Wesdome Gold chases the next million ounces

SITE VISIT

WAWA, ONT. — A gold dor bar doesn’t look all that heavy but it takes a bit of effort to lift 961.5 troy oz. of gold compacted into one convenient brick.

That was the weight of a gold bar made at Wesdome Gold Mines’ Eagle River mine near Wawa, Ont., recently. Geologists, directors and investors alike all felt the weight of that bar during a celebration for Wesdome’s 1 millionth oz. of gold produced over a span of more than 20 years from five mines.

Eagle River has been in production since 1995 and with more than 700,000 oz. gold produced at an average grade of 9.5 grams gold per tonne, is responsible for the bulk of the company’s gold output.

The road has been a bumpy one for Wesdome. Although it managed to keep producing gold during those dark years after 1997, when the gold price dropped as low as US$250 per oz., the legacy of cutbacks in exploration has meant that over the last decade, the company has seldom been able to plan more than two years into the future at any time.

“A lot of people don’t realize that (the Eagle River mine) remained in production,” says vice-president of corporate development, Donovan Pollitt. “We kept it going in belief that the gold price would eventually correct itself, which it has, and we feel very vindicated in that sense.”

Incrementally adding reserves year by year is not uncommon with vein-type deposits like Eagle River but since the company is only operating the 1,000-tonne-per-day mill eight days of 14 — about 57% of the time — it’s eager to find some more mineralized ore. It’s a similar story at its other operating gold mine, Kiena, located in Val d’Or, Que., where the 2,000-tonne-per-day mill is only running at half capacity five days a week.

The first half of 2008 marked a turn of the tides for Wesdome. The company has brought in $37 million in revenue with earnings of $920,000 compared with a loss of $5.7 million for the first half of 2007.

Production for the first two quarters was 43,000 oz. gold between Eagle River and Kiena, putting the company in good shape to meet its 2008 target of 80,000 oz. gold.

Eagle River’s production for the first six months of 2007 was nearly 55,000 tonnes achieving an average grade of 14.8 grams gold per tonne while Kiena produced 129,000 tonnes grading 4.1 grams gold per tonne.

This year, the company plans to drill about 50,000 metres in total between the two projects in an effort to increase reserves and expand resources — maybe even find “the next big fish,” as vice-president of operations Benoit Laplante calls it.

“We have the capacity for more at both mines,” Laplante says. “Both mines right now are good until 2010 but we are working hard to extend the mine life.”

The Eagle River deposit consists of gold-bearing quartz veins hosted by subvertically dipping east-west-striking shear zones that make up a structural corridor within an elliptical quartz diorite stock stretching 1.8 km by 500 metres.

Most production has come from Zones 8 and 6, which are entirely within the intrusive quartz diorite. In Zone 8, the white laminated quartz vein lenses range between 1 and 15 metres thick. The average thickness is about 2.5 metres, and for the most part, the company has been able to selectively mine portions of the vein system with widths between 1.2 and 7.5 metres. Gold grades have averaged 8 grams gold per tonne with individual stoping blocks averaging 5-12 grams gold per tonne.

Meanwhile, the high-grade Zone 6 has returned an average grade of 12-18 grams gold per tonne and sheet veins have ranged in thickness between 1.5 and 6.5 metres.

Deep in the mine on the 811 zone, the lineation of the quartz is easily visible.

“That’s the contact right there,” Pollitt says, pointing up at the pristine white ceiling of the stope, which forms an abrupt and contrasting boundary line with the grey unmineralized rock. “From where you can see it being quartz-y to being wall rock.”

The mine floor is covered with broken pieces of quartz rock, that have yet to be hauled out for processing leftover from the last mining shift in this area.

“You could probably run this stuff through the mill and get between 7 and 20 grams gold per tonne,” Pollitt says.

Some holes for dynamite have been drilled and are ready to be filled.

“Eventually, they’ll blast it down and they’ll muck this part up too,” Pollitt says pointing to the small white stones on the mine floor.

The current mine extends between 240 and 640 metres vertical depth but the planned exploration drilling will reach as far as 1,200 metres. That’s because Wesdome wants to learn more about the underexplored Noname Lake structure, which intersects with Eagle River’s Zone 8.

Over at the Kiena mine, the company is drilling from two barges on Lac de Montigny. Wesdome is hoping to find another S-50 zone, which produced nearly 99% of the 1.56 million oz. grading 4.75 grams gold per tonne between 1981 and 2002, when Falconbridge and then Placer Dome and its predecesors were operators. There are also satellite deposits on the property that the company wants to develop.

Drilling on one of these, the VC deposit, has resulted in some encouraging results. The zone is currently being mined above the 540- metre level and as of the end of June, 227,000 tonnes grading 4.97 grams gold per tonne have been extracted from the zone. Mineralization in the VC3 zone has been confirmed to the 640-metre level and is still open at depth while the VC1, VC4 and hanging wall Schist zone have returned unexpected grades.

Intersections include 3.7 metres (true width) grading 10.97 grams gold per tonne in the Schist zone, 4.1 metres grading 9.44 grams gold in VC4 and over in VC1, 11.1 metres grading 3.6 grams gold, including 2.7 metres grading 11.15 grams gold.

S-50, North and a few other satellite deposits occur as a unique style of mineralization where gold is intimately associated with carbonate, quartz, pyrite and minor pyrrhotite and chalcopyrite. They occur in veinlets and form sheeted veins and stockworks, breccia filling and disseminations in carbonatized and albitized diorite dykes and mafic volcanic rocks.

Only time will tell the future beyond the following two years for Wesdome.

Pollitt says the company is interested in finding other smaller projects to bring into production — ones that the bigger companies don’t want.

“There are very few people at our production level that can take a deposit that’s a million to two million ounces and really make something of it,” Pollitt says. “A lot of people talk about putting things into production but we actually have put things into production. . . Hopefully the next million ounces will be easier.”