It isn’t often that a mining company can generate enough cash flow from a single operation to recover its investment within three years, but that’s exactly what Toronto-based Minnova (TSE) has achieved at the Winston Lake zinc-copper mine near Schreiber, Ont. Brought into production at a cost of $73 million in mid-1988, the 1,000-ton-per-day, Winston Lake mine generated an operating profit of $36.3 million last year, up from a profit of $22.4 million in 1989 and $13.9 million in 1988.
The largest of five base metal and gold mines owned by Minnova, Winston Lake helped the 50.4%-owned Kerr Addison Mines (TSE) affiliate to double its earnings in 1990 to $15 million compared to $6.8 million in the previous year. Noranda (TSE) owns 51% of Kerr Addison.
After stumbling during its early production stages, the high grade Winston Lake operation, hit full stride in 1990 producing 128.9 million lb. zinc, 6.7 million lb. copper, 6,954 oz. gold and 160,000 oz. silver at an operating cost of $70.43 per tonne milled (the company reports production figures in a combination of imperial and metric units). That is well above the 4.8 million lb. copper, 99.2 million lb. zinc, 3,835 oz. gold and 113,841 oz. silver in 1989 at $81.18 per tonne.
Senior-vice President Dave Watkins is naturally very pleased with the way the Winston Lake mine is performing, especially after ground fall problems hampered production in 1988 and the first part of 1989. But because of an extensive rock bolting program, weaknesses are being controlled and the emphasis has turned toward finding new ore.
In mid-1990 the company got some encouragement when it pulled an impressive intersection on claims situated one mile southwest of the mine’s 2,400-ft. production shaft. Located at a depth of 3,300 ft., the 34-ft. massive sulphide intersection averaged 25% zinc, 2.6% copper, 2.9 oz. silver and 0.012 oz. gold. At the time of the discovery, Watkins said it was much too early to predict the potential size of what is now known as the “Pick zone.”
Even though Minnova is using two drills to test for extensions of the zone, it could be mid-year before any major decisions are taken.
“Drilling has been slow because the mineralization is so deep,” said Watkins who believes a minimum of two million tons would be necessary at depth to justify development of the deposit. In theory, the Pick zone could eventually be explored from a drift extension of the mine, he told The Northern Miner recently.
Having completed 23,000 ft. in the Pick zone so far, Minnova has budgeted $1.5 million (about the same as last year) for exploration of the new discovery. Success is important because Minnova is running short of reserves not only at Winston Lake, but also at its Lac Shortt gold and Opemiska copper operations as well.
At the end of 1990, Winston Lake reserves had dropped to 2.4 million tons grading 14.5% zinc and 1.1% copper, from 3.4 million tons in 1988 and unless more ore is found Watkins says the operation will be mined out by about 1998. However, with a year-end cash position of $63 million, the company is well equipped to fund the search for new mines.
Of the $12 million, which Minnova will contribute to exploration programs this year, a large proportion is earmarked for the Chapais-Chibougamau region of Quebec where preliminary reserves of 23.3 million tons grading 0.06 oz. gold and 0.2% copper have been outlined at the Frotet Lake project. With reserves located between surface and a depth of 650 ft., studies show that mineralization is mineable by open pit methods.
Minnova is also studying the feasibility of mining the new 1100 massive sulphide lens discovered on Audrey Resources’ Mobrun mine property near Rouyn-Noranda, Que., as part of an agreement to earn a 50% stake in the discovery. Development costs for the 1100 lens, which is estimated to contain 15.5 million tons of grade 4.64% zinc, 0.83% copper, 1.460 oz. silver and 0.035 oz. gold, have been estimated at $90 million.
Meanwhile, Minnova achieved most of its objectives for the Winston Lake mine in 1990.
Watkins expects legal proceedings launched by Zenmac Zinc (ASE) against Minnova in 1987, to reach the trial stage later this year. In its statement of claim, Zenmac alleges that under the original 1980 option agreement, it is entitled to a 20% participating ownership interest in the mine instead of the 10% net proceeds of production royalty it is currently receiving. MDNM
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