In spite of the challenges of working in the Far North, spending on mineral exploration and evaluation of deposits has roughly doubled over the past two years in both Nunavut and the Yukon. Explorers and developers are projected to drop $569 million in Nunavut in 2012, and $285 million in the Yukon. That compares with expected total spending across Canada of $4.2 billion, an increase of 50% over the past two years.
In the Northwest Territories, however, spending increased in line with the rest of Canada, to a projected $124 million this year. The jurisdiction was rated the worst in Canada in this year’s survey of mining companies by the Fraser Institute, owing in part, to the amount of red tape explorers encounter in the territory.
Nunavut gold exploration may see some blowback from the writedowns Agnico-Eagle Mines (AEM-T, AEM-N) and Newmont Mining (NMC-T, NEM-N) have taken on two of their projects there. But new infrastructure developments, such as the Bathurst Inlet Port and Road, could provide a counterbalance to the bad news by promising to lower costs for nearby projects in the long run.
Regardless, there are still a good number of promising gold projects in Canada’s north. Here are a few that make the grade.
Nunavut & Northwest Territories
Elgin Mining (ELG-T) is hoping to bring the past-producing Lupin gold mine, in Nunavut, back into production by 2014. The company is planning to release a preliminary economic assessment (PEA) for the historic project (see John Zigarlick’s northern legacy) later this year.
Elgin believes it could produce around 80,000 oz. gold per year at a production rate of 1,000 tonnes per day with cash costs in the range of US$750-850 per oz. Capital costs to restart the mine were estimated at $50 million by a previous owner in 2008.
In March, Elgin announced a resource for part of its West zone South of Shaft (WZSOS) zone, based on historical drilling. The inferred resource stands at 1.1 million tonnes grading 11.32 grams gold per tonne for 403,600 oz. That resource could shrink to 1 million tonnes grading 10.73 grams gold for 354,300 oz. gold, if it’s assumed that there was some unrecording mining activity in the WZSOS zone. The calculations used a cutoff grade of 5 grams gold, and did not include a shallower portion of the zone.
The upcoming Lupin PEA will include updated resources for the entire orebody. The project hasn’t seen exploration since the 1990s.
Existing infrastructure at Lupin includes a 2,300-ton-per-day mill, a power plant, tailings and waste storage facilities, fuel storage, and a nearly 2,000-metre-long air strip. Elgin acquired Lupin last summer, and also recently became a producer with a takeover of Gold-Ore Resources and its 40,000-oz.-per-year Bjorkdal gold mine in Sweden.
Lupin produced 3.3 million oz. of gold at a head grade of 9 grams gold per tonne over about 20 years of production. The mine has been on care and maintenance since 2005, and is fully permitted.
About 155 km north of Lupin, Elgin also holds the Ulu gold project, which hosts indicated resources of 751,000 tonnes grading 11.37 grams gold per tonne, plus 418,000 inferred tonnes of 10.61 grams gold.
Not far east of Lupin, Sabina Gold & Silver (SBB-T) is working on a PEA for its Back River gold project, due to be released at presstime. The company has budgeted $70 million this year at the project, which hosts total indicated resources of 22.3 million tonnes grading an average of 5.62 grams gold for 4 million oz. gold in several deposits (Goose, Llama and Umwelt). Inferred resources add another 2 million oz. gold contained in 10 million tonnes grading 6.23 grams gold.
Sabina is drilling up to 76,000 metres at Back River this year to expand and upgrade resources. Environmental and engineering work, in anticipation of a prefeasibility study next year, is also under way. Sabina is studying a production scenario of 300,000 oz. gold per year, based on throughput of 5,000 tonnes per day, starting as soon as 2016. The junior is expecting lower operating costs than Agnico’s Meadowbank because of its project’s higher grade.
Back River hosts five deposits across a 5-km stretch in the Goose Claim block. The George claim block, 50 km to the north, hosts a high-grade underground resource (590,000 indicated oz. at 10 grams gold and 866,000 inferred oz. at 10.5 grams).
After selling the Hackett River silver-zinc project in Nunavut to Xstrata Zinc last year, Sabina finished 2011 with $160 million in cash. The company retains a royalty on silver production amounting to 22.5% of the first 190 million oz. produced, dropping to 12.5% thereafter. The project is only 50 km away from Back River, and Sabina announced in March that it and Xstrata have agreed to work together to advance the Bathurst Inlet Port and Road project (BIPR).
Although Sabina says the plan for a deep-water port, 70 km north of Back River, isn’t crucial to develop the project, the company sees opportunity in the project. BIPR has been stalled then resurrected several times in the past, and is at the feasibility stage, with considerable existing baseline and environmental data. The project, with a pricetag last estimated at $270 million, would see the port connected by an all-weather road to the Tibbitt to Contwoyto ice road. The port would be located 35 km south of Bathurst Inlet.
Sabina is also spending $8.3 million to drill 12,500 metres at its Wishbone project, where it made three discoveries in 2011.
Agnico-Eagle Mines’ (AEM-T, AEM-N) second major project in the Low Arctic is the advanced-stage Meliadine project, 290 km southeast of its Meadowbank mine, near the western shore of Hudson Bay in Nunavut’s Kivalliq region. The gold major picked up Meliadine in 2010 and after an extensive drill program last year, carved out proven and probable reserves of 12.5 million tonnes grading 7.2 grams gold per tonne for 2.9 million oz. gold. Measured and indicated resources stand at 12.6 million tonnes grading 4.09 grams gold for 1.7 million oz. with another 12.7 million inferred tonnes at 5.98 grams gold for 2.4 million oz. A $30-million exploration budget for 2012 includes 90,000 metres of drilling in the project’s six known deposits, and 25,000 metres of grassroots exploration drilling. Agnico has budgeted $52 million for infrastructure, permitting and a feasibility study.
It’s also pursuing permits to build a 25-km, all-weather access road from Rankin Inlet that would allow for year-round exploration.
For an earlier-stage project, North Country Gold’s (NCG-V) Three Bluffs deposit lies northeast of Baker Lake. Located in the 300-km-long Committee Bay greenstone belt, Three Bluffs is 180 km northeast of the Meadowbank mine, and has similar geology and mineralization.
A resource update in April pegged indicated resources at 4.3 million tonnes grading 4.9 grams gold for 678,000 oz. gold. Inferred resources add 4.5 million tonnes at 5.69 grams gold for 829,600 oz.
North Country is planning a 12,000-metre drill program this year targeting high-grade mineralization over 1.2 km of strike and between 300 and 600 metres depth. To date, most drilling has focused on the eastern 1.3 km of a 4.1-km-long trend, and has only extended to 300 metres depth. Drilling this year showed the deposit extends to at least 500 metres.
Three Bluffs is a structurally controlled lode gold system hosted in oxide facies iron formation and greywackes.
In the southwest corner of Nunavut, north of the Manitoba border, Prosperity Goldfields (PPG-V) is exploring the Kiyuk Lake project. The project first saw drilling (14 holes for 2,600 metres) last year, resulting in three discoveries. The Cobalt find returned 32.1 metres of 1.82 grams gold per tonne from 52 metres depth; Gold Point returned 63.6 metres of 2.84 grams gold from 149 metres; and Rusty returned 157.6 metres of 1.7 grams gold from surface. Prosperity followed up with a 4,500-metre drill program in March, and planned more drilling in June. Mineralization at Kiyuk is hosted in a sequence of conglomerates and breccias that occur along an unconformity between two sedimentary units.
Prosperity recently merged with Yukon explorer Smash Minerals.
And in the Northwest Territories, the standout gold project is Seabridge Gold’s (SEA-T, SA-N) Courageous Lake project.
Seabridge is working on a feasibility study, due in June, for the FAT deposit at Courageous Lake. A PEA released last summer projected FAT could produce 383,000 oz. gold per year at a cash cost of US$599 per oz. over 16 years.
Measured resources stand at 1 million oz. (13.4 million tonnes at 2.5 grams gold), with indicated resources at 6.9 million oz. (94 million tonnes at 2.28 grams gold) at a cutoff grade of 0.83 gram gold. Inferred resources add 3.4 million oz. in 49 million tonnes grading 2.18 gram gold.
In hopes of making a new discovery, Seabridge is also spending $8.5 million this year on exploration of the 52-km-long Matthews Lake greenstone belt that hosts FAT.
— This story was originally published in the June 2012 issue of Mining Markets magazine.
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