Light at the end of the tunnel
Ontario exploration spending continues slide, but several projects advance to mine development
Exploration and deposit appraisal expenditures in Ontario were down significantly in 2014 – no surprise to junior mining companies, geologists, drilling companies and manufacturers of drilling consumables. But the news wasn’t all bad as the New Year dawned.
Revised estimates published by Natural Resources Canada in September pegged exploration and deposit appraisal expenditures for Ontario at $509.5 million, less than half the amount spent in 2011 and down again from last year’s total of $562 million.
Ontario still leads all other provinces and territories with 24 per cent of spending in Canada, but that’s down from Ontario’s 30.8 per cent share registered in 2010.
Gold continued to be the predominant target, accounting for $416.3 million of total spending for the year. Grass roots exploration took most of the hit, though several of the most promising projects crossed the threshold from exploration to mine development.
By late January, gold had rebounded from its October low of $1,140 and was sitting at just under $1300.
“We had a very good run from the early 2000s,” said Rod Thomas, president of the Prospectors and Developers Association of Canada. “China was growing at double digit rates and there was a huge demand for commodities starting around 2003 all the way to the financial crisis in 2008… but we bounced back and the industry did really well until around April 2012.”
China consumes over 50 per cent of the world’s iron ore and approximately 40 per cent of all other metals, said Thomas, “so when China is growing at such a monstrous rate, there’s huge demand. Currently though, things are slowing down in China and Europe is wobbling along. The only bright spot on the horizon is the United States.”
Thomas sees some positives in the dramatic collapse in oil prices. It may not be such good news for Canada’s oil patch or for the federal government’s pledge to report a balanced budget, but it’s giving consumers in the U.S. an extra $125 billion a year to spend on cars, electronics and other consumer goods, and “when people start to buy things, that affects the underlying price of commodities, which is the business we’re in,” said Thomas.
“Investing in mineral exploration companies is very much driven by sentiment, so when commodity prices start rising, investors see that as an opportunity to invest. It’s that simple. The reality is you should be buying low and selling high, so now is probably a good time to start looking at companies and trying to determine which ones have the best projects and which ones have the best management. If you can identify those, then as long as you’re willing to accept the risk, it’s probably a good time to invest.
“There’s always light at the end of the tunnel,” said Thomas. “It’s a cyclical business. As a society we consume metals on a daily basis and the mines are depleting assets, so someone has to go out and find new deposits. It’s a supply-demand balance and right now there’s a lot of supply, but that changes. There are fewer reserves in the ground at the end of the day than there were at the beginning, so it will turn around. It always does.”
Established gold miners are poised to take advantage of that turnaround, having trimmed costs to stay afloat as the gold price nosedived through the year. Several advanced stage projects are also gearing up for production, including Rubicon Minerals’ Phoenix project in Red Lake, which plans to begin pouring gold mid-year, and New Gold, which has committed to putting the Rainy River project in production by 2017.
Another bright spot on the horizon is the Borden Lake project near Chapleau, 185 kilometres west of Timmins. The highly prospective, high-grade deposit earned Probe Mines president and CEO the PDAC’s coveted Bill Dennis Award for discovery of the year and is likely to see a headframe rising up in the not too distant future following Goldcorp’s January 19 offer to acquire the junior miner (see Page 16).
Sudbury was another bright spot in 2014 with Vale celebrating the commissioning of Totten Mine in February, KGHM International preparing to sink a shaft at its Victoria project and Sudbury Platinum Corp. drilling its Aer-Kidd project all on the same Worthington Offset dyke west of the city. KGHM is sinking a 6.7-metre exploration shaft to a depth of 1,892 metres, to be followed by underground development and definition drilling through to 2018 at which time a final decision on the economic viability of the project will be made. The company had a choice of sinking two shafts concurrently or in sequence.
It opted for one shaft for the time being, but may decide to sink another one depending on the results of the definition drilling.
Victoria has an inferred resource of 14.2 million tonnes of nickel, copper and platinum group metals grading 2.5% copper, 2.5% nickel and 0.23 oz/t total precious metals. Commercial production is planned for 2023.
Sudbury is also waiting for the results of feasibility studies currently being carried out by Vale for its Copper Cliff Deep project and by Glencore’s Sudbury Integrated Nickel Operations for its Onaping Deep project.
Following is a summary of additional exploration and mining activity in Ontario:
Goldcorp produced just short of one million ounces from its three operations in Northern Ontario in 2014: 414,400 ounces from Red Lake, 300,000 ounces from its Porcupine Gold Mines subsidiary in Timmins and 278,300 ounces from its Musselwhite Mine in northwestern Ontario.
Similar numbers are projected for 2015. Shaft sinking at its Hoyle Pond Deep project in Timmins is expected to conclude by the first quarter of this year, with hoisting expected to commence by year-end. Last year also saw the completion of the six-kilometre Red Lake-Cochenour Haulage Drift connecting the Campbell and Cochenour-Bruce
Channel complexes. Goldcorp expects to begin producing Bruce Channel ore in the third quarter of this year with commercial production of 250,000 ounces per year expected by the second half of 2016.
In its first full year of operation, Detour Gold produced 456,634 ounces of gold at its Detour Lake Mine 185 kilometres northeast of Cochrane. The company plans to produce between 475,000 and 525,000 ounces this year at all in sustaining costs of $1,050 to $1,150.
North American Palladium
With one month left to go until yearend, North American Palladium reported production of 156,409 ounces of palladium from its Lac des Iles Mine in northwestern Ontario and expected to meet guidance of 170,000 ounces for the year.
Underground production from Lac des Iles continued to ramp-up with daily mining rates increasing from 3,736 tonnes in October to 4,765 tonnes in December.
Lake Shore Gold
Lake Shore Gold announced record annual gold production of 185,600 ounces in 2014 and preliminary all in sustaining costs of US$875 per ounce. The company’s guidance for 2015 projects gold production of between 170,000 and 180,000 ounces and all in sustaining costs of between US$950 to US$1,000 per ounce.
During 2014, the company reduced its debt by $45 million and finished the year with cash and bullion reserves of $60 million. Aggressive exploration of its 144 Gap Zone discovery is planned for this year.
Kirkland Lake Gold
Kirkland Lake Gold reported gold sales of 76,878 ounces for the six months ending October 31 and expects to achieve its guidance target of between 140,000 and 155,000 ounces for fiscal 2015 ending April 30th. The company reported an average realized price of $1,398 per ounce for the first half of its fiscal year and all in sustaining costs of $1,374.
Net and comprehensive income for the period was $7.6 million, compared with a loss of $5.7 million the preceding year.
Wallbridge Mining began production from its Broken Hammer deposit on the North Range of the Sudbury Basin in July 2014. By year-end, it had shipped 120,000 tonnes of ore for processing at Northern Sun Mining’s Redstone Mill in Timmins. Since the commencement of production, approximately 4,600 tonnes of copper concentrates have been delivered to a nearby copper smelter with average grade of 23.5% copper and 60 grams per tonne PGMs (19 g/t platinum, 33 g/t palladium and 9 g/t gold).
In addition, more than 60 tonnes of highgrade gravity concentrates have been produced and shipped to a PGM smelter in Europe with an average PGM grade of 1,600 grams per tonne (1,300 g/t platinum, 90 g/t palladium and 210 g/t gold).
The Broken Hammer open pit project is currently expected to continue to June 2015, and provide Wallbridge with more than $6 million in net cash flow.
Richmont Mines produced 42,042 ounces of gold at its Island Gold Mine near Wawa in 2014. Development plans for this year include extending the main access ramp to a minimum depth of 750 metres and the secondary eastern ramp to a minimum depth of 570 metres. It also plans to complete 41,000 metres of exploration drilling to potentially extend the existing resource to the east and 59,000 metres of definition and delineation drilling to upgrade the inferred resources between 500 and 1,000 metres of depth in preparation for mining in 2016.
Gowest Gold is working with Stantec to complete a pre-feasibility study on its Bradshaw Gold Project 32 kilometres northeast of Timmins. Bradshaw has a resource of 945,600 ounces of gold in the indicated category (6.0 million tonnes at a grade of 4.9 grams per tonne) and 536,800 ounces in the inferred category (3.7 million tonnes at a grade of 4.2 g/t Au).
The company has a letter of intent with Glencore’s Kidd Operations in Timmins to refurbish its concentrator to produce high-grade gold concentrate. The prefeasibility study is due for completion mid-year.
Noront Resources’ Eagle’s Nest base metal project in the Ring of Fire has been held up by negotiations between the province and First Nations to achieve an “overarching framework agreement” on revenue sharing and transportation infrastructure.
In January, Noront president and CEO Alan Coutts urged the province to approve the terms of reference for the environmental assessment it submitted two and a half years ago so it could begin work on its mine and a transportation corridor. Eagle’s Nest boasts reserves of 11.1 million tonnes averaging 1.68% nickel, 0.87% copper, 0.89 g/t platinum, 3.09 g/t palladium and 0.18 g/t gold.
Treasury Metals is undertaking an infill drilling program on its 100 per cent owned Goliath Gold Project adjacent to the Trans Canada Highway 15 kilometres west of Dryden. The company has an indicated and inferred resource of 1.7 million ounces of gold and is working toward permitting of an open pit mine and 2,500 tpd processing facility.
A preliminary economic assessment projects a mine life of 10 plus years and capital costs of $92 million. Underground development in subsequent years will be funded from cash flow.