Wawa area back in gold business

Cast your mind back to the late 1980s and the Toronto-based Amax subsidiary, Canamax Resources.The flow-throughshare enthusiast vowed to build five gold mines in five years. Kremzar was the fourth, opening in December 1988 (see CMJ August 1988, July 1989). The mine and mill 50 km northeast of Wawa, Ont., closed less than two years later due to weak gold prices, but they didn’t disappear. Today they are part of the new Island Gold mine operation. The KREMZAR MINE is still closed but the mill processes ore from the nearby, high grade ISLAND GOLD/LOCHALSH underground gold mine, which achieved commercial production on Oct. 1, 2007. CMJ was at the site two days later.

A joint venture between Canamax and Algoma Steel had spent $22 million in capital to build the Kremzar mine and mill in the late 1980s, but it produced only 46,798 oz of gold before closing. The Lochalsh portal and ramp had already been started before the operation shut down. Canamax was taken over by Canada Tungsten in 1993, which was taken over by Aur Resources the beginning of 1997. This was the same time that the Island Gold/Kremzar property was sold for $2.5 million to Toronto-based exploration company Patricia Mining, which put another $5.5 million into the property through diamond drilling and underground exploration work. Richmont Mines of Rouyn-Noranda, Que., completed a $1-million private placement with Patricia in 2003.Richmont took over as operator in 2005, investing $12.6 million in project development that year, achieving its $10.0-million commitment to earn a 55% interest.

To the end of June 2007, the partnership had spent $38 million of capital on the project, including $33.2 million on property, $2.2 million on equipment, $1.3 million on the plant and $1.3 million on the mill. Further capital costs including deferred development from mid-2007 to the end of the mine life are expected to reach nearly $9 million.

Island Gold is very important to both partners: it is Patricia Mines’ only operating mine, and represents three-quarters of Richmont’s current gold reserves (although less than 20% of its current resources).

Geology

The 8,450-ha Island Gold property is underlain by intermediate to felsic volcanic rocks capped by pyrite-bearing iron formation within the Michipicoten greenstone belt, part of the Wawa subprovince in the Archean Superior Province. It lies within the Goudreau Lake deformation zone, host to two other former gold producers nearby–the MAGINO and EDWARDS MINES.

The property covers four significant gold deposits beneath Goudreau Lake: the Island/Lochalsh, Goudreau, Shore and North Shear deposits.The Lochalsh zone is the direct extension of the Island zone, 150 m to the west. Within the Island zone are five anastomosing zones grouped into two dominant haloes of intense alteration: the C/D envelope, and the E/E1 envelope that includes the D1 zone. The Goudreau deposit is 500 m northeast of the Island deposit, along a different strike and direction. Further north are the North Shear, Shore and East zones.

The gold mineralization is controlled by a series of steep, parallel shear zones 25 m apart and several hundred metres long. The shear zones have pervasive iron carbonate, silica and calcite alteration. The gold is found mainly in quartz stringers and veins 1 cm to 1.5 m wide; there are clouds of fine gold droplets up to 3 mm across.

As of May 15, 2007, Island Gold’s NI 43-101-compliant proven and probable reserves total 1.014 million tonnes (t) with an average diluted grade of 8.55 g/t Au, containing 278,711 oz of gold; all reserves are contained in the Island/Lochalsh zone to a depth of 400m. The current reserves are sufficient for a mine life of four years (to 2011).

Mining and processing

The mine has an Atlas Copco jumbo drill to advance the 4.5-m x 4.0-m Lochalsh ramp 4 m per round. In 2006,underground development of the Island property included 899 m of crosscuts and ventilation drifts, 92.5 m of ventilation raises, 506.6 m of ramp, the 179-m Goudreau exploration drift, 91 m of waste stope silling, and 1,700.5 m of ore silling.

An additional 2,346 m of underground development was completed in 2007. By early October 2007, the ramp had reached 340-m depth on its way to a planned depth of 384 metres. According to mine manager Pierre Gauthier, the operation is beginning to develop and drill another five stopes in Q4 2007, to build up ore inventory, gradually increasing the tonnage of ore produced to meet the mill’s designed capacity by the beginning of 2008.

The first mining stopes are on the 315 level.There will be three main levels driven to access the deposit and to haul ore and backfill material.

An underground tour by CMJ revealed the mine to be spacious and extremely tidy. The average width of the ore zone is 2.7 m with good ground conditions, allowing for longhole mining along the 300-m strike length of the Island zone.This method minimizes costs and manpower needs. The maximum ore and waste production rate will be 1,200 t/d.

A 2-m x 2-m slot raise is drilled between the sublevels, which are 17-to 21-m apart. Machine Roger of Val d’Or handles the longhole production drilling, using a 1.2-m x 1.2-m pattern with 5.4-cm hole diameter where the ore is up to 2 m wide. For greater widths, the drill pattern is 1.5 m x 1.5 m with 6.4-cm-diam holes. Richmont handles its own blasting.

Ore is removed by nine load-haul-dumpers ranging from 0.76-4.5-m3, four of which are remote-controlled for use in the open stopes, which are backfilled with non-cemented rockfill. To ensure stability, the stopes are no more than 20-m tall and 60-m long.

The ventilation system pushes 5,100 m3 of fresh air underground.

Tamrock underground trucks bring the ore to surface. A technical report on the Island Gold project released by consultant Genivar on May 15, 2007, made the point that the single ramp leading to the Island/Lochalsh orebody could become a bottleneck unless planning and logistics are handled very carefully.

On surface, a Volvo 180 loader plus 23-t Volvo trucks move ore 1.5 km from the mine stockpile to the Teledyne rockbreaker. A jaw crusher breaks the ore to -6.4 cm, and cone crushers reduce it to -0.95 cm. It takes 10 hours to crush 600 t of ore and fill the mill’s ore bin.

The 650-t/d Kremzar mill operated at 500-525 t/d in Q3 2007. The primary 274-cm x 335-cm ball mill reduces the ore to 80% passing 200 mesh; a secondary ball mill will be working before the end of Q1 2008. The slurry goes to the carbon-in-pulp circuit for gold recovery. The plant tour in early October showed the mill looking somewhat cramped and rusty.However, even without any automation, the plant was achieving 94.7% gold recovery in September 2007.

The tailings treatment system, consisting of a primary tailings pond and secondary settling pond, has recently been approved to increase production from 500 to 650 t/day. The Island Gold closure plan, accepted in April 2007, shows costs of $750,000 including a salvage value for the equipment sold of $2.5 million.

As the only gold mill in the region, Kremzar could have a future in custom processing ore from other area mines.

At full production, the mine and mill will require 120 people, although it employed 134 at the end of September 2007. Many employees live in new accommodations built by the company in the town of Dubreuilville, 15 km from the mine. Of the total workforce, 69 are from the Wawa-Dubreuilville area and 13 are from local First Nations.

Island Gold has set up a three-month train- ing program aimed at helping prepare more local people to meet miner certification requirements. The program trains six people at a time, preparing them to work as miner helpers.So far, 12 local residents have completed the training.

Production and costs

Initial ore production began in September 2006, and the mill poured its f
irst gold two months later. In the course of tests in 2006, 41,531 t of development ore and rock was processed, and 2,151 oz of gold was sold.

In the first half of 2007, the mill processed 65,484 t of development ore, and the operation sold 15,829 oz of gold. The recovered grade in this period was 5.77 g/t Au. During the third quarter, the mine processed 58,677 t of development and stockpiled ore, and sold 7,202 oz of gold. Richmont reported that, in the first nine months of 2007, the 25,380 oz of gold produced was sold at an average price of US$662/oz; the cash cost of production was not reported.

Island Gold is expected to produce 14,300 oz of gold during Q4 2007.

“With the Island Gold mine now in commercial production and the majority of ore coming from longhole stopes, we have seen an encouraging improvement in ore grade,” said Patricia’s CEO Chris Chadder in a Nov. 30 news release. “After a long development phase, we expect that the mine will now start to produce positive cash flow.”

The mill is expected to be fully operational at 675 t/d in Q1 2008, with a targeted gold recovery of 95%. Gold production is expected to increase to over 54,000 oz in 2008. This should rise to 60,000 to 65,000 oz of gold in 2010.

The May 2007 Genivar technical report predicted operating costs over the mine life of Cdn$105/tonne of ore, or Cdn$405.62/oz of gold. Those costs could be cut, as one project superintendent has been dedicated to an ongoing optimization program to reduce costs and improve productivity.

Objectives

The owners expect the life of the Island Gold mine to extend well beyond 2011, when current reserves run out. The principal objective at Island Gold, according to Richmont’s vice-president operations Christian Pichette, is to locate new ore and maintain the reserves at or above 1 million t at current grades.

There are already additional measured and indicated resources from the Goudreau, Island and Lochalsh zones totaling 454,705 t grading 10.26 g/t Au (150,000 contained oz of gold), and inferred resources from the three zones of 610,728 t grading 9.96 g/t Au (195,549 contained oz of gold). Definition drilling in 2008 will attempt to identify additional reserves in the Lochalsh and Island zones.

During the first half of 2007, 6,992 m of drilling was completed under a new exploration program in zones that have demonstrated strong potential, in order to confirm the mineralization models and increase mineral resources. The next exploration target is the Lochalsh zone on the 190 level. “There is good potential in Lochalsh, in the Island past the diabase dike and in the Goudreau zone around the 190-m level,” says Richmont’s director of geology and exploration, Jules Riopel.

CMJ

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