Island Gold moving toward production

Dubreuilville, Ont. — Quiet but effective development work at the Island Gold project, a short drive from this lumber town, should bring a new gold mine to Ontario in the next few months.

The joint venture of junior developer Patricia Mining (PAT-V, PTMHF-O) and small gold producer Richmont Mines (RIC-T, RIC-X) hopes to have a new resource estimate on Island by the end of February, and has plans to start milling ore in July. Success, based on production from a small resource in narrow vein structures, will vindicate the small-is-beautiful school of thought in gold mining.

Narrow-vein miners are often neglected by the market, which is more impressed by large reserves and bulging production numbers. But during the late-1990s downturn in the gold price, many of the smaller gold producers, surviving on a few years’ worth of reserves, were strong cost performers thanks to high grades that multiplied cost savings compared to their larger rivals.

In its current development stage, Island certainly does rest on a relatively small resource: five zones that make up 272,000 tonnes indicated, at a grade of 13.8 grams gold per tonne or 12.3 grams after high assays are cut to 75 grams per tonne. Another 332,000 tonnes in the inferred category average 18.9 grams per tonne, or 12.9 grams after cutting.

Those resources are tightly constrained, given today’s frothy gold market. When they were calculated in 2004, consulting firm Roscoe Postle Associates used a 6-gram-per-tonne cutoff grade, which was based on a gold price of US$400 per oz., a Canadian dollar worth US84, and a (Canadian-dollar) operating cost of $90 per tonne.

Richmont, which has spent $10 million to earn 55% of the project, took over management at the beginning of 2005. Patricia Mining had bought the project from Canada Tungsten, now part of Aur Resources (aur-t, aurrf-o). Assets of the old Canamax Resources — which had briefly put the Kremzar gold mine into production in the late 1980s — had been folded into Tungsten after Canamax ran into financial trouble.

Gold exploration here goes back to the period immediately after the First World War. There was some production in the 1920s and ’30s, along the road between railheads at Lochalsh, on the Canadian Pacific, and Goudreau, on the Algoma Central. The gold rush of the 1980s brought Canamax into the area, armed with flow-through money and a mandate to bring gold mines into production. By 1988 they had started pouring gold from the Kremzar mine, but it yielded only 47,000 oz. before it was mothballed in 1990. The Magino mine, not far away, opened in 1988 as well, but turned out just over 100,000 oz. before closing in 1992.

Richmont’s task at Island Gold has been to drive workings from the existing ramp, which was down to a 255-metre vertical depth at year-end. In all, there was just over 2 km of underground development at Island in 2005, including a ventilation drift and raise and 220 metres of drifts along the vein systems. What that has done is provide access for more drilling on the five Island zones; 80 holes were drilled, and the partners have results from 60 of them in hand.

Intersections from the 7,900-metre program largely confirmed continuity of the mineralized zones, both vertically and laterally, and showed grades in the same range as the resource grade.

Among the better results were a series of holes in the D1 zone, a small zone whose indicated resource stood at only 13,000 tonnes grading 11.5 grams gold per tonne. There, each of nine intersections exceeded the resource grade, including a 1.1-metre intersection grading 47.2 grams per tonne and a 3.1-metre intersection running 12.2 grams.

The zones themselves are a tightly spaced series of vein structures, dipping steeply to the south away from the ramp, in a north-facing series of intermediate volcanic rocks. “The reality is they don’t go on forever,” said Patricia’s chairman, Richard Sutcliffe, during a recent visit by The Northern Miner. “They’re sort of like fish scales, overlapping.”

Recognizing that the zones are narrow has been the key to bringing Island along. Kremzar, during the 1980s, had suffered from grade-control problems that were inherent in large-scale underground mining. Kremzar had “good grade, but they killed themselves on internal dilution,” said mine geologist John Plecash, who was at both mines. “I much prefer this to what we had at Kremzar.” Dilution at Kremzar had run to 40% in longhoe stopes; by comparison, River Gold Mines (RIV-T, RVGDF-O) at the nearby Edwards mine has historically had dilution levels around 15%.

The mining plan at Island is not firm yet, but at the time of The Northern Miner’s visit, the expectation was that Richmont would use cut-and-fill stoping, pulling between 100 and 200 tonnes a day from three or four working areas.

“It’s not the mill that’s going to drive the process,” said J.P. Chauvin, Patricia’s president. “It’s development and getting enough faces.”

The development plan seeks to get those faces from about five different levels in the central “Island” area, but there are other resources along strike to both the east and west. To the east, Patricia is drilling nine holes on the Goudreau zone, where earlier estimates put the inferred resource at 756,000 tonnes grading 9.8 grams gold per tonne. Patricia is earning the property from Algoma Steel (AGA-T, ALGOF-O), which is allowing its interest to be diluted to 25%.

There is development from a ramp on the Lochalsh zone to the west, where previous estimates calculated an inferred resource of 416,000 tonnes at 7.7 grams per tonne.

The partners expect to make a production decision in the first half of the year. Richmont will finance the project. In the meantime, Patricia has done a $1.3-million flow-through financing to cover exploration on the Goudreau and Lochalsh zones, and Richmont has raised $7.5 million, also using flow-through shares, to fund exploration at Island.

The flow-through era’s overenthusiasm for gold production brought some bad projects on-stream, but its legacy in the area puts an asset in Island Gold’s back pocket: the old Kremzar mill, which came with the property in 1996 when Patricia acquired it from Canada Tungsten. For $3 million, and the assumption of Tungsten’s closure and cleanup liabilities, Patricia got three properties plus the well-preserved Kremzar mill, which had cost Canamax $24 million back in 1988.

“That’s what’s surprising,” said mill superintendent Oscar Lafrance. “It’s so long and the structure’s still beautiful.” The mill at Kremzar had worked well, and in its latter days — when Canamax, troubled by grade-control problems at Kremzar, was looking at the Island deposit as a source of mill feed — it recovered 94% of the gold in a bulk sample from Island.

The mill is simple; jaw and cone crushers feed a single-stage ball mill, and comminuted ore goes to a basic cyanide leach system and carbon-in-pulp (CIP) recovery circuit. Ore stays in the leach tanks for about 40 hours, and leachate spends about 12 hours in the CIP circuit.

“This is not the kind of mill that needs a lot of instrumentation,” Chauvin said.

Most of the work at the mill consists of inspecting the equipment. Lafrance believes there are “a few wear parts to replace inside . . . It’s all maintenance that has to be done.”

Chauvin agreed: “Whenever the decision is to turn the key, then it’ll be ready to turn the key.”