Facing Tough Challenges Underground
The Abitibi has given rise to many successful mining companies generating much wealth. But finding and developing the ore is getting more and more difficult in the highly sheared, disrupted ground.
Richmont Mines Inc. has been a small gold producer since 1991, mining low-tonnage, high-grade Abitibi deposits including Beaufor, Francoeur and East Amphi. It has since spread out to Newfoundland, where it operated similar mines (Hammerdown and Nugget Pond), and Ontario. The company owns and operates the Camflo mill near Malartic, Que., and owns mills at Nugget Pond and Island Gold north of Wawa, Ont. Two of its mines–Beaufor and East Amphi–are still in production feeding the Camflo mill.
Current mine development work is going on at the Island Gold property (55% interest) with joint venture partner Patricia Mining Corp. Richmont has at least three Abitibi exploration projects plus the Valentine Lake project in central Newfoundland underway at this time.
East Amphi, which is Richmont’s newest mine, just began production in February of this year. It was expected to replace some of the production from the closed Francoeur, Nugget Pond and Hammerdown mines, but it has turned into a major disappointment, according to president and CEO Martin Rivard. Underground exploration results forced the company to take a $26-million write-down the end of last year.
Richmont had purchased 100% interest in the East Amphi property late in 2003 for $7 million from McWatters Mining Inc., which had mined a bulk sample on surface at the end of 1998.
East Amphi had looked like a good fit for Richmont, being only 15 km from the Camflo mill and close to the Beaufor mine. The company built a ramp for underground exploration, to access the deposit from better ground conditions, and confirm and increase the resource, but that’s not what happened.
East Amphi lies directly on the Cadillac Fault; three phases of deformation have complicated the geology. The diorite dike and porphyry dikes that contain the gold (within coarse pyrite grains) were found to be discontinuous. The ore, therefore, has to be mined selectively using longitudinal longhole mining on 3-m widths, and transverse longhole mining on 5-6-m widths.
The $23 million that Richmont spent on development and exploration at East Amphi in 2004 and 2005 proved that only 40% of the gold resource could be moved into reserves. By the end of 2005, the project had proven and probable reserves of 640,800 tonnes at 4.88 g/t Au containing 100,500 oz of gold. As well there were measured and indicated resources containing 124,400 oz of gold, and 59,000 oz of gold in inferred resources.
With the development work already done, the company decided to go ahead and mine the Main (B) zone in February, and has been able to keep the dilution down to 8%. Talc schist in the B North zone has forced the stope shapes to be modified. To date, the mined grade is slightly lower than forecast, but the tonnage and costs are better than budgeted. At mining costs of $62/tonne, East Amphi is generating a modest profit. According to Jules Riopel, the company’s director of geology and exploration, other zones are currently being checked below the 200-m depth to confirm their shapes.
Richmont has just over 250 employees. It sold 69,207 oz of gold in 2004, but only 36,956 oz in 2005. In the first half of 2006 it sold 25,111 oz of gold at an average cash cost of US$561/oz. Despite these high costs, it is generating a profit because of the selling price of US$589/oz in the first half of this year.
Young leader in Abitibi
Not many mining company presidents can get in the car and visit their mines within an hour, but Martin Rivard of Richmont Mines can. That’s not the only thing that makes him unique. At age 32, he’s the youngest person running a mining company in the region, and likely one of the youngest mining company CEOs in Canada.
Richmont was founded in 1981 by Martin’s father Jean-Guy Rivard, and the company went public in 1984. Martin obtained a bachelor of Business Administration before joining the company in 1996 as manager of investor relations, and was appointed to the management committee the next year. In 2000 he became the executive vice-president, and late last year took over the reins as president and CEO. Jean-Guy remains as Richmont’s chairman.
One could definitely look on Richmont as family business, although the father and son are the only two of the family who work there. Richmont maintains an office in Rouyn-Noranda and another in Montreal.
CMJ interviewed Martin Rivard in his office in Rouyn-Noranda in July to find out more about the man and his company.
CMJ: Do you see being a mining company executive as a viable, long-term career?
MR: There are a lot of opportunities in this business and a lot of potential. There is a place for a company like Richmont to grow in this industry. There was a hiatus of new professionals entering the industry for 10 years, so there are opportunities for people my age.
CMJ: What are the advantages and disadvantages for you to be based in the Abitibi?
MR: I have always lived here in Rouyn-Noranda. It is convenient for me to be close to the operations; I visit the sites often. Another advantage is that the cost of living is cheaper here than it would be in Toronto.
The transportation from here is convenient to our projects near Wawa [Ont.] and Deer Lake [Nfld.], and to our Montreal office where Christian Pichette, our vice-president of operations, is based. With technologies such as the Internet, it is not hard [to communicate].
There are some disadvantages. We do not have as much presence with the financial world as if we had an office in Toronto.
CMJ: What is the biggest challenge for you in your job?
MR: My biggest challenge is to renew the reserves, replace the production and find new assets. We have underground assets with a short mine life. I would like to have mines with longer lives.
CMJ: What is your goal with this company?
MR: I believe that Richmont has a good track record in mining underground deposits. We have survived a very difficult market in the gold industry from 1997 to 2002. Generally speaking we are in much better market conditions right now. We are in a very good position to capitalize on opportunities and grow the company to an intermediate size–something like 250,000 oz of gold production a year. We need one or two more acquisitions to do that, and some exploration success at our own properties.
We are in a particular niche. We do not compete with the 8- to 9-million-oz/yr gold producers. The assets we want are not of interest to them, but could make a major difference to a company like Richmont.