MINERAL REVIEW AND FORECAST: PRECIOUS METALS; GOLD

Canada’s gold production, which increased rapidly during the 1980s, reached 5.7 million oz (177 tonnes) in 1991, compared with 5.4 million oz (167 t) in 1990. By comparison, production was 967,740 oz (30 t) in 1980. Canada is the fifth largest gold producer behind South Africa, the United States, the former Soviet Union, and Australia.

There were 60 primary gold mines in Canada at the end of 1991, and these accounted for about 80% of gold produced. Total employment in gold mines is estimated to have increased slightly from 12,000 in 1990 to around 12,400 in 1991. The value of gold production, calculated on the basis of average cash gold prices, decreased by 2.2% to $2.36 billion.

In 1991, the average price of gold was US$362/oz compared with $384 in 1990 and $381 in 1989. Factors influencing the price of gold were the Gulf War (which briefly raised the price to $404 early in the year), strong production by Western World producers, increased exports by socialist countries, the collapse of the Soviet Union, and relatively low inflation and interest rates. Gold traded at $344 in mid-September, its lowest level since 1985.

British Columbia

In 1991, British Columbia’s gold production reached 603,225 oz (18.7 t), compared with 519,355 oz (16.1 t) in 1990.

In January, Cominco started production at its Snip gold/copper/silver project, held jointly with Prime Resources. The $65-million project was scheduled to produce at a rate of 300 t/d. Reserves are 936,000 tonnes with an average grade of 30 g/t Au.

The SB project of Westmin Resources and Tenajon Resources started production in June. Ore is processed at Westmin’s Premier mill.

Rea Gold took over QPX Minerals, which owns the QR gold prospect. The project had previously received approval in principle by the Mine Development Review Committee and is also awaiting a production decision. Reserves are estimated at 1.2 million tonnes grading 5.2 g/t Au.

International Shasta Resources temporarily shut down the Shasta mine in November, due to an underground collapse. The 180 t/d operation is scheduled to reopen in May, 1992.

After reaching a conditional agreement which would have shared the ownership of the Eskay Creek project on a 50-50 basis with International Corona, Placer Dome elected not to proceed. The companies were unable to agree on the size of the operation. Prime Resources and Stikine Resources each own 50% of the Eskay Creek property, and both are controlled by Corona. (At presstime, International Corona and Placer Dome were close to a new agreement.)

A preliminary study based on a 450-t/d operation estimated that the capital cost would be $210 million for production of 250,000 oz Au annually. The Eskay Creek deposit is estimated to contain 43.97 million tonnes of ore grading 26.4 g/t Au and 998.4 g/t Ag.

Placer Dome Inc. decided in early February not to proceed with the Mount Milligan project. Placer Dome cited the price of gold as the main factor in its decision. Reserves, according to a feasibility study, are 300 million tonnes grading 0.23% Cu and 0.56 g/t Au.

After acquiring Corona’s 38.4% share in the Mount Polley copper-gold deposit, Imperial Metals decided to seek potential buyers for the property. Despite good feasibility study results, Imperial has had difficulties in arranging financing for the $131.5-million open pit project. Reserves are estimated at 48 million tonnes grading 0.38% Cu and 0.55 g/t Au.

In the northwestern part of the province, the Windy Craggy copper-gold deposit of Geddes Resources has been undergoing an environmental assessment. Geddes has also been looking for potential investors for the $500-million project. Current probable and possible reserves at the deposit are about 272 million tonnes, grading 1.44% Cu, 0.07% Co, 0.2 g/t Au and 3.8 g/t Ag.

Northwest Territories

Gold production in the Yukon and Northwest Territories increased to 696,774 oz (21.6 t) in 1991, up from 651,613 oz (20.2 t) in 1990.

The Colomac mine of NorthWest Gold, a subsidiary of Northgate Exploration, was put on care-and-maintenance in June. Lower recoveries and grades resulted in higher operating costs. The company suspended operation because it could not arrange financing to buy fuel for the 1991 winter. The mine produced during its 18 months of operation about 150,000 oz Au.

Saskatchewan

The Jolu mine of Corona and International Mahogany closed in October due to exhaustion of ore.

Claude Resources started production at the Seabee gold mine. However, cost overruns and start-up delays substantially increased the cost of the $22.9-million project. The 400 t/d operation is targeted to produce around 50,000 oz Au each year. Proven and probable reserves are 1.0 million tonnes grading 13.7 g/t Au.

The Jasper mine of joint venture partners Cameco and Shore Gold Fund is the only other operating gold mine in Saskatchewan. Mineable reserves are 163,300 tonnes containing 16.1 g/t Au. The mine is expected to yield 85,000 oz during its anticipated two-year life.

The Contact Lake property of Cameco, Uranerz Exploration and Mining and Westward Explorations has undergone a feasibility study for a planned 635-t/d operation. The project’s estimated capital costs of $38 million are for a mine producing 64,000 oz Au annually.

Ontario

Ontario’s gold production in 1991 totalled 2.5 million oz (77 t), a decrease of nearly 4% over the 1990 total. Gold from the three mines in the Hemlo area account for over 50% of Ontario’s production.

Only one mine opened in 1991, the Cheminis gold operation of Northfield Minerals and Towerland Properties. It was brought on-stream in July near Virginiatown at a cost of $13 million. The mine’s production rate is expected to be between 10,000 and 15,000 tonnes per month at a cost of $300/oz.

The Renabie gold mine of Corona and American Barrick closed in September. The move was due to declining reserves, lower grades, rising costs and weak gold prices. The Renabie mine has been reactivated four times since it was opened in 1941 and has produced a total of 1.13 million oz Au.

Canamax announced in October that it would close the Bell Creek mine near Timmins. Shortly afterwards, Falconbridge Gold signed a letter of intent to purchase the mine and mill for $5 million. Falconbridge Gold plans to reopen the mill to process ore from its nearby Hoyle Pond mine.

Two other mine closures took place in the Timmins area — Eastmaque’s tailings project and St Andrew Goldfields’ mine.

Finally, Degussa Canada announced the shutdown of its gold refinery in Burlington, Ont. in February, last year.

Quebec

In 1991, Quebec’s gold production increased by 28% to 1.67 million oz (51.9 t) from 1.31 million oz (40.7 t). Despite low gold prices, the rise in production was caused mainly by production increases by TVX Gold at Casa Berardi and by LAC Minerals’ Bousquet No. 2 mine.

Cambior commissioned the Mouska mine in Bousquet Township. It was the company’s third new mine in the past three years. It previously opened the Pierre Beauchemin mine near Rouyn-Noranda and the Lucien C. Beliveau mine near Val-d’Or.

Agnico-Eagle started production at its Eagle West mine, 800 m west of the company’s Eagle shaft in the Joutel area.

Two other small mines also started in 1991 — the Norlartic mine of Aur Resources and Nova-Cogesco, and the Simkar mine, jointly owned by Ronrico Exploration and Louvicourt Gold Mines.

Aur Resources and Societe Miniere Louvem jointly announced the development of the Louvicourt deposit. (For more information, read accompanying article on copper.)

Aurizon Mines ceased operations at the Sleeping Giant mine because of low gold prices. However, Cambior is undertaking a three-year, $12-million exploration program to delineate new reserves. After completing the work, Cambior will earn a 50% interest in the project.

The 500 t/d Estrades mine of Breakwater Resources shut down temporarily in June due to low metal prices and excess operating costs. In 1991, Estrades produced over 50,000 tonnes of ore grading 4.38 g/t Au, 10.25% Zn and 1% Cu.

New Brunswick

The Murray Brook mine of NovaGold Resources is the only operating gold mine in New Brunswick. It uses an indoor vat leaching process to treat 1,300 t/d of ore grading 2 g/t Au and 39.5 g/t Ag.

Newfoundland

Hope Brook Gold, a subsidiary of BP Resources Canada, announced in May the temporary closure of its Hope Brook mine near Port aux Basques. Even though a new effluent treatment system was installed in January, 1991, contaminated effluent from the previous system had to be retreated; therefore, the entire operation was shut down.

In December, Royal Oak Mines entered into an agreement with BP to purchase the Hope Brook mine. Completion of the deal is subject to regulatory approval, a definitive agreement and due-diligence review, and receipt of environmental permits and satisfactions of other labor and government-related issues. The Hope Brook mine is scheduled to reopen in July, 1992.

Outlook

Canadian gold production is expected to be stable over the next two to three years, assuming prices remain close to current levels. With an average cash production cost of about US$250/oz, Canada generally has a strong competitive position; however, about 10% of Canadian mines have costs near or above US$350/oz and are vulnerable to closures should prices weaken. As well, many promising properties across the country could come on-stream with a strengthening in price.