Golden Opportunity for San Gold

The words “Manitoba” and “gold rush” don’t often appear in the same sentence, but that may soon change. San Gold Corp. of Bissett has quietly opened two gold mines in the Rice Lake camp, and a third one is on the way. The company is finding extremely high grades that rival those found in Goldcorp’s Red Lake, Ont., operation, only 60 km to the east.

“The rocks are the same: the Uchi Subprovince,” San Gold president and CEO Dale Ginn told CMJ. “Rice Lake has produced 2 million ounces of gold, and Red Lake has recovered 20 million ounces from the same kind of rocks.”

A geologist by training and having worked in the Dickenson mine (now the ‘Red Lake mine’ owned by Goldcorp), Ginn understands the gold potential of the area.

The Uchi greenstone belt stretches 550 km east-west, but only 150 km of it is in Manitoba. The formation hosts the Rice Lake camp in Manitoba as well as the Red Lake, Pickle Lake and Dona Lake camps in Ontario. Gold is typically found in Archean lode deposits and occurs in small fractures within quartz as well as the wall rocks adjacent to quartz veins.

San Gold was founded in 1997 by Hugh Wynn (its chairman), and counted among its holdings only the San Gold prospect near the Bissett gold mine. But the company began to grow when it formed a joint venture in 2004 with Gold City in order to finance the purchase of Harmony Gold (Canada), bringing the former Rice Lake mine and mill into the portfolio. Now San Gold began to outline another profitable gold deposit to mine called San Gold No.1, located 3 km east of the Rice Lake mine and mill.

Rice Lake mine

The Rice Lake mine began life as the San Antonio gold mine, which operated continuously from 1932 to 1968 when the surface hoist burned. During that time it produced 1.36 million oz of gold. In 1980 the original mill was also destroyed by fire. The property operated as the Bissett mine from 1982 to 1983. There were other attempts to restart production and a new mill was built, but it was Harmony that got the project going in 1998.

“Harmony was running the mine at 1,000 tons a day, and we were just treading water at soft, 300-dollar gold,” said Ginn, who worked for Harmony at that time. The mine was put on care-and-maintenance in 2001.

San Gold approached the project from a different angle. It chose to operate the Rice Lake mine at a lower tonnage–360 tonnes/day (t/d)–so that exploration and development of high-grade vein systems could be carried on at the same time. That strategy is paying off beautifully.

Several high-grade veins have been discovered and developed deep in the mine. The 98 vein lies on the 29th level, at 1,340 m. It has a diluted average grade of 36 grams/tonne (g/t) Au over a strike length of 90 m and a width of 1.8 m. An extension of the 93 vein (which has so far averaged 65 g/t Au over a strike length of 60 m) is being followed toward a drill intersection (29 g/t Au over 3.47 m) that was 60 m to the north of the current face on the 28th level (1,280 m). Both of these veins are open in an upward direction above the current workings and are not included in current resource and reserve calculations. Ginn noted that the property has good potential for additional discoveries along strike to the east and between 1,200 and 1,500 m in areas that have been drilled but not yet developed.

Shrinkage is the mining method of choice for most of the Rice Lake mine. There is also some mechanized cut-and-fill as well as longhole stoping practised in the deepest parts of the mine. The mine has a 1,190-m shaft, a tracked haulage level, an internal winze from 1,460 to 1,550 m, and a ramp reaching 1,610 m below surface. Ore is trucked up the ramp, hoisted up the D winze, trammed 1,400 m along the 26th level, then skipped to surface up the A shaft. The production rate is 360 t/d.

Based on current resource numbers and the potential of finding many more high-grade veins, the Rice Lake mine looks to be set for several years. Proven and probable reserves are 895,000 tonnes at 9.6 g/t Au. There is a measured and indicated resource of 874,500 tonnes at 9.9 g/t Au and an inferred resource of 1.71 million tonnes at 10.3 g/t Au.

San Gold No.1 mine

The San Gold No.1 deposit, the first one in the San Gold portfolio, lies only 3.2 km east of the Rice Lake mine. It has been developed via ramp, and mining occurs on five levels to 107 m below surface so far. Longhole stoping predominates, but cut-and-fill or shrinkage is used in the narrowest zones. The No.1 mine is also producing 360 t/d of ore.

The deposit contains 232,300 tonnes of proven and probable reserves grading 7.5 g/t Au. Measured and indicated resources are 256,900 tonnes at 7.5 g/t. The inferred resource adds another 849,500 tonnes at 7.5 g/t Au to the total. Although smaller than Rice Lake, the San Gold No.1 mine has grades nearly as high.

Rice Lake mill

The mill that currently stands at Rice Lake has a capacity of 1,090 t/d. It was built prior to Harmony acquiring the property in 1998. After crushing and ball milling, the ore passes through both a gravity circuit and a leach circuit.

The gravity circuit includes a Falcon and a Knelson concentrator plus a shaking table that collect 40-50% of the gold in the ore. San Gold plans to add another Knelson concentrator so that the circuit can treat all the ore coming into the mill. Then the company expects to capture 60% of the gold in the gravity circuit. The change will also boost the final recovery rate to 96% from the current 93%.

Feed for the leach circuit is conditioned, passed through rougher flotation cells, reground and thickened. The concentrate passes through a six-stage carbon-in-leach (CIL) circuit. Gold is removed from solution in an electrowinning (EW) cell. The EW sludge joins the gravity concentrate for smelting in an electric induction furnace and pouring into dor bars.

Tails from the flotation and CIL circuit are combined and treated with the Inco-SO2 cyanide destruction process. They are then pumped 2.4 km to the tailings pond. Water from the impoundment area passes through a polishing pond before it is discharged into the environment.

San Gold marked the official reopening of its two mines and the Rice Lake mill with a gold pour in August 2006. The company expects to produce at least 60,000 oz of gold during 2007.

Total costs, including capitalization and exploration expenditures, run US$345/oz of gold produced. Ginn predicted that by the middle of this year, San Gold will be making a profit from its mines.

Securing the future

The next producing property at Rice Lake is likely to be the Cartwright zone that was discovered only last year. It lies a kilometre and a half west of the Rice Lake mine. Drill intersections from 215 m below the surface have returned assays such as 7.2 g/t Au over 4.60 m. One hole even returned 120 g/t Au over 0.49 m.

The most recent report put probable reserves in the Cartwright zone at 58,100 tonnes at 9.2 g/t Au. There is also an indicated resource (114,500 tonnes at 7.5 g/t Au) and an inferred resource (1.60 million tonnes at 7.5 g/t Au).

San Gold is planning to collar a decline on the Cartwright zone in April 2007 to further investigate this promising deposit.

The former Gabrielle mine, which lies between the Cartwright zone and the Rice Lake mine, is in advanced exploration. It was the site of limited development in the 1920s, but given San Gold’s success in finding gold in the area, it might in the near future become a producing mine. So far core has assayed as high as 13.4 g/t Au over 1.0 m, and 9.6 g/t over 3.60 m.

One and a half kilometres east of the San Gold No.1 mine lies the San Gold No.2 and No.3 deposits. They too are in advanced stages of exploration. The latest numbers put the indicated resource for both at 157,000 tonnes at 6.9 g/t Au and the inferred portion at 177,400 tonnes at 8.9 g/t Au. The deepest drill hole so far on the San Gold No.3 deposit intersected 17
.8 g/t Au over 6 m.

Other tantalizing possibilities exist. San Gold controls the Greenbelt and Wingold prospects in the immediate area of the Rice Lake mine. Wingold was partially developed in the 1930s. It also has the Oro Grande property 32 km southeast of the Rice Lake mine; gold was produced from two mines there in the 1930s and 1940s. With the exception of the Greenbelt property where San Gold has an option to earn a 100% interest, all its other holdings are wholly owned.

San Gold is well on its way to becoming its dream: a mid-tier gold producer. With luck, it might be the very company to open up the Rice Lake camp and help turn it, like Red Lake, into a 20-million-ounce producer.

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