Wesdome Reopens Kiena Mine

The celebrations marking the official reopening of the Kiena underground gold mine on Aug. 18 were particularly sweet for Toronto-based Wesdome Gold Mines, coming as they did after many tough, frugal years spent assembling a viable property package, raising money and carefully hunting for new ore beneath Lac de Montigny.

Situated 10 km west of Val d’Or, Que., the Kiena headframe and mill sit on Parker Island, towards the southwest end of the 8-km-wide Lac de Montigny, and are accessible by road via a causeway.

Wesdome fired up the mill on schedule on July 24, and began commercial production on Aug. 1. The ore is being run through a conventional SAG mill, with gold recovered using carbon-in-pulp. Historically, gold recovery at the mine has been around 95%.

To get things rolling, the company milled some 12,000 tonnes of stockpiled development ore grading 4 g/t Au. With limited feed from underground, the mill will operate only five days per week at 1,250 tonnes/day for the rest of the year, well under its daily capacity of 2,000 to 2,300 tonnes.

But mine production will be gradually ramped up over the months to come, yielding about 20,000 oz of gold for the year. Next year, Wesdome hopes to produce 50,000 oz of gold from Kiena, perhaps even hitting 60,000 oz in 2009.

Murray Pollitt, who recently retired as Wesdome director, told a large crowd at the opening ceremonies: “Today is the culmination of thirty years of work, dreams and hope, and thirty years of battles to get properties and the money to build the mines. It’s thirty years of scheming to draw a road map to accomplish this.” Pollitt also paid special tribute to the efforts of his late friend and business partner Conrad Hach, who served as Wesdome president and CEO until his death in 2000. “The Kiena complex is a very good mine, and it will go on for a long, long time if we take care of it,” Pollitt concluded.

Pierre Corbeil, Quebec’s minister of natural resources and wildlife and member for Abitibi-Est, was on hand to take in the festivities. He noted that the mine was creating 140 new full-time jobs (mostly represented by the Steelworkers union) plus another 40 new jobs for contractors.

Wesdome Gold Mines was created in 1999 through the consolidation of several properties held by Western Quebec Mines and Dynacor Mines in the Val d’Or gold camp. These properties comprise seven contiguous claims (one of which is named ‘Wesdome’) covering much of the northern portion of Lac de Montigny, and include the long-dormant Siscoe mine on an island in the lake’s east end–the camp’s first and richest gold mine. Western Quebec Mines still holds a 35% stake in the company.

In 2003, however, Wesdome took its biggest step towards becoming a gold producer with three major acquisitions: the Kiena mining complex at Lac de Montigny’s southwestern end, the Shawkey gold property at the lake’s southern end, and the McKenzie Break gold property 30 km north of Val d’Or. By 2004, Wesdome had secured a major land package mostly under and around Lac de Montigny totaling 100 km2 and including eight past-producing mines.

As it assumed ownership of Kiena, Wesdome estimated it would need to spend about $15 million on a first phase of underground development to prove up adequate reserves to restart commercial production. A second, $10-million underground development phase will be paid for partially out of the mine’s cash flow.

Using Kiena’s 920-m shaft, Wesdome started its underground drifting program in January 2004. The idea was to start drifting in two directions: straight north on the mine’s 520-m level to the Wesdome property, 4.2 km away; and southeastward on the 330-m level towards the old Shawkey mine property 1.5 km away.

However, the discovery immediately north of Kiena of two new zones of gold mineralization–named VC and 388–focused Wesdome’s attention on the northward drift, and bulk sampling was needed to get a better idea of grade. This delayed the drifting towards Shawkey and its key known gold zones, named Martin and 22.

During 2005, exploration crews at Kiena delineated a total of 230,000 oz of new gold resources, extending the potential mine life to five years. At the end of 2005, measured and indicated resources at Kiena stood at 1.4 million tonnes grading 4.5 g/t Au.

In February 2006, Wesdome Gold Mines Inc. merged with sister company River Gold Mines to form Wesdome Gold Mines Ltd. River Gold’s key asset was its Eagle River underground high-grade gold mine near Wawa, Ont.–an operation very similar in scale and scope to Kiena. Wesdome followed up the merger by issuing 9.5 million shares at $2.20 each, for gross proceeds of almost $21 million, with funds earmarked for the restart of mining at Kiena.

Kiena history

Wesdome is only the latest in a long list of companies that have hunted for gold around and under the southwestern portion of Lac de Montigny.

The first discovery of native gold-bearing quartz veins in the entire Lac de Montigny area was made on Parker Island during the period 1911-14. Geologists soon found that the area’s gold deposits were characterized by carbonate-quartz stockworks, veins, breccia-filling and disseminated sulphides with associated carbonatization and albitization in diorite and surrounding volcanic rocks.

Kiena Gold Mines was established in 1936, and four shafts were sunk on Parker Island in the late 1930s, before wartime issues forced their closure in 1940. The next big event at Kiena was the discovery of the large, carbonate-rich S-50 gold zone by then-owner Falconbridge (now part of Xstrata).

Campbell Red Lake Mines (later absorbed into Placer Dome, which was recently bought by Barrick Gold) acquired Kiena in 1986 and operated it until 1997, when it was sold to the now-defunct Montreal-based junior McWatters Mining. McWatters ran the mine until 2002, when it was closed owing to low gold prices.

McWatters’ deep financial problems allowed Wesdome to buy the Kiena mine and mill for a miniscule $3 million in December 2003. A few months later, Wesdome bought out Kiena’s remaining royalties for another $2.2 million.

In all, between 1981 and 2002 Kiena produced 1.56 million oz of gold from 10.7 million tonnes grading 4.75 g/t Au, with virtually all the ore coming from S-50. Between 1985 and 2002, output averaged 70,000 oz of gold annually at a cash cost of US$234/oz.

Today at the Wesdome property, at the north end of the lake, there are several gold-bearing vein systems that may relate to gold-bearing structures seen at the Siscoe property, which is along strike to the southeast. The best-developed vein system at Wesdome, named Zone A, hosts an indicated and inferred resource of 760,000 tonnes grading 5.2 g/t Au, or 125,000 contained ounces of gold.

At Siscoe, deep drilling in 1997 cut high-grade gold quartz veins at a depth of 800 m. This work was followed up by Western Quebec Mines’ shaft collaring, hoist installation and construction of surface buildings, but low gold prices forced the project into care-and-maintenance mode in 2001. In the years to come, Wesdome hopes to further explore the Siscoe gold structures using exploration drifts extending from the Kiena workings.

Farther afield, at Wesdome’s McKenzie Break property, there is a shallow, indicated resource of 186,000 tonnes grading 10 g/t Au that remains open at depth.

Ontario gold

At Wesdome’s wholly-owned Eagle River gold mine, 50 km west of Wawa, Ont., the company is similarly turning its attentions to building up the resource base after some difficult years of belt-tightening.

Discovered in 1987 on the heels of the nearby Hemlo gold find, Eagle River has been in continuous production since October 1995, pouring 650,000 oz of gold from 2.2 million tonnes grading 9 g/t Au. Shallow satellite orebodies have chipped in another 151,000 oz of gold over the y
ears.

Wesdome scaled back mining operations early in 2005 to control costs and improve cash flow, with a particular effort on reducing ore dilution. These efforts have paid off: the mine has been cash-flow positive for the last four quarters. Still, for this year and next, Eagle River will crank out just 35,000 oz annually.

In April, Wesdome reported that deep drilling into the mine’s 808 zone had intersected high gold grades within a quartz vein delineated over a 125-m strike length and to a depth between 350 and 450 m. As a result, miners deepened the main ramp to 450 from 350 m depth to gain access to the new ore, as well as the neighbouring 811 zone. Management believes tapping into these two zones may add a year and a half to the mine’s life.

At year-end 2005, Eagle River had only 78,000 oz of gold in reserves (217,200 tonnes at 11.3 g/t Au) and a further 44,000 oz of gold in resources (136,000 tonnes at 10 g/t Au), though the mine has a good history of replacing mined ounces.

In Ontario, Wesdome also has the Mishi-Magnacon gold exploration project, where there is an indicated resource of 1 million tonnes grading 5.1 g/t Au, or 171,000 contained oz of gold. With gold prices higher, Wesdome aims to reactivate surface mining at Mishi and further explore its underground potential.

Overall, Wesdome is on track to produce 55,000 oz of gold this year and at least 75,000 oz of gold the next. The company has for a long time been a staunch non-hedger on its gold production, and is now poised to benefit from a continuing upswing in the gold price.

John Cumming is the editor of The Northern Miner, where this article first appeared in the September 15-21, 2006 issue. Reproduced with permission.

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