Thursday 24th September 2020

Resource Clips

Mining’s Last Frontier?

Nunavut’s Cold, Remote and Potentially Very, Very Rich

By Greg Klein

Canadian explorers and miners operate in over 100 countries, but one of their last frontiers might be within our borders. Nunavut certainly holds potential but, at least for the present, it takes the financial resources of an Agnico Eagle TSX:AEM to bring subterranean resources to surface.

Even then the territory can prove a costly disappointment, as the company’s Meadowbank Gold Mine write-down shows. Last month came news of an even bigger disappointment, Newmont’s TSX:NMC $1.61-billion write-down of its Hope Bay Gold Project. Curiously, the failure was offset to some extent by an announcement made just yesterday. A privately held upstart, HTX Minerals, has formed a strategic alliance with an Inuit organization to explore the region encompassing Hope Bay.

Nunavut's Cold, Remote and Potentially Very, Very Rich

Newmont’s February 23 write-down dramatically portrays the risks of working in the Arctic. Located in western Nunavut, 150 kilometres north of the Arctic Circle, Hope Bay suffers long winters of 24/7 darkness and minus-30 temperatures, environmentally sensitive tundra and, of course, isolation. As for infrastructure, you bring it or build it. Newmont refers to Hope Bay as “one of the few remaining undeveloped Greenstone districts in the world.” Despite the $1.61-billion investment, that description will hold for some time.

By comparison, Agnico’s $644.9-million write-down on its Meadowbank Gold Mine in eastern Nunavut seems relatively benign, even if it is the territory’s sole operating mine. An open-pit that began production in 2010, it saw lower-than-anticipated grades and higher production costs. By the end of 2011, new figures chopped three years off the mine life, now projected to 2017 with annual production estimates 29% lower than original. Proven and probable reserves dropped by 1.3 million gold ounces to 2.2 million ounces. Cash costs for 2011 were $1,000 an ounce and are expected to rise to $1,040 for 2012.

Even Nunavut’s wildlife conspires against enterprise. That became apparent last year when a solitary wolverine racked up $18 million in direct costs and caused a 14% drop in Meadowbank gold production for 2011. The oversized weasel prevented an electrician from performing maintenance, leading to a short circuit that burned down the kitchen. That, in turn, necessitated a mine shutdown and evacuation of all but a skeleton crew.

Nunavut is by its nature difficult, but even Quebec’s infrastructure-rich Abitibi region has let Agnico down. Last October, the company suspended operations at its Goldex Mine due to rock instability.

Agnico is still bullish on Nunavut, however. Some 300 kilometres southeast of Meadowbank, Agnico is pushing its Meliadine Gold Project towards 2013 feasibility, 2014 construction and 2017 production. As President/CEO Sean Boyd tells, “Meliadine will benefit from its size, its grade and its proximity to Rankin Inlet. All that will help the economics of Meliadine versus Meadowbank.”

Meliadine will benefit from its size, its grade and its proximity to Rankin Inlet. All that will help the economics of Meliadine versus Meadowbank —Sean Boyd

As of December 2011, Meliadine had open-pit and underground proven and probable reserves totalling 2.88 million gold ounces, an indicated resource of 1.66 million ounces and an inferred resource of 2.44 million ounces.

Meadowbank sits 70 kilometres by air or 110 by road from the nearest town, Baker Lake, an inland port 320 kilometres from Hudson Bay. Meliadine, by comparison, is a mere 24 kilometres from Rankin Inlet, a port directly on Hudson Bay. An all-weather road is slated for completion by April 2013.

Boyd says his Nunavut team has extensive boreal experience drawn from northern Quebec and from employees poached from other companies active in the Arctic. But as much as possible the company recruits from Nunavut. About 40% of Meadowbank’s staff come from territorial communities. They fly in for two weeks before flying home for another two.

That, however, can cause a serious disruption to the Inuit way of life. “It’s been difficult for some to adapt to being away from home for even two weeks,” says Boyd. “I think that’s one of the benefits we’ll see at Meliadine. Given its proximity to Rankin, we’re hopeful we can set up a structure where people can get home more often, maybe on a daily basis during parts of the year. I think that will be a huge advantage.”

As the major lays down infrastructure, juniors might follow. “Our roads may open up the area for other explorers. But what’s more important, I think, is that we’ve been able to work closely with local communities and create a project that benefits local businesses and people. I think that’s much more important than just putting in physical roads for the future of the regions.”

See Part II of this story.

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