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Exploration

Gold continues to drive exploration

March 1, 2013
by Norm Tollinsky
In: Exploration

Several projects undergoing environmental assessments, but financing hard to come by for grass roots projects

AuRico Gold’s Young-Davidson Mine in Matachewan, 60 kilometres west of Kirkland Lake, began pouring gold from an open pit in 2012, and continues shaft sinking and underground development.

Two thousand and twelve was another stellar year for exploration and mine development in Northern Ontario with estimated spending of $916 million, Detour Gold poised for commercial production and at least a half dozen projects undergoing environmental assessments and feasibility studies.

At the same time, financing for companies with grass roots projects has all but dried up, share prices for many junior miners are in the single digits, fewer drill rigs are turning and manufacturers of drilling consumables have had to resort to layoffs.

“The ability to raise money has become more difficult, which is really going to flavour things for 2013,” commented Garry Clark, executive director of the Ontario Prospectors Association.

“I could see the slowdown was happening last March,” he said. “Most people raise their money in (September-October) for the next season, but a lot of flow-through financings never happened. Then, after Christmas, they said they were going to raise money in the New Year, and that never occurred.

“If you have a good project, you don’t seem to have a problem getting money, but we have a huge number of juniors that are trading sub 10 cents, and if you’re raising a $1 million at 10 cents, that’s a lot of shares and it dilutes you down pretty good.”

Downstream, drillers, geologists and assay labs are all affected, crossing their fingers and hoping for a turnaround.

On the other hand, exploration and deposit appraisal expenditures of $916 million qualifies 2012 as one of Ontario’s best years ever, falling just short of the record $1 billion in expenditures the previous year.

Northwest

In northwestern Ontario, current producers Goldcorp and North American Palladium continued to spend money on mine expansion projects.

“Things are quite bullish for gold producers because their revenue streams have gone up along with the price of gold, so they’re still quite aggressive in terms of doing exploration, especially at Goldcorp’s Red Lake and Musselwhite mines,” said Mark Smyk, northwest regional manager, Ontario Geological Survey.

At its Red Lake Complex, Goldcorp has completed 60 to 70 per cent of a five-kilometre high-speed haulage drift to the Cochenour shaft at the 5400-foot level.

“As they’ve been extending the drift to the west, they’ve been setting up drilling stations and drilling from underground, which bodes well for them because there are all kinds of targets that have never been tested,” said Smyk.

Goldcorp has also been refurbishing the Cochenour shaft and may have to extend it another 250 metres to access the Bruce Channel deposit, pushing back gold production from Bruce Channel to mid-2015.

Lac des Iles

North American Palladium is also conducting an aggressive underground exploration and development program at its Lac des Iles Mine north of Thunder Bay.

“Until now,” said Smyk, “production from Lac des Iles was mostly from their open pit. They went underground a few years ago with a ramp and now they’re putting the finishing touches on an 800-metre shaft to access their Offset Zone. They’re looking at over $200 million in expenditure there by the time it’s all said and done.”

Barrick Gold is scheduled to run out of reserves at its Williams and David Bell mines in the Hemlo camp, but is looking at the feasibility of expanding its C-Zone open pit, which would provide the operation with a few more years of mine life.

And gold isn’t the only bright spot. In the much touted Ring of Fire, Cliffs Natural Resources is undergoing an environmental assessment (EA) for its Black Thor chromite deposit, Noront Resources is undergoing an EA for its Eagle’s Nest nickel-copper-PGM project, and just north of Marathon, Stillwater Canada and partner Mitsubishi are moving ahead with plans to develop a copper-palladium deposit as an open pit with a projected 12-year mine life.

Rubicon

Rubicon Minerals’ Phoenix Gold project is in the advanced stage of development with a new headframe and modern hoist installed and shaft deepening underway. The existing shaft was originally sunk in the ’80s, but never completed. The property has just over one million tonnes grading 14.5 g/t gold for 477,000 ounces in the indicated category and 4.2 million tonnes grading 17 g/t gold for an additional 2.3 million ounces inferred.

Osisko’s Hammond Reef project is an open pit, bulk tonnage deposit with global measured and indicated resources of 5.43 million ounces of gold at an average grade of 0.86 g/t and a global 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 is planning for an ore processing plant with projected throughput of 50,000 tonnes per day and a 14-year mine life at Hammond Reef. The company has budgeted to spend $10 million on the project this year.

Rainy River Resources’ project near Fort Frances, billed as Ontario’s next gold mine, is another low-grade, bulk tonnage deposit with just over six million ounces of measured and indicated gold. (See story on Page 19.)

Elsewhere in the northwest, Premier Gold Mines continues to work on its Trans-Canada project in the former producing Geraldton-Beardmore camp. In October, the company received a permit to dewater the underground workings of the historic MacLeod-Mosher Mine as a prelude to advanced exploration and, in December, it released an updated resource estimate of 4.12 million ounces of gold in the measured and indicated categories.

Work is also continuing at Claude Resources’ Madsen project in Red Lake, Treasury Metals’ Goliath Gold project near Kenora and PC Gold’s Pickle Crow project near Pickle Lake.

Iron ore

One interesting development is the renewed interest in iron ore exploration, remarked Smyk. There are currently three active iron ore projects in the northwest, including Bending Lake Iron Ore’s Josephine Cone project between Dryden and Ignace, Northern Iron Corp.’s Griffith Mine project near Ear Falls and Rockex Mining Corp’s Lake St. Joseph project 80 kilometres southwest of Pickle Lake.

The renewed interest in iron “is partly due to a change in economics and partly due to a change in technology,” said Smyk. “Some of them are looking at the Kobe process to process a metallic nugget of iron as opposed to the taconite or the typical pellets.”

The metallic nuggets, also known as hot briquetted iron (HBI), are in increasing demand as a substitute for dwindling supplies of scrap steel, which electric arc furnaces are wholly reliant on as a raw material.

According to the International Iron Metallics Association, “steelmakers everywhere are looking to alternatives to steel scrap.” Taconite pellets aren’t the answer because the process used in electric arc furnaces “involves shorting an electric current through a metallic product rather than the reduction of an oxide as in a blast furnace.”

However, bringing any of these projects into production will be contingent on electricity prices as the process is extremely energy intensive, cautioned Smyk.

Another departure from the northwest’s focus on gold is Rock Tech Lithium Inc.’s Georgia Lake project south of Beardmore. The property saw some development in the 1950s, but “like many lithium projects, sat dormant for a long time,” said Smyk.

The company has an NI 43-101 indicated resource of 3.2 million tonnes of 1.10% lithium oxide and an inferred resource estimate of 6.3 million tonnes at 1.00% Li2O.

Detour Gold

In the northeast, the big story is Detour Gold, which began pouring gold in January. Located 185 kilometres northeast of Cochrane, the property has proven and probable reserves of 470 million tonnes grading 1.03 g/t for total contained gold of 15.6 million ounces. Project details include a mine life of 21.5 years, mill throughput of 55,000 tonnes per day, and annual average production of 650,000 ounces. Total capex will come in at $1.45 billion.

In Timmins, Goldcorp is bringing the Hollinger Mine in the city’s downtown back into production as an open pit and executing the Hoyle Pond Deep project to access extensions of current orebodies and newly discovered zones.

The former Hollinger Mine was shut down in the 1960s and has been a problem for the City because of damage caused by sinkholes and subsidences. Rather than continue to spend money filling the holes, Goldcorp is building an open pit that will do away with the underground hazards, restore the land for other uses and pay for the work with the remaining ore it digs up.

A haul road and overpasses to isolate the haul trucks from vehicular traffic in the city has been completed and construction of the pit and a berm around the site is set to begin.

Meanwhile, at Hoyle Pond, work is progressing on a new 5.5-metre diameter winze to 2,200 metres below surface.

Just west of the city, Lake Shore Gold is continuing to develop the Thunder Creek Zone parallel to its Timmins Mine and working to increase the capacity of its Bell Creek Mill to 3,000 tonnes per day. Gold production for 2013 is projected to increase to between 120,000 and 135,000 ounces at cash cost of between $800 and $850 per ounce. Capital spending for 2012 totalled $175 million. This year, Lake Shore Gold has plans to spend $80 million to expand mine and mill operations, and an additional $10 million on underground exploration.

Probe Mines

Further south near Chapleau, Probe Mines released an updated pit constrained indicated resource estimate of 3.7 million ounces of gold averaging 1.02 g/t and an additional inferred resource of 625,000 ounces averaging 1.08 g/t at its Borden Lake project. The updated resource estimate was based on results from 313 diamond drill holes totalling over 94,000 metres.

“During 2013, we will be focused on evaluating the new high-grade mineralization and further improving the deposit and advancing the project development,” said company president David Palmer in a release earlier this year.

IAMGOLD Corporation’s acquisition of Trelawney Mining and Exploration in June 2012 has raised hopes for expedited development of the Côté Lake Gold project halfway between Sudbury and Timmins. A mid-tier miner with annual production of approximately one million ounces of gold from five mines in Suriname, Mali and Burkina Faso, IAMGOLD released an updated indicated resource estimate of 7.6 million ounces grading under a gram per tonne in January and expects to complete a pre-feasibility study for the property in the second half of this year.

Raising capital is a lot easier if you’re a producer like IAMGOLD, so “that’s nice,” said Brian Atkinson, regional resident geologist for the Timmins District. “Trelawney was a junior mining company that has to keep going back to the market. Detour Gold did it and kudos to them. They raised over $1 billion to put that into production, but that’s a difficult thing to do.”

There are several other juniors active in the Timmins District, including Explore Resources Inc., which has made a new gold discovery on its Timmins Porcupine West property on trend between Lake Shore Gold’s Timmins Mine and “the more typical mines in the Timmins camp itself,” said Atkinson. Explore Resources announced a 10,000-metre drill program started in January.

Along the same trend, Xcellon Resources Inc. has a 5,000-metre drill program underway at its DeSantis project, which includes the former producing DeSantis Mine.

Another junior, Melkior Resources, chalked up a discovery at its Carscallen property five kilometres northwest of the Timmins Mine.

Sixty kilometres south of Timmins, SGX Resources made a discovery on its Edleston property, with one hole intersecting 68.5 g/t over 6.3 metres at less than 100 metres below surface. The property, said Atkinson, “is a possible extension of the break that comes in across from Kirkland Lake.”

Meanwhile, in the James Bay Lowlands, noted diamond hunter Charles Fipke’s Metalex Ventures is working to take a bulk sample from diamond bearing kimberlites on its Kyle Lake property 100 kilometres east of De Beers’ Victor Mine.

The Kirkland Lake district also had its share of good news in 2012, headlined by AuRico Gold’s start-up of its Young-Davidson Mine.

“They’re still building the mine, but going ahead with open pit mining initially,” said David Guindon, regional resident geologist for Kirkland Lake. “That’s big news for us because it’s the biggest mill in our district – 6,000 tonnes per day. They’re also sinking a new shaft and developing stopes underground.”

In two years, said Guindon, most of the mine’s production will come from underground.

Armistice Resources’ McGarry Mine in Virginiatown began shipping concentrate in September 2012 and announced a 60,000-foot drilling program for both its McGarry and adjacent Kerr-Addison Mine properties, the latter producing 11 million ounces prior to closing in 1996.

St. Andrews Goldfields

Another producer in the district is St. Andrews Goldfields (SAS), which produced approximately 100,000 ounces of gold last year from its Holt, Holloway and Hislop Mines. SAS is also doing advanced exploration on its Taylor project with plans to complete a ramp development to a second bulk sample area by the end of this year. The mineral reserve estimate for the Taylor project is just over 700,000 ounces in the probable, indicated and inferred categories.

Queenston Mining figured prominently in the news in 2012. In August, Queenston sold its share of a 50:50 joint venture to Kirkland Lake Gold for $60 million, in September it received permission to proceed with an advanced exploration program at its copper-gold Upper Beaver project, and in December it was acquired by Osisko.

An emerging mid-tier producer, Osisko declared commercial production at its flagship Canadian Malarctic property near Val d’Or, Quebec, in May 2011, and is well positioned to advance the Upper Beaver project. For 2013, it has budgeted to spend $70 million on engineering, design and fabrication of a headframe and hoisting facilities, initial collar excavation and preparation for the sinking of a 1,300-metre shaft. It also has an exploration budget of $50 million for all three of its projects – Canadian Malarctic, Hammond Reef and Upper Beaver.

Elsewhere in the district, Brigus Gold has its Black Fox Mine in production and is working toward the development its Grey Fox Mine four kilometres away – both along the Destor-Porcupine Fault Zone. The company is evaluating a possible expansion of processing capability to between 3,500 and 4,000 tonnes per day and is looking at refurbishing and reopening the Stock Mine.

Also busy along the Destor-Porcupine Fault are Northern Gold Mining Inc., which announced the discovery of a 600-metre high-grade trend of mineralization on its previously producing Garrcon property in January, and Moneta Porcupine, which released a positive preliminary economic assessment on its Golden Highway project in November.

The big player in the Kirkland Lake district, however, remains Kirkland Lake Gold’s Macassa Mine, which has a workforce of 950 and “keeps finding more and more gold in its South Mine Complex,” said Guindon. The company produced 100,000 ounces of gold in 2012 and is spending $95 million to increase production capacity to 2,200 tonnes per day.

Sudbury

Although not a commodity mined in Sudbury, iron ore had a lot to do with the highs and lows that have buffeted the city. Two huge capital projects Sudbury was counting on were either downsized or delayed in all probability because of the jitters experienced by iron ore invested sponsors Vale and Cliffs Natural Resources.

In May, Cliffs selected Sudbury as the site of a $1.8 billion chromite refinery, but in September announced it was delaying project startup by a year (from 2015 to 2016) and considering the possibility of taking on a partner.

Vale, which had been trumpeting a $2 billion smelter upgrade for years, announced in October that it was extending the completion of the project by a year. Then, in January, it decided to downsize to a single furnace operation, slashing the capital outlay to $1 billion.

Vale

Brazilian owned Vale also announced it was suspending operations at its Frood site, but held out hope that it would accelerate development of its Copper Cliff Deep and Victor-Capre projects.

Backtracking by both Vale and Cliffs reflect the roller coaster ride iron ore prices experienced through the year, plunging to a three year low of $89.50 per metric tonne in September after hitting a high of $187 per metric tonne in October 2009. Revenue, profit and share prices for both companies have also been hit hard, and although iron ore prices rebounded in December to $138, market observers expect the price to fall again as the Chinese economy slows.

Last year also saw the purchase of nickel producer Quadra FNX by Poland’s KGHM International. Prior to the acquisition, Quadra FNX touted its Victoria project “as one of the most significant discoveries made in the Sudbury district in the past 40 years,” and announced the imminent sinking of two shafts. Since the acquisition, Victoria has gone quiet, possibly as a result of negotiations with Vale, whose predecessor Inco sold the property to FNX in 2001 with provisos relating to processing and back-in rights.

The property, boasting a NI 43-101 compliant inferred resource of 12.5 million tonnes grading 2.3% copper, 2.2% nickel, and 8.5 g/t precious metals, is still destined to be developed, but by whom, and when are still to be determined.

Still, Sudbury is holding its own. Vale’s Totten Mine is expected to come on stream by the end of the year, Xstrata Nickel’s $119 million Fraser Morgan project is gearing up for production, First Nickel resumed production at its Lockerby Mine in April and junior miner Wallbridge is planning to begin production from its Broken Hammer copper-PGE project this year. Also in the works is a refurbishment of the former producing Errington-Vermillion Mine by Xstrata Zinc, which is trying to make up for lost production due to the closing of its Brunswick Mine in New Brunswick. Errington-Vermillion has about 10 million tonnes of resources containing zinc, copper, lead, silver, and gold and is expected to produce 46,000 tonnes per year.

The future remains bright for Northern Ontario as a whole with gold prices holding up and the development of the Ring of Fire in the offing, but not without a few bumps in road.

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