[Update] Brigus to drive production growth

Brigus Gold (BRD-T) says gold production will increase as it ramps up the Black Fox mine and exploration efforts in Timmins, Ont.

“We are making very good progress at Black Fox,” says Wade Dawe, company’s chairman, CEO and president, adding its on track for month-over-month growth in production.

Yield increased by nearly 80% in the second quarter over the previous quarter, but fell 5% below the company’s estimate due to slower-than-expected underground development, as Brigus looked to secure an underground mining staff.

“The labour market is tight in the Timmins area and in Canada for that matter, particularly, for skilled underground miners,” says Dawe.

The company has recruited about 80% of the required staff, but still has some key hires to make to fill the superintendent and chief geologist positions among some other roles.

Brigus’ prized mine processed 181,488 tonnes grading 2.86 grams gold per tonne for 15,688 oz. from April to June, with recovery averaging 94.1%. Although, the company anticipated second quarter output of between 16,500 and 18,000 oz., it was well above the first quarter’s 8,772 oz.  

For the second quarter, more than half of the tonnes were mined from the open pit, while the rest came from the underground mine and development ore.

The Black Fox mill averaged 1,994 tonnes per day, however, in June hit 2,115 tonnes per day.

Brigus says ore production from both the phase two open pit and underground mine started in late March. While the open pit kicked off commercial production in April, the underground mine is expected to reach commercial status in the third quarter.

When it does, Brigus expects an uptick in output, reaching 800 tonnes per day in the third quarter, and 1,000 tonnes daily by year-end. And by that time, the mine plan should include roughly 10 mining stopes, says Dawe. Currently, underground production comes from a mix of four mining stopes and low-grade development ore.

“We think Black Fox is getting to the point where there is enough room underground to start delivering decent underground ore tonnes,” says Haywood Securities’ analyst Kerry Smith in a note.

An initial mill expansion to boost capacity from 2,000 to 2,200 tonnes daily is planned for the third quarter. The company will decide whether to further expand capacity to 3,500 tonnes per day in the latter half of the year.

Smith notes while 1,000-1,500 tonnes were mined daily from the open pit during the quarter that number should decline by year-end as the company ramps up underground higher-grade ore production. As a result, the grade should increase.

Although Black Fox previously operated as an underground mine from 1997-2001, it was launched as an open-pit mine in May 2009. Both the mine and the mill are part of Brigus’ wholly owned Black Fox Complex, which spans about 18 sq. km and extends 6.5 km along the strike, at depth, of the Destor-Porcupine fault zone.

The complex includes the new Contact and 147 gold zone discoveries, along with the adjoining Grey Fox-Pike River property, all in the township of Black River-Matheson, Ont. The company scooped up the mine and Grey Fox-Pike River when Linear Gold, formerly led by Dawe, merged with Apollo Gold last June.

After acquiring the Apollo properties, Brigus completed induced polarization and magnetic geophysical surveys within the complex in late 2010.

With the surveys, the company indentified a “multitude of high priority drill targets,” which resulted in the Contact and 147 discoveries. Brigus plans to test the other previously highlighted targets over the next 12 to 24 months.

“We hope to find one or two more zones of gold mineralization on the property,” says Dawe. 

Brigus currently is working through an $11-million exploration program for the year, with a focus on expanding Black Fox along strike and downdip, and drilling the Contact and 147 zones, along with testing some of the potential gold-bearing targets.

It has three drills turning at 147, and two on the Contact zone, some 400 metres to the north of 147.

The junior has been pulling intriguing results from the 147 zone ever since uncovering it in April, some 4 km south of the Black Fox mine.

“We drilled 50 holes in the discovery to date, and we are getting some very good drill results,” says Dawe.

Some highlights include: 20.11 grams gold per tonne over 16 metres, including 34.06 grams gold over 5 metres; 3.94 grams gold over 24.2 metres, including 6.86 grams gold over 11.7 metres; and 3.84 grams over 25.5 metres, including 14.38 grams over 5 metres.

 “What’s interesting is the grades are high, and the ore zone is thick and it remains open at depth,” enthuses Dawe.

Brigus, which has extended 147 to a vertical depth of 240 metres, describes gold mineralization as occurring mainly within several quartz and carbonate healed brecciated zones within bleached units of mafic volcanics.

It plans to add another rig to the property in August, and release an initial resource on both the Contact and 147 zones by year-end. 

For the year, Brigus expects to produce 73,000-80,000 oz. at a total cash cost of US$575-US$625 per oz.

The company also has the Goldfields project in Uranium City, Sask. Goldfields has little more than 1 million oz. gold in reserves from the Box and Athona deposits (14.9 million tonnes grading 1.4 grams gold, and 10.4 million tonnes at 1 gram, respectively). 

Dawe says Brigus is mainly completing “desktop type of work” at the project, such as engineering and some drilling. The company anticipates production to start in 2013.

He adds that Black Fox is the company’s priority. “We want to optimize the production situation at Black Fox. We want to reach nameplate capacity, with respect to production, maximize our cash flow. And after that time, we would be able to contemplate our next steps with Goldfields.”

Black Fox has an estimated mine life of 8.5 years based on reserves of 6.3 million tonnes grading 4.4 grams gold for 895,800 oz. It has another 5.9 million tonnes at 5.5 grams for 1 million gold-equivalent oz.

Smith of Haywood Securities rates Brigus Gold as “sector outperform” and has a 12-month target of $2.50 per share. The company notes that Smith owns Brigus shares and has visited the property, and that Haywood has taken part in financings over the past year.

The company’s shares recently closed at $1.61, within a 52-week trading range of $1.11-$2.15.