Pioneer nets $15.75m. for Puffy Lake gold mine

Project financing has been secured by Pioneer Metals for its Puffy Lake gold mine, 45 miles northeast of Flin Flon, Man. Debt- free, and with $4 million in working capital (excluding the financing), Pioneer has opted to fund the venture entirely through equity.

The 3.5-million share offering, which incidentally is being done on a firm basis and should net $15.75 million, will be placed with Loewen Ondaatje McCutcheon & Co. of Toronto for distribution nationally. It’s big money and certainly reflects the faith that particular institution has in the project and in Pioneer’s young but talented management team.

Puffy Lake will be the second gold mine for Pioneer which operates a moderate-sized heap leach operation in Idaho. That project is essentially a joint venture between Pioneer and MFC Mining Finance Corp., a major shareholder in the highly successful Blackdome Mining project near Clinton, B.C.

With a 30,000-oz-per-year production rate, the seasonal Idaho mining operation is making money and has contributed significantly to the joint venture’s bottom line. Last year, Pioneer reported a profit of $2.24 million or 27 cents per share based on an average 8.3 million shares outstanding.

Construction work is scheduled to begin at Puffy Lake by April 15, says President Robert Willis, who notes the 500- ton plant should be operating at three-quarters of capacity by mid-December. Proton Systems of Vancouver is responsible for construction procurement and project management; it’s also involved with Granges Exploration’s Tartan Lake project near Flin Flon. Proton will report to Pioneer’s project manager. Incidentally, Granges has a 20% net profits interest in the operation.

Most of the equipment in the plant will be new but some refurbished equipmen t will also be utilized. A semi-modular construction approach is planned and many of the components will be built off- site. Estimated cost for the total project is $18 million but Mr Willis tells The Northern Miner they should be able to “shave $3 million off the cost.”

At present, the hydro right-of- way is being cleared (a distance of about 12 miles) and site preparation is under way for the batch plant which will provide concrete for foundation work during the construction phase. Existing camp facilities will be taken out and construction personnel will live in nearby communities; so will those involved with mine operations later.

Diamond drilling is continuing underground and 200-400-ft step- out holes are testing the stacked ore horizons along strike. About 200 holes have been completed thus far and he confirms they are “finding more of the same.” At last report drill-indicated reserves were 1.3 million tons grading 0.21 oz gold. These reserves occur in four horizons and he confirms that recent drilling has encountered a fifth. Gold occurs in the free state and about 75% of it will be recovered by gravity separation and the remainder by flotation. None of the gold is tied in with arsenopyrite which will concentrate in the gravity circuit. They will batch leach the concentrate from both circuits, he says.

The quartz-rich zones are 2-3 m wide and there is no faulting to complicate mining or increase dilution. The stacked orebodies have been outlined over a vertical distance of 1,000 ft and for about 3,200 ft along strike. Some test stoping has been done and he notes the 3,500-ton bulk sample graded 0.21 oz gold per ton — considerably higher than the 0.12 oz indicated by drilling. This is not uncommon to situations with a strong nugget effect.

The ore zones dip at about 30– which to some extent complicates mining; so the company has been careful to select a proven method to ensure maximum extraction. Mr Willis describes it as a “delayed back-fill open stope panel mining method.” something even he admits is quite a mouthful. The system is used extensively in the Elliot Lake uranium camp and involves slushing ore to the stope bottom followed by trackless haulage. Sometime in the future, an internal shaft may be installed to access the lower reaches of the mine.

The mining method will afford them a 100% extraction rate and geology will be used to direct mining operations because there is such a nugget effect and not all ore is readily identifiable as such. Rock mechanics suggests the company will be able to mine 200-ft-long stopes across a 50-ft width. “But we may be able to increase this, ” he adds. Hydraulic backfill (with cement) will be placed in worked- out stopes and it will take 30 days for the fill to set up. When the fill is in place, the company will recover rib and crown pillars, achieving 100% extraction.

There is no water underground and ground conditions in the quartz-rich zones are exceptional, so ground control costs should be low. This will offset some of the higher costs associated with their mining method. Dilution will probably be less than 10%.

The Puffy Lake mine is expected to produce 40,000 oz gold per year at an operating cost of $175(US) per oz. Mr Willis believes Pioneer’s 1987 earnings will be similar to last year’s but he expects a “big jump in 1988” when the mine achieves full production.