million with 52 per cent of project revenue from rare earths. (See story on Page 14 for more on Pele Mountain Resources).
Pace sees an opportunity in the current market for grass roots prospectors to pick up ground abandoned by junior mining companies that can’t come up with the money to keep properties in good standing. “With the price of gold coming down, a lot of companies don’t have the money to move forward on these projects, so we’re probably going to see properties come up for restaking, especially in the greenstone belts,” he predicted.
The current climate “also gives district geologists an opportunity to recommend new areas to explore,” said Pace. “In a boom time, we spend as lot of time just monitoring what’s going on and assisting companies that are out there. Now, we have an opportunity to get out there to look at new opportunities.”
Pace also urges prospectors and exploration companies to diversify their exploration objectives.
“Everyone talks about gold, but if you watch the market, base metals seem to be holding their own, so people have to start looking at other commodities like moly, copper and zinc.”
Sudbury
Northeastern Ontario saw two new mines go into production in 2013: Vale’s Totten Mine, 40 kilometres west of Sudbury, and the Detour Lake gold mine 185 kilometres northeast of Cochrane. Vale’s sixth operating mine in the Sudbury area will ramp up to a production output of 2,200 tonnes per day.
Also promising for the Sudbury camp are Vale’s hiring of Stantec to do another feasibility study on its long-delayed Copper Cliff Deep project, KGHM International’s commencement of site preparation work at its Victoria copper-nickel-precious metal project with GlencoreXstrata’s plans to bring the Errington-Vermillion zinc project into production.
Also in the Sudbury area, Wallbridge Mining Corp. is moving ahead with plans to develop its copper- PGM Broken Hammer deposit on the north range of the Sudbury Basin.
In December, the company signed a binding term sheet with Northern Sun Mining Corp., formerly Liberty Mines, for the custom milling of its ore at Northern Sun’s Redstone concentrator in Timmins.
According to Wallbridge president and CEO Marz Kord, production from Broken Hammer is expected to begin by the end of Q1 2014.
The deposit has a NI 43-101 indicated resource of 259,500 tonnes grading 0.88 per cent copper, 2.32 g/t platinum, 2.10 g/t palladium, 0.77 g/t gold and 6.95 g/t silver.
Wallbridge also has an agreement with Lonmin plc to jointly fund exploration activity on the Wisner package of properties, excluding Broken Hammer.
Timmins
Detour Gold announced commercial production August 12th after operating for a period of 60 days at an average mill throughput of 41,250 tonnes per day.
Gold production in 2013 totalled 232,287 ounces at an average mill grade of 0.75 g/t, but cost overruns and falling gold prices led to the resignation of president and CEO Gerald Panneton, who spearheaded the development of the mine after acquiring the property from Pelangio Exploration in 2006.
Detour Lake boasts gold reserves of 15.6 million ounces and plans to produce up to 500,000 ounces of gold this year at a cash cost of $800 to $900 per ounce.
The company experienced a setback two days before Christmas when the mill’s pre-leach thickener system failed, forcing the shutdown of the mill until January 2.
“On an operation of this scale, though, it always takes a year or two to get all the bugs ironed out,” said Brian Atkinson, district geologist for the Timmins district. “It’s just the nature of the game. When you’re producing 55,000 tonnes per day, there’s very little room for error.”
Aside from the Detour Lake Mine, the Timmins district boasts four other operating gold mines – Goldcorp’s Dome and Hoyle Pond operations and Lake Shore Gold’s Timmins and Bell Creek operations – plus GlencoreXstrata’s Kidd Creek base metal mine, the deepest base metal mine in the world, and DeBeers’ Victor diamond mine in the James Bay Lowlands.
Site preparation at Goldcorp’s Hollinger pit operation on the site of the former Hollinger Mine in downtown Timmins began in December.
The Hollinger Mine operated from 1910 to 1968 producing 19,327,691 ounces of gold from 65,778,234 tonnes of ore.
The site was closed in 1989, leaving behind many hazards from mine shaft openings and near surface stopes prone to ground subsidence.
The pit will be rehabilitated and made available for recreation purposes while also generating revenue from gold remaining from historical mining activity.
Lake Shore Gold’s Timmins Mine recorded gold production of 134,600 ounces from 952,700 tonnes grading 4.6 g/t in 2013, including 51,700 ounces in the fourth quarter.
“After several years of effective development, construction and investment, it is extremely gratifying to see our operations meeting our targets and generating cash,” said Lake Shore Gold president and CEO Tony Makuch.
Looking ahead to the exhaustion of its Victor Mine 90 kilometres west of Attawapiskat, De Beers Canada initiated an environmental assessment for its Victor Mine Extension project and the mining of the Tango kimberlite pipe seven kilometres northwest of the existing minesite.
Assuming board approval, De Beers would begin producing ore from the Tango pipe in 2018, by which time the existing pit will be exhausted.
In a November 29 press release, Metalex Ventures reported some progress toward the negotiation of an exploration agreement with the Attawapiskat and Marten Falls First Nations that would allow it to collect and process a 10,000-ton bulk sample from its U2 diamond project approximately 60 kilometres west of the De Beers operation.
The company is working closely with the two First Nations to conclude an agreement and applying for permits in the hope of mobilizing equipment to the site this winter road season.
Metalex hopes to transport drilling equipment and plant equipment capable of extracting 1,000 to 2,000 carats of diamonds along a 60-kilometre extension of the winter road supplying De Beers’ Victor Mine. Plans call for the drilling of fifty 60-centimetre holes to a depth of 360 metres.
Further south, but still in the Timmins district, Probe Mines has discovered a high-grade zone of gold at its Borden Lake property nine kilometres from Chapleau and one kilometre off Highway 101.
Borden Lake was recognized by the Ontario Prospectors Association as discovery of the year in November and plans to update its currently reported 4.3 million ounce resource to include the recently discovered high-grade zone this year.
Work at the Cote Lake property acquired by IAMGOLD in 2012 has been impacted by slumping gold prices and the company’s decision to focus on “cost reduction, disciplined capital allocation and cash preservation.”
However, $15 million has been budgeted this year for completion of a pre-feasibility study, initiation of a feasibility study and permitting. Located 130 kilometres southwest of Timmins, Cote Lake has an indicated mineral resource of 210 million tonnes grading 1.01 g/t for a total of 6.83 million ounces at a cut-off grade of 0.50 g/t.
Gold remains the predominant target of interest in the Timmins district, but a graphite discovery by Zenyatta Ventures northwest of Hearst and 30 kilometres north of Highway 11 is also attracting attention.
A technical report released in January delineates an indicated mineral resource of 25.1 million tonnes with an average grade of 3.89 per cent graphitic carbon and an inferred resource of 201 million tonnes grading 2.2 per cent graphitic carbon.
In December, Roscoe Postles was hired to conduct a preliminary economic assessment on Zenyatta’s Albany graphite deposit, which it describes as the “largest and only high-purity hydrothermal graphite deposit being developed in the world.”
Graphite is considered a strategic commodity for its growing importance in high technology manufacturing and in the emerging “green” industries such as electric vehicle components and energy storage due to its unique chemical, electrical and thermal properties. It maintains its stability and strength under temperatures in excess of 3,300°C and is very resistant to chemical corrosion. It is also one of the lightest of all reinforcing elements and has high natural lubricating abilities.
Magnesite, another non-traditional mineral, is being targeted by two companies: Globex Mining Enterprises and General Magnesium.
In January, Globex announced receipt of a 21-year lease covering 413 hectares at its talc magnesite deposit in Deloro Township, 13 kilometres south of Timmins. The deposit has an indicated resource of 12.7 million tonnes grading 52.1 per cent magnesite and 35.4 per cent talc and an inferred resource of 18.8 million tonnes with similar grades.
A preliminary economic assessment for the proposed mine projects gross revenue of $2.58 billion over a 20-year period.
General Magnesium’s property, located 12 kilometres west of the Kidd Metallurgical site, hosts a 97 million tonne resource containing talc and magnesite. Kirkland Lake
The Kirkland Lake district saw an increase in gold production from six operating mines: Kirkland Lake Gold’s Macassa Mine, AuRicoGold’s Young-Davidson Mine in Matachewan, Brigus Gold’s Black Fox Mine and St. Andrew Goldfields’ Holt, Holloway and Hislop operations.
However, falling gold prices have taken their toll, especially at Kirkland Lake Gold, which initiated “a strategic review process to explore alternatives for the enhancement of shareholder value.”
In a statement issued January 6, Kirkland Lake Gold CEO George Ogilvie said, “The strategic review will encompass a careful evaluation of the company’s business plan, development strategy, market valuation and capital structure and will consider various alternatives … including the potential sale of the company’s shares or assets, and any other options identified by executive management with the fundamental objective of achieving the best value for the company’s shareholders.”
In December, Kirkland Lake Gold reported a net loss of $6.1 million for the second quarter ending October 31st and cash operating costs of $1,113 per ounce of gold. In November, chief operating officer Mark Tessier resigned and George Ogilvie replaced Brian Hinchcliffe as CEO with the latter accepting a new position as deputy chairman.
Exploration drilling was reduced to two underground drills and one on surface from a high of 10 diamond drills as of October 31. Some consulting contracts were terminated, some staff were laid off and a freeze placed on all hiring.
Gold production for fiscal 2014 is expected to come in at the lower end of the company’s guidance of 150,000 to 180,000 ounces. However, gold production is expected to increase in future years as a result of the company’s $95 million expenditure on infrastructure upgrades.
As of October 31, Kirkland Lake Gold had 1,215 employees.
Brigus Gold, which is in the process of being acquired by Primero Mining, reported 2013 production of 98,710 ounces from mill throughput of 752,959 tonnes.
In October, the company announced highgrade intersections of 18.09 g/t over 37.8 metres and 40.71 g/t over 26.75 metres as a result of its underground exploration program at Black Fox, and in December, it announced the discovery of a new hanging wall zone at its Grey Fox project. In its third quarter report, Brigus reported the completion of 21,458 metres of drilling at Grey Fox and announced plans to release a preliminary economic assessment for the property in Q2 2014.
AuRico Gold achieved commercial production at the underground component of its Young-Davidson Mine in Matachewan on October 31 following successful commissioning of the shaft and hoisting infrastructure.
Production for 2013 from both surface and underground operations totalled 120,738 ounces at a cash cost of $744. St. Andrew Goldfields reported production of 99,548 ounces from its Holt, Holloway and Hislop operations in 2013.
The company carried out diamond drilling programs at its Hislop pit, as well as at its Taylor project 53 kilometres east of Timmins.
On the mergers and acquisitions front, Osisko Mining Corp. completed the acquisition of Queenston Mining in December 2012, but in January, Osisko itself was the target of a hostile takeover by Goldcorp.
According to Kirkland Lake regional geologist Dave Guindon, Osisko did a fair amount of drilling on the Queenston properties early in the year and then scaled back.
Other companies active in the district through 2013 include Mistango River Resources, Laurion Mineral Exploration, Alpha Minerals, Moneta Porcupine Mines, Temex Resources and Orefinders Resources, a Vancouverbased company, which picked up the Mirado property, southeast of Kirkland Lake.
Mining analyst John Kaiser’s prediction that “500 Canadian listed junior mining companies will disappear” in 2013 have proven to be exaggerated, but risk capital has dried up, exploration programs in all but a few cases have been cut back or suspended and gold prices appear to be stuck in the $1,200 range, suggesting that 2014 will likely be another challenging year for the exploration industry.
“But we’ve gone through dips in the cycle before and we’ve always come out of them,” said Smyk, northwest regional manager with the Ontario Geological Survey.
“On the plus side, there are a lot of quality projects out there, so we’ll be well positioned when the money starts flowing again.”
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