Size matters, especially with regard to gold projects in the Far North. As the yellow metal continues to languish below US$275 per oz., gold explorers in this high-cost environment are focusing on adding bulk to their projects, rather than fast-tracking them to production.
A case in point is the the Meadowbank project, north of Baker Lake, Nunavut. “Under current gold price scenarios, there is nothing to do but make this thing as big as we can,” says Glen Dickson, president of
Cumberland’s decision to return to the grindstone rather than consider development follows the completion, earlier this year, of a prefeasibility study. The study reached the disappointing conclusion that Meadowbank was short of the ounces needed to make production worthwhile, despite years of drilling and adding new reserves at the remote gold project.
The conclusion is directly linked to the slump in the gold price, which reduces the amount of gold that can be placed in the reserve category. Gold has lost more than 30% of its value since 1996, when the price averaged US$388 per oz., and is not expected to move above US$300 per oz. anytime soon. Gold projects in the Far North are particularly sensitive to lower gold prices because the cost of operating there is relatively high.
Undeterred, Cumberland continues to hunt for new resources that could eventually enhance the 1-million-ounce reserve base and create economies of scale.
Cumberland’s geologists have had some success in this regard. During the latest field season, their drills intersected a new zone, the Vault zone, when eight of 10 holes cut shallow gold mineralization under a surface showing about 5 km northeast of the known Meadowbank deposits.
Results included a 17-metre section grading 4 grams per tonne at a depth of 55 metres and a 9-metre section grading 7 grams just below surface. The Vault mineralization has been traced over a strike length of 850 metres and a width of 300 metres, and remains open in all directions.
Cumberland is developing a resource estimate for the new zone, and has budgeted $1.3 million for further exploration at Meadowbank in 2001.
The new ounces will be a welcome boost to the 11.3 million tonnes averaging 5.73 grams gold — including proven and probable open-pit reserves of 5.5 million tonnes grading 5.44 grams per tonne (960,000 oz.) — in the four established zones at Meadowbank (Third Portage, Bay Zone, North Portage and Goose Island).
Cumberland is aiming to put at least 1.6 million oz. in the reserve category, says Dickson. Reaching this goal would allow a 10-year mine life with a 4.2-year payback period, based on a long-term gold price of US$325 per oz., about US$60 above the current price. At a daily milling rate of 2,500 tonnes, the open-pit mine would produce 157,000 oz. per year. Capital costs are estimated at US$93 million and cash operating costs, at US$187 per oz,, according to the prefeasibility study.
A similar study is under way at the much larger Meliadine West project, near Rankin Inlet, Nunavut, where Cumberland (with a 22% interest) participates in a joint venture with
Meliadine West contains a resource of 23.6 million tonnes grading 8.5 grams gold per tonne, or 6.5 million oz., in four closely spaced deposits. WMC has invested more than $40 million in the project, including 110,000 metres of diamond drilling.
Partners Cumberland (50%) and Comaplex (50%) have been less successful at outlining new mineralization at the earlier-stage Meliadine East project, along the eastern half of the Meliadine gold trend. The main Discovery zone contains resources of 2.1 million tonnes grading 6.9 grams per tonne, or 400,000 oz. A summer program intersected an extension of this zone but came up empty-handed elsewhere on the property.
Adding new resources is also a priority for partners
Eventually, the partners hope to establish a gold mining camp that will produce more than 300,000 oz. per year at cash costs of under US$200 per oz.
Toward this end, the joint venture recently spent an extra $4 million on exploration, in addition to an original budget of $15 million. The added funds were used to test for structural extensions of known gold mineralization at the high-grade Boston and Doris deposits, investigate possible extensions of high-grade zones within the Madrid deposit and drill new targets in the Hope Bay belt and the neighbouring Elu greenstone belt.
The Boston is a shear-hosted gold deposit where the partners drilled 144 holes from underground in the first half of 2000. Resources currently stand at 5.7 million tonnes grading 13.1 grams gold per tonne, or 2.4 million contained ounces within three principal zones of mineralization: B2, B3 and B4. The Doris deposit contains an additional 2.1 million tonnes grading 17.8 grams gold or 1.2 million contained ounces.
The summer program cut several intersections of narrow mineralization. “These relatively narrow but high-grade intercepts in the B2 Zone at Boston confirm indications, from our underground drilling and prior BHP surface drilling, that there is potential to expand the Boston deposit to the north and south,” says Anthony Walsh, Miramar’s president and chief executive officer.
The joint venture expects to announce a new resource estimate for Hope Bay by year-end. At presstime, the partners were also working out the details of next year’s program, which Walsh says will be “substantial.”
The partners have a “conceptual” reserve target of 2-3 million ounces for Hope Bay, or enough to support a 2,000-tonne-per day operation, says Walsh.
Meanwhile,
Kinross can earn a 70% interest in George Lake by spending $20 million on exploration before Nov. 30, 2004. The latest, 40-hole program hit high grades at depth along the property’s Main and East zones, suggesting that these zones continue to plunge to the north.
Although the cost of operating in the Far North is high because the projects are remote and the seasonal exploration window is short, the Meadowbank, Meliadine, Hope Bay and George Lake projects enjoy the advantages of ocean access, shallow deposits, uncomplicated metallurgy and relatively high grades. Now all they need is a few more ounces, a higher gold price, or — better yet — a combination of the two.
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