Major gold mine Big Missouri, Silbak in production by late ’88

It took nine years and 24 separate deals to consolidate the Big Missouri properties near Stewart, B.C., into a simplified package for Westmin Resources. Over that period, Tournigan Mining Explorations spent $1 million to secure the ground; and Westmin was told two years in advance what the option arrangement would be.

They agreed and it looks like the Big Missouri will now be part of a major new gold mining operation which will also include the old Silbak Premier mine. That particular property came into the Westmin fold in 1983 almost a year after Henry J. Block took control of British Silbak Premier Mines. The company mounted a $2-million exploration program in 1979 but ran out of money and was eventually taken over by the Block brothers.

A detailed feasibility study on the combined project should be completed by June for board approval. Contingent upon adequate financing being in place, mine development could begin this summer and full production in late 1988. Because of winter conditions in the region, it will be imperative for Westmin to begin construction this summer. Otherwise the startup date will have to be moved ahead six months or more.

In many respects, the development is a mirror image of the Mascot Gold Mines project near Hedley, B.C. Both are former underground producers and the economics of each proved to be much more favorable as open pit mining operations. Each of them mined to an underground cutoff that would be economic today on an open pit basis. Economies of scale also come in play with open pit mining.

In terms of gold equivalent, Westmin’s holdings are about two- thirds the grade of Mascot but they have a lower stripping ratio and Westmin has the ability to generate its own hydro- electric power.

According to A. E. (Art) Soregaroli, Westmin’s vice- president exploration (mining), the 1986 drill program in Silbak’s Glory Hole area increased the gold grade by 15% and silver by about 7%. Geological reserves now stand at approximately 6.4 million tons grading 0.069 oz gold and 2.69 oz silver per ton or a gold equivalent of 0.105 oz. There was only a small increase in tonnage from the previous estimate and the strip ratio dropped by about 15% to 4.4-to-1 (waste-to-ore).

These results are based on work to the end of 1986 which doesn’t include more than 8,000 ft of drilling on the upper levels of the Glory Hole area, says Harlan Meade, exploration manager western region. The holes were drilled from the No 2 level in the mine and he expects “a small improvement in the reserve base.” Winter conditions allowed them to rotary drill caved material at the bottom of the Glory Hole and he admits they are “getting some good numbers there too.”

Reserves at the Big Missouri, which would be a seasonal mining operation because of its elevation, occur within four open pit zones. Westmin describes these as mineable reserves and they total some 1.8 million tons averaging 0.089 oz gold, 1.17 oz silver at a 2.3-to-1 strip ratio. Mr. Soregaroli notes that “several of the pits are open to expansion since they do not include all geologic reserves.”

The company has updated a prefeasibility study prepared by Kilborn Engineering just over a year ago and the numbers look very positive. Capital costs for the project are estimated at $62 million and payback would be two years at $390 gold and silver at $5.40. Cash operating costs are expected to be around $134 per oz gold and $3.06 for silver during the first three years of production when higher grade material will be mined. (With the exception of capital, all costs are in U.S. dollars.)

Annual production should be approximately 80,000 oz gold and 560,000 oz silver during the first three years, says Bruce K. McKnight, manager corporate planning and development. But in subsequent years gold production will drop significantly based on the current mine plan. On the other hand, silver production will almost double as the company begins to draw most of its mill feed from the Silbak. These production scenarios could (and probably will) change should additional reserves be blocked out, particularly at the Big Missouri.

Mill rate will probably be 2,000 tons per day or higher and they are looking at alternatives to cyaniding concentrate. Direct cyanidation of ore is one possibility but he says “we are still experimenting with that.” Recoveries are expected to be at least 90% for gold and 50% for silver but they are trying to improve on the latter.

Small hydro is an important part of the development concept and Westmin has the water rights in the area. The company expects to rebuild an existing power dam on the property and would generate three times more power by increasing the head and also the length of the penstock. Westmin generates its own power at Buttle Lake on Vancouver Island where it has a 3,000-ton-per-day milling operation.

The company will have to apply for a special permit from the government and could supply excess power to nearby Stewart at a small cost. At the moment, Stewart’s power is diesel-generated.

The company will probably use a sub-aerial (land based) system for tailings disposal similar to that used at Buttle Lake. With little or no environmental legislation in place decades ago, previous operators dumped tailings into creeks which flowed into the ocean. This new method will be considerably more sophisticated and environmentally secure.

Westmin has a vested 50% working interest in the Silbak Premier and British Silbak has elected to have Westmin continue making expenditures to a total of $6.7 million. At that point, Westmin must provide a feasibility study and British Silbak may elect to continue on a 50-50 joint venture basis or be diluted down to a 20% carried net profits basis.

Westmin has earned a 70% working interest in the Big Missouri and Tournigan retains a 30% net profits interest. Westmin can buy 7.5% of Tournigan’s interest for $1 million within 90 days of commercial production. Canacord Resources, which provided $3 million for the 1986 exploration program, has earned 18.75% (working) of Westmin’s interest in the whole project.

Mr McKnight says the company is looking at tidying up this aspect of the project, noting that one option would be to put everyone’s interests into a new company and issue shares. John Powell, a vice- president at British Silbak, confirms that several companies have approached him about “acquiring a piece of the action.” While admitting the company has not put a “for sale” sign up, he concedes that “everything is for sale at a price.” British Silbak has several subsidiaries and is actually a real estate company. It feels more comfortable in that business, he admits.