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The meltdown at Rubicon Minerals Corp. highlights the risk of building a gold mine without getting to know the deposit as well as possible.
The Toronto-based miner’s shares plunged as much as 68 per cent on Tuesday after it halted underground development of the Phoenix gold project. Rubicon said it needs to do further work to understand the deposit in order to mine it most effectively.
“We believe there is considerable room for improvement in the development of the Phoenix gold project,” interim chief executive Michael Winship said on a conference call. He added that it is a complex, narrow-vein deposit that is more difficult to mine than surface drilling suggested. The company is now studying a mix of possible mining methods.
The stock closed down 55 per cent at 26 cents Tuesday. The problem, experts said, is that Rubicon may have identified these problems much sooner if it hadn’t moved so quickly.
Rubicon never did any sort of feasibility or pre-feasibility study on the US$342-million Phoenix project, which is located in Ontario’s Red Lake camp.
These are important studies that take a great deal of time and effort and give companies a deep insight into their deposits. It is unusual for a miner to skip the feasibility stage when developing a significant project.
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