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The Big Mining Roundup

The Big Mining Roundup

Hey, at least 2016 wasn’t as depressing as the last two years!
By Herb Mathisen
Nov 14
2016
From the November 2016 Issue

If you’re a miner, things could be worse. Sure, De Beers finally pulled the plug and flooded its Snap Lake diamond mine after closing it last winter. And yeah, the Yukon’s last operating mine, Capstone’s Minto, probably has less than a year left before temporarily closing its doors—and that’s on the heels of the recent Cantung and Wolverine mine closures. And the picture ain’t too rosy with Baffinland either, as it proposes ever more Mary River mine plan modifications to regulators while the Qikiqtani Inuit Association—the local land-rights holder—alleges the company owes it millions in royalties. But still, it's not all bad.

De Beers has just opened the Gahcho Kué diamond mine in the NWT and there’s enough diamonds there to keep it open for 12 years—and possibly longer. In Nunavut, TMAC Resources forges ahead with its Hope Bay project and, if everything goes well, it could be pouring gold by the end of the year. And in the Yukon, Goldcorp, a multinational mining giant, swooped in and bought a promising property for more than $520 million, which is big news in an industry where perception seems to matter just as much as reality.

The long game: Gahcho Kué opens 21 years after the initial discovery

Carl Verley was there when it happened, when the initial 5034 kimberlite discovery was made at what’s now Gahcho Kué, the NWT’s newest diamond mine, 280 kilometres northeast of Yellowknife. (At the time, the NWT spanned from the Mackenzie Mountains east to Baffin Island.)

“I saw that first kimberlite come out of the ground,” says Verley, a geologist by training and a director of Mountain Province since its inception in 1986, when it was but a fledgling gold explorer. “The Canamera geologist on the drill job, I don’t think he really knew what kimberlite was, so I was able to help him along with that.”

This was way back in February 1995, at an austere drill camp on Kennady Lake. “We were logging core on the floor of a tent. It was freezing cold and the core was colder than hell,”

he says. “You pick up a frozen piece of core and it’s sticking to your fingers. It’s not much fun. But you could tell it was kimberlite.” And it proved diamondiferous.

They continued to drill it out and two years later, Mountain Province signed a joint venture with De Beers—De Beers owns 51 percent of Gahcho Kué, Mountain Province owns 49 percent. De Beers quickly discovered three new kimberlite pipes and that got everyone excited about the possibility of a mine.

But that doesn’t happen overnight. You need to build up your mineral reserves, you need to explain your project to local landowners and sign impact and benefits agreements, you need to design your mine and have it approved by regulators. All of this takes time. All of this costs money.

That last part was the big hurdle. 

Rather than necessitating an environmental assessment like its diamond mine predecessors Ekati and Diavik had, Gahcho Kué was referred by the Mackenzie Valley Environmental Impact Review Board to a full environmental impact review—a more detailed, onerous and lengthy assessment of the project. De Beers challenged the decision in court, but lost in 2007 before halting the regulatory process due to a depressed diamond market. Finally, four years later, De Beers brought the project back to regulators, and it was ultimately approved.

Gahcho Kué—or Gahcho Tué, depending on whom you ask—means alternatively Place of the Jack Rabbit or Big Rabbit Lake in Chipewyan. (It makes sense that you’d find carats near a big rabbit.) To date, the project has a probable reserve of 54 million carats, enough to sustain the mine for more than 12 years. But there’s no shortage of opportunities to extend that lifespan—an indicated resource of 20 million carats could keep it running for five more years. And Mark Cutifani, Anglo American CEO (85 percent owner of De Beers) has hinted at further exploration around the Gahcho Kué mine site.

In early August, mining started on site, according to De Beers Canada CEO Kim Truter, and they expect to reach full production early in 2017. On a chilly Tuesday in September, Verley shared a room with Dene chiefs and Métis dignitaries, company CEOs, investors worth billions, international media and many of the people instrumental in bringing the property from a tiny tent camp on a frozen lake to a billion-dollar complex, with towering processing facilities, fleets of mammoth trucks and shovels, camp accommodations that will house its more than 500 rotational shift workers. At that grand opening, chefs served up prime rib for lunch.

Verley, now 66, toured the site, and the pit that nearly extends out to that fateful 5034 drillhole, painstakingly logged 21 years earlier. It was surreal.

“Yeah, it’s changed a lot,” he says. “They’ve put up these dykes to block off part of the lake and they’ve drained it, so it does look different. You go, ‘Hmm, where is it?’”

 

How does Gahcho Kué stack up
next to Ekati and Diavik?

Carats (in millions)

Ekati: 63 mined, 110.8 in probable reserves including the Jay Pipe (Jan. 2016)

Diavik: 100 mined (May 2016), 52.8
in proven/probable reserves (Dec. 2015)

Gahcho Kué: 54 in probable
reserves... so far (Dec. 2015)

 

Mine life:

Ekati: open for 18 years,
13-17 more projected

Diavik: open for 13 years,
7 more projected

Gahcho Kué: +12 years... so far

 

From discovery to production:

Ekati: 7 years (1991-1998)

Diavik: 9 years (1994-2003)

Meadowbank: 22+ years (1987-2010)

Mary River: 52 years (1962-2014)

 

Hope on the horizon: Nunavut’s third mine could be just months away

The insignia are everywhere. In arenas across the North, parents in slick Dominion Diamond jackets or scuffed up Diavik ball-caps watch their kids play hockey; in airports, workers waiting out delays sip burnt coffee from Agnico Eagle travel mugs. The ubiquity of company swag—
dispensed at conferences, in raffles, to employees—is a constant reminder of mining’s influence up here.

In June, a new logo emerged: the red-and-black lettering of TMAC Resources—emblazoned on caps worn by the company’s Hope Bay mine rescue team at a competition held in Yellowknife. It’s a sign—albeit, a small one—that Hope Bay has made it.

TMAC already has its amended project certificate approved to begin mining and milling at the Doris North deposit. All it needs now is its water license. “Really, the water license is almost like your building permit,” says CEO Catharine Farrow. “You have to show that you can do it right.” Public hearings were held in September and a decision could come as soon as December.

From the operations side, its processing plant components all arrived by sealift at the end of the summer and construction began in September. Farrow hopes they will be able to begin commissioning it by December. (TMAC has been mining ore since late 2015, so there’s a stockpile awaiting processing.)

So that brings us to the first gold pour. “It could be as early as late December or early 2017,” Farrow says, before qualifying: “The reason I’m facetious about that answer is because we can make it as early as we like. But to me, this is not about a photo op, because to get that photo op, you may be pushing some other key engineering details back and actually hurt yourself for
achieving commercial production. When we’ll crack the champagne is when we have steady state production.” 

And once that happens, expect to see a lot more of the TMAC logo for years—perhaps decades—to come.

A pretty big deal: Coffee purchase wakes up a sleepy Yukon mining sector

In the mining sector, there’s a risk in being first. Only after Diavik proved that wind turbines could pump out power at -40 C did other Northern miners admit they were investigating wind power—and now they boast about being early adopters. No one wants to try something new with shareholder money and fail, but when a company sets out on its own and succeeds, others follow. (Just look at the cluster of exploration work happening on the borders of the NWT’s diamond mines.) So when Goldcorp, one of the biggest gold miners in the world, announced it would buy up Kaminak’s Coffee project south of Dawson City this May for $520 million, it was no surprise that others started taking note of the jurisdiction.

The acquisition came months after Kaminak released a feasibility study for the Coffee project, which outlined a probable mineral reserve of 2.15 million ounces and a ten-year mine life. The return is so high that the $317 million needed for initial construction costs would be paid back in just two years. And that study used a gold price of US$1,150 as a benchmark—as of late September, gold was at US$1,330. (The higher the gold price, the more lucrative the project becomes.

In late September, Goldcorp was still getting up to speed with, what they deem in corporate-speak, its “medium-term” Coffee project, so spokespeople weren’t saying much. However, in its most recent quarterly report, Goldcorp stated it would invest $15 million there in 2016 in exploration, infrastructure upgrades and permitting. The company retained much of Kaminak’s exploration team and they will look to build up reserves and resources. Goldcorp estimated that permitting and construction would take four years total, with 2020 as a  tentative target for production.

While Goldcorp decides on its path forward, other Yukon gold miners are basking in the glow of the deal, touting their proximity to Coffee and the improving economics of their projects as the gold price continues to rise and the Canadian dollar stays low. “Things really picked up after Goldcorp acquired Kaminak Gold and the Coffee project, which really draws attention to the jurisdiction,” John McConnell, CEO of Victoria Gold and its Eagle project—north of Mayo, Yukon—told the Northern Miner. 

It’s obviously too early to say this will spur a new flurry of exploration and acquisitions in the Yukon, but, hey, at least people are looking. 

 

Should I yay or should I no? Much at stake over the last 18 months in Nunavut mining

Decisions, decisions.  

It’s been all hands on deck at the Nunavut Impact Review Board, which upped staff from 18 to 24 positions in the last 12 months to keep up with a deluge of major mining projects in front of it for consideration.

Quick recap: the NIRB gave TMAC Resources the thumbs up on its Doris North plan at Hope Bay, but it sent two other projects—AREVA’s Kiggavik  uranium project and Sabina Gold and Silver’s Back River gold project—back to the drawing board. With Kiggavik, the sticking point was the lack of a definitive project start date—AREVA held back on this with uranium prices sagging and showing no sign of picking up. The board found it could not adequately weigh the socioeconomic and environmental impacts of the project with that indefinite timeline. With Sabina’s project, the potential impacts on caribou herds caused the NIRB to nix the project. In both instances, the federal government—via Indigenous and Northern Affairs Canada minister Carolyn Bennett—can refer the project back to NIRB for further consideration, or support NIRB and reject the project as conceived. Bennett did exactly that with AREVA in July; she has yet to weigh in on Back River. (Though the Nunavut government and Kitikmeot Inuit Association—along with the GNWT—are supporting Sabina.)

In other Nunavut news, Agnico Eagle’s promising Amaruq gold project was referred by NIRB to undergo a full environmental impact review. With its potential to extend the life of Agnico’s current Meadowbank mine by providing it with feed, Amaruq is now the company’s priority. And why shouldn’t it be? In just three years since the initial discovery, the high-grade (5.97 grams per tonne) resource has grown to 3.71 million ounces. Agnico is building a 62-kilometre road to connect it with Meadowbank and hopes to start mining Amaruq by Q3 2019. As a result of all this, Agnico Eagle has decided to push back its decision to seek board of director approval for its fully permitted Meliadine gold project to early 2017. That said, it has budgeted US$96 million toward Meliadine development this year and estimates are it would cost north of $900 million to build.

Decisions, decisions indeed.

 

Mactung a year later: So what’s the deal with the GNWT owning a mining property?

A primer: Last November, North American Tungsten—operator of the Cantung mine and owner of the Mactung lease in the Nahanni range—went into creditor protection. After a confusing transaction, the GNWT came out as the owner of Mactung in order to pass on clean-up obligations of the now-closed Cantung mine to the federal government. What made the process more bizarre was no territorial government minister could talk about the deal at the time because the NWT was in full election mode, and ministers were not allowed to publicly discuss government business for fear of influencing voters.

Nearly a year later, where are we? Well, not much further. The final price the GNWT paid for Mactung was $4.5 million. This was done to ensure that once—ahem, if—tungsten prices improve, the GNWT will be able to flip the property for more than that and recover some of the money North American Tungsten owed it. (Had Mactung been sold last November for less than $4.5 million, any money owed to the GNWT and the feds by North American Tungsten would have been lost, as the court costs would have been satisfied first in the sale.)

The GNWT doesn’t have any obligations to do work on the lease to keep it. And though Wally Schumann, the NWT’s new industry minister, says it won’t cost any money to hold Mactung, government resources—flying its geologists up to site to verify engineering reports, etc.—are already being devoted to it.

How exactly will Mactung be sold? That’s not entirely clear yet because, as Schumann says, there’s been very little interest thus far. (See: tungsten prices.) But if interest did pick up, the GNWT would be on the lookout for a good corporate citizen with a clean environmental record. (Also, he says the GNWT would talk to the Yukon government to get some clarity on a joint environmental assessment process to give the hypothetical buyer certainty, since Mactung sits on the Yukon-NWT border.)

“Let’s pretend the market conditions rebounded next week, we would probably internally get everyone together—the Department of Lands, Executive, Finance, [Aboriginal Affairs and Intergovernmental Relations], all these working groups—and figure out whether we’re going to do an RFP, or put it out for tender, or put a price tag on it and hang a shingle on the door,” says Schumann. So essentially, we’ll see what happens.