Strike ends at Con

Unionized mine workers at the Con gold mine in Yellowknife, N.W.T., have voted to accept a new collective agreement with owner Miramar Mining (MAE-T), ending a strike that started almost a year ago.

Despite current low gold prices, Miramar will immediately begin the process of getting the mine back up and running, even though it failed to win any significant wage concessions from the union. Miramar’s interim president, Anthony Walsh, says the new collective agreement is effectively a rollover of the last contract, which expired in April 1997. He says the union was unwilling to accept any wage concessions as it had not had a pay raise in seven years.

With ongoing care-and-maintenance costs at the mine running $600,000 per month, management and the board believe it is in the best interest of the company to reactivate the mine. Walsh says the mine will be able to generate positive cash flow of US$2-3 million at current spot gold prices, while allowing for concurrent environmental cleanup of the mine site. Walsh says that if they instead closed the mine and went straight to cleanup, it could cost the company $15-20 million.

“It was apparent to us, given the state of negotiations, that it was better for the company to restart operations and begin reclamation activities rather than continue to incur care-and-maintenance costs,” Walsh says. “We have a plan that allows us to generate some cash flow and deal with the environmental [aspects], and, if the gold price goes up, [we’ll] benefit from that.”

The operating plan for the Con mine calls for Miramar to produce about 100,000 oz. gold per year over the next five years at a targeted total cash cost of US$280 per oz. Gold production will come from a combination of free-milling and refractory ores, and will be supplemented by gold recovered from the reprocessing of roaster sludges. Under the 5-year plan, Miramar will mine 1.1 million tons of reserves grading 0.35 oz. gold per ton. A gold recovery of 93% is expected.

The mine plan is a variation on what Miramar entered into at the beginning of 1998, except that the company will be resuming production from the refractory ore, which ceased in 1997 as a result of metallurgical problems. Brian Labadie, senior vice-president of operations, says the company worked on those problems in 1998 and has come up with an enhanced method of processing the refractory ore, with all the necessary equipment already installed in the mill.

Under the mine plan, Con will produce about 900 tons per day. The ore will be blended, as opposed to the past practice of separating it into free-milling and refractory components. The mill will be modified to integrate both the free mill and refractory circuits so that all ores will be processed through both flotation and cyanide leach circuits. The flotation sulphide concentrates containing the refractory gold will be processed in an autoclave on site. A significant free gold component will remain in the flotation tails, which will be subject a whole ore cyanide leach.

Labadie says blending the ore will enable Miramar to save on operating costs. Also, in the autoclave, Miramar will reprocess some 80,000 tons of arsenic calcines and sludges left from prior roaster operations. The arsenic calcines and sludges are readily recoverable from surface storage impoundments and are estimated to average 0.46 oz. gold, of which 80% is expected to be recovered.

The reprocessing of these materials, in conjunction with sulphide concentrates from the flotation circuit, is expected to stabilize the arsenic in an environmentally benign form of ferric arsenate, effectively providing permanent remediation. It will take the next five years to reprocess this material; hence Miramar’s 5-year mine plan.

The 600-tonne-per-day free mill component is expected to be up and running by the beginning of July, with the 300-tonne-per-day refractory component coming on-line before year-end. Capital costs are estimated at $2.5-3 million for startup and $5 million for the total 5-year plan.

In the past, the Con mine has been a high-cost producer. By May 1998, when production was suspended, the mine had produced 23,477 oz. at a cash cost of US$343 per oz. for that year. In 1997, the Con produced 94,410 oz. at US$351 per oz., versus 112,273 oz. at US$336 per oz. in 1996.

Miramar says the lack of significant concessions in the settlement with the union could have an adverse effect on the mine’s long-term viability. The company therefore will be working with various stakeholders, including various levels of government, to consider ways of improving the mine’s outlook. In addition, the company will seize any hedging opportunities in the gold market should they arise. At this time, Miramar has no plans to resume exploration at the mine.

During a conference call with mining analysts, Walsh was asked if Miramar would be interested in Royal Oak Mines‘ (RYO-T) Giant gold mine, now on the block. “There are certainly synergies between the two operations,” he responded. “Yes, I think there could be some opportunities there.”