Echo Bay underground at Nuinsco’s Cameron Lake

It may have taken Echo Bay Mines a little longer than expected to make up its mind on Nuinsco Resources’ Cameron Lake gold project, but now that the all-important decision to head underground has been made, the company means business.

A 20-man crew has been on the 2,400-acre property, located in the Kenora mining district, since early December and within that short period, the decline ramp has been collared and driven 100 ft of its 2,670-ft length.

A substantial camp has also been set up on site including a 42-room bunk house, eating-kitchen facilities, office, dry and a 40 x 100-ft machine shop.

With three shifts working around the clock seven days per week, there is little doubt that this $3.6-million phase one program will be completed by the end of July. By that time, the 16×12-ft ramp will have reached the 425-ft level and some 2,000 ft of drifts and crosscuts will have been completed.

On a recent visit to the site of the underground exploration, The Northern Miner learned the reason behind all this activity

“The potential is excellent,” sums up Murray Strachan, Echo Bay chief geologist, Lupin division, who also holds the same position at the Cameron Lake project.

The Echo Bay/Nuinsco partnership is nearly two years old. Under the original terms, Echo Bay was to have said yea or nay to an underground program before the end of September, 1985. However, at that time Echo Bay was given a one- year extension to make the decision. At the end of that period, the long-awaited go-ahead for underground development was finally given.

Nuinsco President Douglas Hume describes his company’s relationship with Echo Bay as “a perfect marriage.” While Nuinsco is good at the exploration end, Echo Bay has the mining and operating expertise, he explains. Indeed, Echo Bay expects to have a net gold production of approximately 475,000 oz this year as a result not only of operating efficiences but also because of recent acquisitions south of the border. Cameron Lake reserves

At Cameron Lake, drill-indicated reserves in the Main zone now stand at 1.6 million tons with a weighted average grade of 0.16 oz gold per ton to a depth of 1,100 ft. Of that amount, one million tons grades 0.2 oz, including a higher grade core of 516,000 tons grading 0.258 oz undiluted.

A stripping program this past summer exposed gold mineralization over a strike length of 700 ft with channel samples of the stripped portion returning a weighted average grade of 0.28 oz.

This leads Mr Hume to expect the underground program to increase reserves to about 2 million tons of about 0.2 oz.

The purpose of the phase one underground program is to prove the grade and ore reserves to the 425-ft level and to determine orebody continuity, mining methods, rates and bulk sampling.

Diamond drilling, also part of phase one, is scheduled to start next month, says Fred Sveinson, Echo Bay general manager of the Lupin division, who holds the same position at the Cameron Lake project. About 20,000 ft of drilling is planned above the 425 level. The drilling will be done from the 21 drilling stations to be located at 100-ft intervals along the ramp.

Upon the completion of phase one, Echo Bay will take a breather of one to two months to evaluate the data. At that time a decision will be made whether or not to proceed to the second phase of the program.

The $3.1-million second phase program would involve driving the ramp an additional 2,500 ft to the 800-ft level with more fill-in drilling plus 3,500 ft of drifts and crosscuts to this elevation. Production decision

Either at the end of phase two or somewhere in the midst of the phase, a production decision will be made, says Mr Strachan. Production could start as early as 14 months after a positive decision and at a capital cost of about $30 million, estimates Nuinsco’s Mr Hume.

If the decision is a go, it’s envisaged the operation would come in at between the 500- to 750 ton-per- day rate with an annual production rate of between 50,000 to 60,000 oz of gold, says Mr Sveinson. Mining would initially be via the ramp. It’s possible a shaft would be sunk at some later point from the 800-ft level.

Though it’s still premature to talk about operating costs, Mr Sveinson does say that corporately Echo Bay aims for an operating cost of $200(US) or lower.

Nuinsco also owns a 100% interest in the Monte Cristo property to the east at Rowan Lake. Here drilling has indicated over 200,000 tons of material grading 0.2 oz. Gold ore is similar to the Cameron Lake ore, says Nuinsco, adding that it’s highly likely these two properties can be developed jointly with considerable cost savings. Funding by Echo Bay

Funding for the phase one program on Nuinsco’s Cameron Lake project is via Echo Bay’s purchase of 1.5 million Nuinsco flow-through treasury shares at a price of $2.30 per share, for proceeds of $3.6 million. In addition Echo Bay will purchase ordinary Nuinsco treasury shares to provide working capital.

Options have also been granted to Echo Bay for a 2-year period to purchase 2.5 million ordinary shares at $1.65 per share. Completion of all commitm ents and exercise of options would earn for Echo Bay 49.2% of Nuinsco’s issued capital.

At present, there are 8.5 million outstanding Nuinsco shares of which 27.1% are owned by Echo Bay.

The original 50% interest in the Cameron Lake property held by Vancouver-based Lockwood Petroleum now stands at about 31%, having been reduced due to non- payment of its share of expenditures. Once the work program is completed, its interest will be diluted to 17% working interest, subject to futher dilution for non- payment to a non-dilutable 10% net profits interest with Nuinsco holding a 100% undivided interest in the claim group.

Both Echo Bay and Nuinsco trade on the TSE. Around press- time Echo Bay was trading at $35.25, with a 52 week high and low of $37.13 and $18.25, respectively. Nuinsco was trading at the $2.10 level with a 52-week high and low of $2.40 and $1.08, respectively.