The Graduating Class 1987 GOLD REPORT MASCOT GOLD MINES

Back in 1984 a 300-ton-per-day Bgold milling operation was being considered. In 1985 that jumped to 1,500 tons per day. In early 1986 it was increased to 1,8 00 tons per day and by the end of 1986 the project had the green light for 2,700 tons per day.

Today Mascot Gold Mines says its Nickel Plate open pit mine near Hedley in southern British Columbia will be the province’s largest gold mine — and one of the largest in the country — when it starts production this summer.

No one is arguing. Proven ore reserves of 8.3 million tons grading 0.14 oz gold per mineable ton of open pit ore have been established with anothe r two millio n tons of underground ore grading 0.16 oz indicated. In 1988 output is expected to be 160,000 oz of gold. What’s more, the mine is expected to be a very low-cos t producer by Canadian standards, with an average cost of $120(US) per oz over e ight years (the life of the mine based on current ore reserves).

Among those Canadian mines scheduled to go into production this year, Mascot is in a class of its own. President Henry Ewanchuk says winter has not slowed the project at all. He expects the mill to turn over sometime in February and says the projected July start-up might even be pushed ahead if all goes well.

Technically the Nickel Plate mine isn’t new. But the scale of the new mine, al though it includes a former producer, is much larger and will not really make us e of any of the old facilities other than some of the underground workings from exploration. A different mining method — open pit versus the former underground operation — leaves little to compare between the two operations except some regional geology.

Located in a mining district which dates back to 1860, when placer gold was discovered, the first claims on Nickel Plate Mountain were recorded in 1894 with p roduction starting in 1904. Between then and 1955, when operations ceased, some 1.4 million oz of gold were recovered from the Nickel Plate mine at an over-all recovered grade of about 0.44 oz per ton.

Mascot acquired the property in 1971 and began exploration in 1979, when gold prices started to increase dramatically. The new mine is between t he 5,100-ft and 6,000-ft elevations on the south and east slopes of Nickel Plate Mountain, t wo miles east of Hedley and about 150 miles due east of Vancouver. It overlays t he old underground mine workings. Standard open pit mining methods will be used to break and move an average of five million tons of rock each year, 656,000 ton s of which will be ore. Crushing and gold recovery plants are adjacent to the th ree open pits: the south pit (called the Bulldog), the central pit and the north pit (called the Nickel Plate).

A stripping ratio of about 8.2-to-one appears high, but Ewanchuk says that’s only in comparison to past open pit mines, most of which were base metal operatio ns. The grade of the ore is the justifying factor, he says, citing examples in t he U.S. where stripping ratios are in the 8- or 9-to-one ratio with mined grade of 0.04 oz gold per ton. “It depends on each property,” he says.

Even with that stripping ratio, a combined mining and milling cost of less than $25 per ton is anticipated, he says. A mill recovery rate of 88%-89% is also e xpected even though the former mine enjoyed recoveries of about 94%. The reason is that mining will be done in three distinct areas, giving three types of ore a nd thereby reducing the over-all recovery rate.

Total cost of the project is estimated at $68 million, including equipment, mine preparation, mill construction, pre-production operating costs and interest c osts. The company has arranged $70 million in non-recourse project financing, a portion of which is in the form of a gold loan at an interest rate of 3%. At the time the loan was arranged, Donald Worth, Canadian Imperial Bank of Commerce vice-president of mining, indicated the bank’s confidence in the project:

“Although this is a fairly unseasoned mining company and it’s quite unusual for banks to underwrite 100% project financing for juniors, we went along with it because the management team had a proven track record,” Worth says. “They’re goo d, sound mine operators.”

Backing up the mangement team at Mascot is Royex Gold Mining which owns 52% of Mascot. Senior management at Royex includes several people who have advanced through the ranks of mine management, including Royex Chairman Peter Steen and Gil Leathley, senior vice-president of operations and former mine manager at the Go den Giant gold mine at Hemlo, Ont.

In fact Mascot is considered the exploration arm of the Corona group, with Ewanchuk holding the position of vice-president of exploration for both Corona and Royex. Royex is considered the operating company in the group, so there may be some movement in the future to shift the Nickel Plate mine into Royex’s hands.

Regardless of how the ownership of the mine eventually works out, there are few skeptics when it comes to its viability. It’s bound to climb to the ranks of Canada’s major gold mines by the end of the 1980s.