Canada’s Next Gold Mine

Ninety-five kilometres north of La Sarre in the northern part of the Abitibi belt is the Casa Berardi gold mine, which is slated for reopening later this year by 100% owner Aurizon Mines Ltd. According to vice-president Michel Gilbert, the Vancouver-based company has developed an “amazing” relationship with the local community, the source of 75% of its workforce. “We are not at Casa Berardi to open a mine; we’re there to make sure that it will not close.” This resonates in a town of 8,000 that saw its paper mill close at the same time the Casa Berardi construction began.

Aurizon acquired the 37-km-long Casa Berardi property, including two former underground mines, in 1998 for $6 million and a gold-indexed 2%-4% NSR royalty. Casa Berardi is now Aurizon’s only operation, since selling its interests in the Beaufor and Sleeping Giant mines.

Casa Berardi was built by Inco Ltd., which started up the East mine and the mill in 1988 (see CMJ June 1988), and the West mine in 1990. Both underground mines are accessed by ramp, and are joined by a 5-km drift on the 550-m level. A 379-m shaft sunk at the East mine was never used. After producing 807,000 oz of gold, the mines shut down in 1997 due to reserve depletion and ground instability. The mine and mill equipment remained in place.

From the start, Aurizon intended to reopen the mine as quickly as possible, while keeping the capital costs low. Its exploration concentrated in the West mine area, discovering the 113, 120 and Lower Inter zones. In 2004 the decision was taken to build a 760-m shaft to give access to the new discoveries. The shaft was completed by Dumas in September of this year; related underground infrastructure should be completed early in the fourth quarter. The adjacent ramp is being extended to the mine bottom. Raises for fill, ventilation and ore- and waste-passes are under construction.

Aurizon has several strategies to avoid ground problems. Mine workings crossed over to the competent rock north of the Casa Berardi fault. For workings south of the fault, the back is cemented. “It is key to keep the fault dry,” says Gilbert, because it contains graphite. The selected mining methods are sequestial transversal and longitudinal longhole (where the vein is wider than 10 m), and longitudinal longhole retreat. The longhole stopes are small–15-m long by 20 m high and 10 m thick, yielding 9,000 tonnes (t). The primary stopes will be filled with cemented rockfill within a day of being mined; secondary stopes will have unconsolidated rockfill. There should be three months of ore ready for mining before the startup.

The headframe for the shaft is new, as well as a 25-kV electrical distribution system. Purchases or leases include a load-haul-dumper, cable-bolter, three production drills, seven service trucks and a tractor.

Aurizon has rehabilitated the mill equipment, changed wiring and piping, and added new gravity equipment by Gekko. The gravity circuit is expected to capture 45% of the gold. Historic gold recovery in the mill was 87%; with the increased recovery in the gravity circuit Aurizon expects a total recovery of between 91% and 95%. The plant will start up at a rate of 1,600 t/d, and increase to 2,200 t/d after 15 months. The plan is to produce an average of 175,000 oz of gold/year at total cash costs of US$240/oz.

As of May there were 62 Aurizon employees including all management down to the supervisor level. As well there were about 310 hourly workers on long-term labour contracts. At full production the total workforce will be about 250.

The project is on budget and on time, with commercial production expected to begin in early November. The estimated capital cost for the project is $102.6 million. The company launched a $28-million equity financing in late 2005, and concluded a comprehensive debt financing package with BNP Paribas for up to $75 million in February 2006. If gold averages Cdn$500/oz, the payback period will be just two years. A combination of puts and calls has given Aurizon price protection for 286,000 oz of gold, allowing the price to move freely between US$500 and US$850/oz.

The current reserves (i.e., 113 zone down to 700-m depth) are 4.9 million tonnes grading 7.7 g/t Au, containing 1.2 million oz of gold. As well, there are 450,000 oz in resources in 113 zone, and 1.2 million oz in other resources. This will allow for 6.2 years of mine life. Aurizon is conducting a 50,000-m infill drill program this year to convert resources to reserves, and is exploring elsewhere on the property. Gilbert’s hope is to extend the mine life to 17 years.

There was an exciting twist on May 23, when Northgate Minerals of Vancouver made an unsolicited bid for Aurizon. This was rebuffed by Aurizon management, and the dispute wound up in the B.C. Supreme Court. At the end of June, the court granted a permanent injunction enforcing the confidentiality and standstill agreement that the two companies had entered into in October 2005. The decision effectively prevented Northgate from proceeding with the takeover, and it withdrew the offer.