Canadian Mining Journal September 2013

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GOODNESS GRACIOUS

GREAT GRAMS OF

GOLD CANADIAN MINERS CONTINUE TO PRODUCE SIGNIFICANT AMOUNTS

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TM

Departments 5 Editorial

This month Editor Russell Noble talks about “Gold” (theme of this issue) and how plentiful it is but how difficult it is to find and process.

CANADIAN Mining Journal CONTENTS

6 Mining Matters

Canadian Mining Journal’s popular look at what’s making news across the country.

9 Investing

Ned Goodman’s regular “Investing” column looks at the US economy and why it’s not the most attractive place for foreigners to invest their money.

11 Law

Gold in Canada

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Cover Story

Agnico Eagles’ Meadowbank Gold Mine shines again after 2011 fire thanks to cutting risks and improved teamwork.

Norton Rose Fullbright Canada’s Janet Howard and Marc Kestenberg talk about how important it is for directors and senior officers to protect themselves when pursuing certain corporate opportunities for personal benefit.

18 Mid-tier Miner

13 In My Mined

22 Community Relations

David Stewart, Advanced Analytics Leader, Deloitte, takes a look at Safety Analytics and Mining.

36 CSR and Mining

Marketa Evans, Extractive Sector, CSR Counsellor, Government of Canada, looks at the mining industry’s escalating social risks around the world.

38 Exploration Opportunities

Zahid Fazal, a partner in EY and the firm’s Quebec mining and metals leader, says the key question mining companies need to address right now is how to balance between cost reduction activities and maintaining a competitive advantage.

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Brigus Gold’s Black Fox Mine is a clean and well-equipped operation that enables the ‘mid-tier’ miner to stay competitive.

New Gold’s President and CEO Robert Gallagher explains why his New Gold and New Afton gold and copper mines are both doing well.

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September 2013

Goodness

ABOUT THE COVER This month’s cover image provided

by Agnico Eagle.

The gold rush of the mid-19th century could make a comeback thanks to some new activity in the province.

30 Placer Mining

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Fortune Minerals’ expects to start construction next year on the NICO Mine in NWT after 17 years of exploration and development.

Great Grams of

Canadian miners Continue to produCe signifiCant amounts

Canada Post Canadian Publications Mail Sales Product Agreement No. 40069240

Coming in October Mining in Quebec

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The lure of gold and the call of the wild keeps veteran placer miner coming back to northern BC.

goodness gracious

gold

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26 NS Gold

32 New Mine Canadian Mining Journal

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For More Information

Please visit www.canadianminingjournal.com for regular updates on what's happening with Canadian mining companies and their personnel both here and abroad. A digital version of the magazine is also available at www.digital.canadianminingjournal.com

www.canadianminingjournal.com

September 2013 • Canadian Mining Journal |

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ENGINEERS: MINING MECHANICAL ELECTRICAL GEOTECHNICAL ENVIRONMENTAL

GEOLOGISTS: PRODUCTION EXPLORATION

BUSINESS SUPPORT: ACCOUNTANTS FINANCE BUSINESS SUPPORT PROJECT SUPPORT & MANAGEMENT

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We recognize it takes world-class people to run world-class mines. When you work with us, you’re part of a growing community of skilled professionals committed to pioneering advances in modern, sustainable mining.

One company, thousands of opportunities.

CANADIAN Mining Journal September 2013 Vol. 134 — No. 7 80 Valleybrook Drive, Toronto, Ontario M3B 2S9 Tel. (416) 442-5600 Fax (416) 510-5138 www.canadianminingjournal.com Editor Russell B. Noble 416 510-6742 rnoble@canadianminingjournal.com Field Editor Marilyn Scales 613-270-0213 mscales@canadianminingjournal.com Art Director Mark Ryan

Editorial

Gold is plentiful, getting it is painful

By Russell Noble

G

old is always an interesting topic to feature in the magazine because regardless of what it’s doing on the Circulation Manager Commodity Index, it seems that everyone Cindi Holder 416 442-5600, ext. 3544 wants to read about who’s still producing, cholder@bizinfogroup.ca or who’s going broke trying to find it?

Publisher A few years ago when it was deemed to Robert Seagraves 416 510-6891 become a $2,000.00 mineral, gold comparseagraves@canadianminingjournal.com nies were boasting about their vast reserves Sales and how rich their investors were about to Western Canada, Western U.S.A. Bonnie Rondeau become over the next few months and years 416-510-5245 ahead. Now, however, with production brondeau@canadianminingjournal.com Toll Free Canada: costs reaching or, in some cases, surpassing 1-800-268-7742 ext 6891 or 5245 the value of the product, many of those Toll Free USA: 1-800-387-0273 ext 6891 or 5245 same companies have gone dark and silent.

Group Publisher And that’s understandable. After all, it’s Doug Donnelly a hard thing to accept that what was once President Vice-president a sure thing isn’t worth the effort any Bruce Creighton Alex Papanou more; even with all of those grams still in Established 1882 Canadian Mining Journal provides articles and information of practical the ground. use to those who work in the technical, administrative and supervisory aspects of exploration, mining and processing in the Canadian mineral exploration and In fact, anyone involved with gold minmining industry. Canadian Mining Journal (ISSN 0008-4492) is published 10 times a year by Business Information Group L.P. BIG is located at ing will tell you that it’s one of the toughest 80 Valleybrook Dr., Toronto, ON, M3B 2S9. Phone (416) 442-5600. minerals to find, and the costs associated Legal deposit: National Library, Ottawa. Printed in Canada. All rights reserved.

The contents of this magazine are protected by copyright and may be used only with recovering and processing it are among for your personal non-commercial purposes. All other rights are reserved and commercial use is prohibited. To make use of any of this material you must first the highest in the entire mining world. And obtain the permission of the owner of the copyright. For further information what’s more, the hit-and-miss odds of findplease contact Russell Noble at 416-510-6742.

Subscriptions — Canada: $47.95 per year; $76.95 for two years. USA: US$60.95 ing gold, as compared with iron ore, coal per year. Foreign: US$72.95 per year. Single copies: Canada $10; USA and foreign: US$10. Canadian subscribers must add GST and Provincial tax where necessary. and certainly potash, are stacked in Mother GST registration # 809744071RT001.

Nature’s favour. Quite simply, she hides and From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not protects the stuff really well. wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374; Fax: 416-442-2191; For those of you who have ever looked E-mail: privacy officer@businessinformationgroup.ca; Mail to: Privacy Officer, for a trace of gold in a rock or core sample, Business Information Group, 80 Valleybrook Dr., Toronto, ON, M3B 2S9.

Publications Mail Agreement #40069240. PAP Registration No. 11000. We you know what I mean. To the untrained acknowledge the financial support of the Government of Canada through the Publication Assistance Program towards our mailing costs. Return undelivereye, it’s invisible and even some hard-core able Canadian addresses to: Circulation Dept., Canadian Mining Journal, 80 Valleybrook Dr., Toronto, ON, M3B 2S9. E-mail: bigcirculation@bizinfogroup.ca geologists admit that it’s damn-near Canada Post: Publications Mail Agreement PM40069240. Please forward impossible to see in most cases.

Forms 29B and 67B to 80,Valleybrook, Toronto, ON M3B 2S9.

“Visible Gold,” however, is really excitCanadian Mining Journal, USPS 752-250. US office of publication: 2221 Niagara Falls Blvd., Niagara Falls, NY 14304-5709. Periodicals Postage Paid at Niagara Falls, ing to look at in its natural setting and it NY. US postmaster: Send address changes to Canadian Mining Journal, PO Box 1118, Niagara Falls NY 14304. makes me appreciate how much work is We acknowledge the financial support of the Government of Canada through the Canada Magazine Fund toward our editorial costs. involved in getting rid of the host rock before reaching that spec of paydirt.

In any event, gold is still an interesting mineral and it’s just unfortunate that some of the luster has fallen off of it because of the cost to produce it.

Labour and equipment costs are the obvious culprits for the slim-to-no profit margin, Canadian Business Press Indexed by Canadian Business Periodicals Index roduction Manager Print Production Manager P Steve Hofmann Phyllis Wright

but location is also a killer and, like I said earlier, Mother Nature is very protective when it comes her gold. In fact, it’s unfortunate that so much of the world’s gold is so well protected and virtually out of reach.

Take almost anywhere north of 60 in Canada, for example, where vast deposits are known to exist but are, in most cases, inaccessible. Again, it’s largely topographical and environmental issues that prevent mining companies from setting up camps there, but there’s also the shortage of people willing, or skilled enough, to occupy those camps and I think it’s time for Prime Minister Stephan Harper to step in with more than the $100 million for a federal geo-mapping program for the Far North he talked about on his recent trip to the Arctic, and chip in another $100 million or more to actually get something done.

The government’s geo-mapping program is meant to point resources companies toward potential rich veins, but as I mentioned earlier, the mining industry already knows where the minerals are located; it’s the cost of getting them out that’s the problem.

A geo-mapping program is all well and good and shows that the federal government at least recognizes the overwhelming resource potential of the North, but it does little to get the minerals to mills, and market.

The Prime Minister touts that his government’s geo-mapping program has resulted in more than 700 maps that have led to some ‘significant’ discoveries, but those maps have cost nearly half a billion dollars to produce since the program started five years ago.

For that amount of money, I’d rather see the start of another Labrador City where an entire community grew from a single mineral discovery. Where and what, exactly, would be mined, is on those maps and while Mother Nature would probably wish they didn’t exist, they are the maps to Canada’s treasures and should be followed.

CMJ September 2013 • Canadian Mining Journal |

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MiningMATTERS A LOOK AT WHAT’S NEWSWORTHY FROM ACROSS THE COUNTRY

EQUIPMENT DESIGNER NOMINATED TO INT’L MINING HALL OF FAME Boart Longyear is proud to announce that Edmund J. Longyear has been nominated in the exploration category for the International Mining Hall of Fame. Longyear has been nominated for his influence in contract diamond drilling, geological services and shaft sinking in the early part of the 20th century, serving the growing U.S. iron ore mining and steel industry. In 1890, Longyear drilled the first diamond core hole in the Mesabi Iron Range in northern Minnesota. A panel of 200 experts and leaders in the fields of exploration, mining and processing will vote on the nominations for the International Mining Hall of Fame — which proclaims to be the only hall of fame to recognize the global innovators

in the mining industry. Of the accepted nominations, only 14 will be inducted into the International Mining Hall of Fame during a gala dinner hosted at the Grand America Hotel in Salt Lake City, Utah on Saturday, Feb. 22, 2014.

MINING CONFERENCE DRAWS RECORD CROWD Organizers of the 23rd World Mining Congress & Expo are pleased to announce that the event held in Montreal last month was the most successful in terms of attendance with more than 4200 delegates from around the world passing through the doors during the four-day event.

In addition to a technical program featuring nearly 50 sessions and about 200 individual presentations, delegates were also treated to an exhibition hall where more than 250 manufacturers and service providers to the mining industry displayed everything from the smallest pumps, to personal safety equipment, portable shelters, to large underground mining equipment.

The next World Mining Congress & Expo will be held in Rio de Janeiro in 2016.

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6 | Canadian Mining Journal • September 2013

   

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Investing

Borrowing from the future turns off tomorrow’s investors

By Ned Goodman

F

ederal Reserve Chairman, Ben Bernanke, spoke and investors cringed, causing stocks to decline and US Treasury bond yields to rise and the US dollar to rise sharply. All this because of Bernanke’s Machiavellian comments that the Federal Reserve has upgraded their “assessment of the economic recovery” saying that unemployment and inflation “may” fall or stay at the same levels until 2015. I say Machiavellian, based on Niccolo Machiavelli, author of The Prince, which has made his name synonymous with political machinations. In The Prince, Machiavelli wrote about the various techniques a successful politician must use if he is to achieve his political ends. This is mostly done without regard to the moral justification or truth of the means deployed. In The Prince, Machiavelli shows how a leader can best achieve his ends by justifying that the ends may be worthwhile, rarely worrying or speculating on the rightness or wrongness of the words or methods. It’s all based on the hopeful perspective that “the ends may justify the means.”

The facts are that the US economy is still in the stagnant stage it has been in since the beginning of the fourth quarter of 2012, and the Chairman must know that the real inflation in the US today is not anywhere near 2%. According to the American Institute of Economic Research, as well as the Shadow Government Statistics, the inflation rate in the US is closer to 7% or 8%, not 2%.

There are today approximately 47.5 million Americans who are enrolled to use the Supplemental Nutrition Assistance Program known as SNAP which replaced the legacy Food Stamps program in 2008. The soup kitchen line ups that were the vision of the 1929-30 Great Depression are now hidden by the electronic means. There are 23 million US households who can acquire food paid for by the government from 231,000 retailers who accept the government-paid-for special credit card for as many as 47.5 million people. Ten years ago there were approximately 20 million users of the free food program, less than 50% of those that require those beneficiaries of today. Since 2007 the ranks of SNAP users have almost doubled from 26.3 million to today’s 47.5 million peoples representing a 12.5% compound annual growth rate over the last five years of poor, hungry people or, almost 15% of the US population.

The US economy is stagnant and is not growing and actually shrank in GDP in the fourth quarter of 2012 for the first time since 2009. Yes, shrank, as opposed to growth. Machiavelli would be impressed by Dr. Bernanke’s style and success of keeping the voters and politicians happy, and raising, not lowering, the value of the US dollar.

The US economy is a bit like the Potemkin village of Russia which had an impressive façade designed to hide undesirable facts

Ned Goodman is President and Chief Executive Officer of Dundee Corporation

of its condition. GDP growth is high enough, unemployment is made to look low, and household wealth has the appearance of increasing. But a closer look reveals a more sobering reality.

America’s growth is in large part being borrowed from the future. It’s like a company striving to make its annual sales projections by offering special incentives to its accounts to stock up now, before the year closes, instead of waiting to resupply at the normal time. The special incentives are the creation of very low interest rates. US consumers are consuming, but with borrowed money, as they use their mortgaged homes to maintain a US tax deductible living standard.

Many economists are remaining sanguine because they see the US economy falling less fast and, as well, as a more rapidly increasing productivity than any other economy. Thus they think it can continue to be the most attractive place for foreigners to invest their money. They are wrong.

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September 2013 • Canadian Mining Journal |

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COMPROMISE, NO.

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Law

Exploring corporate opportunities?

Janet Howard is a partner at Norton Rose Fulbright in Toronto. Marc Kestenberg is a partner at Norton Rose Fulbright in Toronto.

By Janet Howard and Marc Kestenberg

I

ndustry players on the look-out for the next big opportunity are often tapped for their expertise and connections to serve in management roles and as directors on boards of mining companies.

However, a recent decision of the Supreme Court of British Columbia reminds directors and senior officers of the importance of steps that should be considered in an effort to protect themselves when pursuing certain opportunities for their personal benefit, as opposed to that of the corporation they serve.

The decision in First Silver In the case of First Majestic Silver Corp. v.

Davila, the Court awarded a hefty US$93.84 million judgment against a former director and officer of First Silver Reserve Inc. after his holding corporation indirectly acquired rights to a Mexican silver mine known as Bolaños. The Court found that the acquisition opportunity belonged to First Silver, the corporation to which he owed a fiduciary duty. As a result, the Court awarded equitable damages for the breach.

Directors and officers aware of buying opportunities are well advised to be cautious before pursuing deals if they know the corporation they serve was also considering that same opportunity. While the most obvious advice may be to avoid situations in which personal interests conflict with those of the corporation, business realities may require a more practical approach. While it is necessary to be alert

to certain risks, there are some ways to reduce potential liability, while still considering these opportunities.

Practical approach First, before personally pursuing an opportunity that may be of interest to the corporation, directors and officers should obtain consent from management and the board of directors of the corporation. The consent should confirm that the corporation is aware of the opportunity but has decided not to pursue it. Any delay or failure on the part of the corporation to act quickly enough should not be taken as a sign of lacking interest, especially when the board is monitoring the situation.

Next, consideration should be given to what a director or officer knows about the opportunity, even if acquired through past dealings, outside the scope of their work for the corporation. If the corporation decides to pass on an opportunity, the decision must be informed. This requires the individual in question to disclose to the corporation relevant information about the nature of the opportunity and the details of the deal. The consent obtained from the corporation should include an acknowledgement that full disclosure was provided.

Third, fiduciaries should keep in mind that their duty to act in the best interests of a corporation can extend beyond their resignation and that following their departure they may not be free to pursue an opportunity for themselves.

A release can be obtained at the time of resignation. To help ensure against a court’s narrow interpretation of such release, directors and officers should provide full and complete information to the corporation about the opportunity prior to its execution.

Last, full and complete disclosure by the fiduciary and transparency at all stages in an acquisition process will assist efforts which may be desirable to advance a defence strategy relying upon shared assumptions, informed consent and the corporation’s decision not to pursue a corporate opportunity.

Assessment of damages The method used by the Court to assess damages is also worth noting. The calculation of the corporation’s loss was based upon an estimate of the mine’s future income, calculated to exceed the actual purchase price for the acquisition of Bolaños by the individual’s holding company. In addition, the Court assessed the corporation’s loss with the benefit of hindsight, resulting in the increase of the award to account for increasing silver prices.

In conclusion, while directors and officers are free to pursue certain corporate opportunities for themselves, consideration should be given first and foremost to the duty owed to the corporation they serve. The manner in which an opportunity is pursued may make the difference between a successful venture and a very costly mistake.

CMJ September 2013 • Canadian Mining Journal |

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In My Mine(d)

A look at Safety Analytics David Stewart is Advanced Analytics Leader, Deloitte

By David Stewart

O

ver the past few decades, safety performance at mines has greatly improved and rates of injury have decreased. At Goldcorp Inc., one of world’s largest gold mining companies, injury frequency rates have dropped 75 per cent over last 6 years, while over the same period, fatality rates remain basically unchanged. Adding rules, procedures and increasing compliance requirements have reduced injury rates, and while fatality rates remain very low, more can and should be done.

Goldcorp realized it needed an innovative approach to address this critically important issue that has faced mines for decades, and, in particular, understand why their fatality rates have remained stubbornly flat. They were eager to dig deep and understand all the various types of precursors that have and could potentially contribute to accidents and injuries.

With more information about incidents, Goldcorp knew it could do more to prevent them.

The mining industry as a whole is working towards making mining as safe as possible. With this industry-wide priority in mind, Goldcorp began working with Deloitte’s Advanced Analytics team.

Organizations have historically analyzed internal and external data to provide insights into key business challenges, such as improving operational efficiency and productivity, strengthening customer relationships, using asset more efficiently, streamlining production, and solving complex logistical problems.

Today, analytics are increasingly being applied to safety issues in order to generate actionable insights through the identi

fication of behavioural or operational patterns that potentially contribute to safety risks. The Deloitte team has been working with mining companies to apply this analytic insight. Using best practices garnered from these projects, Deloitte deployed a unique smart safety analytics methodology — the first such program in Canada — to analyze Goldcorp’s data.

For this project, Deloitte focused on a single large Goldcorp mine, employing more than 1,000 people. Deloitte looked at a variety of Goldcorp’s existing data and corresponding external data. Over the course of three months, Deloitte built an analytic solution that looked back at 2,000 incidents over five years and tracked more than 1.8 million employee days worked.

The data went beyond standard incident data to include operations data, weather, production, demographics, economic factors and more, totaling more than 792 million data points.

“We were trying to understand what we didn’t know. Without the analytics we were just making assumptions, but the analytics showed us the facts,” said Paul Farrow, Senior Vice President, People and Safety, Goldcorp. “By putting all this data together and applying visualization techniques, patterns began to emerge. We noticed trends that hadn’t been on our radar before. We were seeing causal factors that were contributing to incidents at the mine for the first time.”

As the smart safety analytics methodology was applied, one pattern that emerged was a relationship between compensation and injuries. Other interesting trends also came through quite strongly in the data, including relationships between

injury rates and age, tenure and job roles.

With this knowledge in hand, Goldcorp is now exploring procedures and management training that will help to address these issues.

Marital status also tended to make a difference in terms of number of incidents affecting a particular group of miners, with single men exhibiting higher incident risk. While there could be many reasons for this correlation, the insight provided by the analysis was empirical confirmation that supervisors and managers need to know their crew members and who might be more likely to take unnecessary risks.

“The findings of this project are driving behaviour change at the site,” said Farrow. “Now that we know that certain incidents have particular characteristics, we can take action in advance and before an injury or a fatality occurs.”

Technology advancements have provided organizations the opportunity to digest immense amounts of data from a variety of sources, it’s essential that this be transformed to information which can then be translated into intelligent actions. The true value proposition of safety analytics will be the understanding of what signals the data is showing and executing necessary change based on those insights. Taking operational action leveraging analytics is innovative and can accelerate the transformation safety in the mining industry.

“Based on this initial project at one mine, we are looking to expand this program company-wide,” added Farrow. “In mining, safety really happens on the operations side and this allows for the deep analysis that simply wasn’t possible before.” CMJ September 2013 • Canadian Mining Journal |

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| Gold in Canada

CUTTING

RISKS TO MOVE

FORWARD Agnico Eagle leads Nunavut into modern mining era

By Northern Correspondent Bill Braden

F

ebruary 24, 2010, was a big day for Agnico Eagle Mines Limited’s Meadowbank project, as Board chairman Jim Nasso, flanked by Inuit business and community leaders, watched the first pour of molten gold and silver doré from the roaring refractory furnace at the $700 million project.

Nasso passed that still-warm ingot among his guests, and later among the hundreds of excited workers who posed to have a photo with it. President and CEO Sean Boyd toasted their work at a gala mine site dinner with glasses of gold-flecked champagne and news that gold bullion that very day had touched a new record of $1,260 an ounce on world markets.

Before the Meadowbank mine was launched in 2010, the vast Kivalliq region of Nunavut hadn’t seen an operating mine for 25 years. But it has been the engine of a new economy, creating hundreds of jobs and fos14 | Canadian Mining Journal • September 2013

tered millions of dollars in business ventures for a cluster of small Inuit communities with very few other career opportunities.

For its veteran parent company, the mine’s $1 million-a-day output is the biggest in its portfolio of five mines in Canada, Mexico and Finland, making Agnico Eagle Canada’s fifth largest gold producer at $US1.8 billion in revenue last year.

Rewards come with Effort and Teamwork The reward had not come without its measure of effort, investment and teamwork from both the company and its 790-strong workforce.

The Meadowbank project is geographically almost smack in the centre of Canada, yet is far from any existing infrastructure. Baker Lake, the nearest community, is about 110 kilometres south over an all-weather road scraped

up from the tundra. It is the longest road in all of Nunavut.

Hauling in the construction, fuel and production materials is restricted to summer ocean freighters sailing into Hudson’s Bay, then by barge 320 kilometres inland to storage sites and tanks at Baker, and finally overland year-round via the road to the mine.

The 28 megawatt diesel plant that powers and heats the 11,000 tpd mill and 450 person camp has a voracious thirst. When the brutally cold winter of 2012-13 threatened fuel stocks, Meadowbank’s General Manager Dominique Girard took the critical problem to his team and worked out some solutions.

“We were looking at having to fly in fuel, and had to cut consumption. One option was to postpone projects, but also to stop idling all vehicles — when it’s warmer than -25C, equipment is stopped.” www.canadianminingjournal.com

Overall view of Agnico Eagle Mines’ Meadowbank project.

The Meadowbank Mine is Agnico Eagle’s largest of its six producers. Inset: Board Chairman Jim Nasso and Baker Lake Inuit elder Simon Tookoome with Meadowbank’s first gold ingot in February 2010.

“We achieved it, we did not have to fly in fuel... from 210,000 litres per day over January and February, we were down to 180,000 litres,” said Girard. “We saved around $400,000 in our first quarter over the year before... a major boost to the costs.”

The mine also started to burn its own waste engine oil, and is looking to source waste oil from community operations in Baker Lake. The landing strip at site was recently lengthened to accommodate Boeing 737 “combi” jets, an expense that’s easily compensated by greater efficiency of the bigger planes over small, propdriven Convair aircraft.

“The real future (for really great efficiency) is not these individual steps,” says Girard. “We are working on the culture among all employees and contractors. If we have one thousand people working to reduce our costs, over the years, the savings will be huge.”

Growing that culture of teamwork crossed a major threshold early in the morning of March 10, 2011, when a disastrous fire wiped out the camp’s kitchen and office wing (see sidebar). Battling the cold and dark, the team stopped it before it could reach the accommodation block.

“A change started after the fire,” says Girard. “The fire created a sense of urgency, we mobilized the workforce to work together.” While it halted production, the

full operation was restarted after only three weeks with temporary facilities and a vigorous new sense of what they can do by working together.

“It’s not magic. We use a systematic way to work. We do a risk assessment, we plan based on priorities while encouraging new ideas, we execute the mitigation plan and we celebrate our successes. “ says Girard.

“We are minimizing risk and planning in advance how we could do better.”

A Clear Social Intent Agnico Eagle has been earning kudos for investing in social responsibility, sustainability and corporate performance abroad and at home. An example of that social intent can be found at the Meadowbank mine.

It poured its first gold to great applause — and great expectation — that it would kick start the region’s remarkable mineral potential. Accepting the challenge of a September 2013 • Canadian Mining Journal |

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| Gold in Canada chronically under-employed Inuit workforce with no mining experience, the company and the seven Kivalliq communities shared a vision: a stable sustainable mining economy and less dependence on flying in southern workers.

Meadowbank reckoned that on-thejob training, partnerships with a (shortlived) mine training alliance, and a steady pay cheque would be the key incentives for Inuit to stay on. Indeed, by 2011, Inuit workers were bringing $16 million home from their two-and-two week rotations.

But after two years, it wasn’t working out. A disappointingly high rate of noshows was so bad it was hobbling production. The problem, said mine manager Girard, was the high cost of the additional workforce required to maintain a steady operation.

“In hind-sight, I would say maybe our expectations were a little high. Local employees were not ready to work in a mining environment, it was a culture shock,” he says, “ and changes were made over the last 24 months. We shifted to a one-on-one career path approach, including the southern hires, graphing an individual progression path showing timelines and milestones leading to promotions and higher wages.

“Today we are seeing perhaps fewer employees succeeding through the training program but the ones who pass are staying with us. We are doing a better assessment during the training, and we invest in work readiness up front to help them get used to being away from home, camp life, safety and personal finances.”

“They can see right at the beginning where they start, how long it takes, and

what they need to do to grow into the job,” he said. They purchased a haul truck simulator and started an on-site 350-hour training program, and will be upgrading the reading and math skills, It’s paying off, says Girard. Inuit turnover of 25 per cent in 2011 dropped to 16 per cent in 2012 and so far this year, a very impressive eight per cent. The program has even better results among non-Inuit: turnovers of 13 per cent in 2011 have almost disappeared, to two per cent this year. While the mine does not set aboriginal hiring targets, 246 Kivalliq Inuit were on the payroll in June of this year, just over a third of the total workforce of 786.

“In my mind, to stay over 30% is a very, very good achievement and we have many growing into more skilled positions thanks to the career path.”

Ambitious Growth, Disciplined Spending The Kivalliq’s sparse mining history counts only two long-closed mines: North Rankin Nickel of the 1950s, and the Cullaton LakeShear Lake gold mine, west of Arviat, in the early 1980s. The Meadowbank deposit was found in 1987 and was acquired by Agnico Eagle in 2007 from Cumberland Resources.

Development had already started including negotiating impact benefit and partnership agreements with Inuit organizations.

The deposit, currently being mined from three pits all within seven kilometres of the mill complex, has 2.3 million ounces of gold in reserves and will yield 358,000 ounces annually through 2015.

Exploration continues to define the resource, expected to operate until at least 2018. Eight to 10 doré bars a week

are poured, running about 81 per cent gold and 19 per cent silver.

The parent company charts its roots back seven decades to 1953 when five marginal miners joined to form Cobalt Consolidated Mining. In 1957 they adopted the scientific symbols for their prime products — silver, nickel and cobalt — and became Agnico Mines. Led by Paul Penna, it merged with Eagle Mines Ltd, and in 1974 brought Eagle’s Joutel deposit into production.

It later acquired the Dumagami property from Noranda Mines, renamed it LaRonde, and from this foundation built a diverse portfolio of properties in Finland (Kittila), Mexico (La India, Pinos Altos) as well as in the prolific Abitibi gold fields of Quebec (LaRonde, Lapa, Goldex).

In 2012 it poured a record 1,043,811 ounces of gold and almost 4.7 million ounces of silver. Its gold reserves stand at 18.7 million ounces, plus approximately 96 million ounces of silver, 220,000 tonnes of zinc and 73,000 tonnes of copper.

And in an environment where metals have lost a lot of their shine, Agnico Eagle has an ambitious growth forecast of boosting gold output by 20 per cent — to 1.2 million ounces — by 2015.

In a July 2013 message to investors, CEO Boyd said the 200,000 new ounces will come from new properties and ramping up production at others. But during the current volatile market, he also announced it will be curbing exploration and capital spending by $US250 million over the same period.

“The low gold price has actually accel-

A driver training simulator is part of Meadowbank’s investment in job training. Below: the Meliadine advanced exploration project could be the company’s biggest producer. Photos courtesy Agnico Eagle Mines Ltd.

16 | Canadian Mining Journal • September 2013

www.canadianminingjournal.com

erated the industry from a high growth phase into a more moderate growth phase, focused on execution and delivery of plans,” said Boyd. “Agnico Eagle is no exception.... we’ve got the production growth, we’re able to pull back on some of that capital investment to improve flexibility and withstand the volatility.”

While the cuts are substantial, the company stills plans on ploughing some $US400 million into capital at existing mines and on exploration in Canada, Mexico, Finland, Alaska and Nevada.

Among the company’s advanced projects, another Arctic deposit stands out as its largest yet — the Meliadine find, 290 kilometres southeast of Meadowbank and just 25 kilometres north of the Kivalliq hub of Rankin Inlet.

Proven and probable reserves pegged at three million ounces have been found in seven deposits within a sprawling strike zone some 80 kilometres long. The company plans to invest approximately $125 million over the next two years on defini-

tion and grassroots drilling, ramp development, permitting and the completion this summer of a 24 kilometre all-season road to Rankin Inlet.

Further development will depend on the results of a technical report by mid-

2014, market conditions and board approval. With a 60-year track record of performance, and 31 years of paying consecutive dividends, Meliadine may well be the next success story for both Agnico Eagle, its shareholders and Nunavut.

CMJ

FIRE! The fire started small but grew steadily, spreading in the crawlspace under the kitchen and office wings and threatening the living quarters for some 400 workers at the Meadowbank gold mine near Baker Lake, Nunavut.

The danger was magnified by the weather. It was March 10, still dead-cold winter, and with the nearest help a two-hour drive from Baker Lake, the Meadowbank team was on its own. When the alarm was turned in at 4 A.M., workers were evacuated to the gymnasium and firefighters beat back the stubborn blaze with no injuries.

Production was not impaired, but the camp couldn’t feed the whole workforce. It sent about 300 workers home and kept a skeleton crew of 150 until a temporary kitchen was flown in.

Meadowbank was back in full swing by April, suffering $18 million in direct costs and carving 50,000 ounces off its 360,000 ounce target for the year.

The cause may indirectly have been an opportunistic wolverine. An electrician had tried to repair the heat trace on a frozen pipe the day before, but the animal - regarded as one of the Arctic’s most ferocious critters - had claimed the cozy crawlspace as his. The worker wisely retreated but the fire started hours later, blamed on a short circuit. There is no word on the fate of the wolverine.

September 2013 • Canadian Mining Journal |

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| Gold in Canada

Mid-tier miner is big on

‘SAFE’ Production

By Russell Noble

C

AT BLACK FOX MINE

alling Brigus Gold Corporation a “mid-tier” mining company is technically correct based on its $117 million in gold sales last year, but a visit to its Black Fox gold mine near Matheson, Ontario, quickly gives the impression there’s a big-time operator running the show.

From its guarded gates, to the mine’s streamlined administrative centre, to its vast open pit that dominates a large portion of the 32-acre site, the Black Fox gold mine is an impressive and highly functional operation.

The mine is, quite frankly, a picture-perfect operation carved discretely into a Northern Ontario landscape and tucked out of sight of passersby on Highway 101, a major route in the Timmins area near the Quebec border.

In fact, the Black Fox mine is unlike many ‘mid-tier’ mining projects in that its main focus is on being a good and safe neighbour, followed closely by being highly productive, then, what is hard to believe given the nature of mining… clean.

A scrap of paper or a coffee cup blowing in the wind would be cause for any of the mine’s 330 workers to stop what they’re doing to pick it up. In fact, according to Steve Poliquin, General Foreman for the open pit operation, “Anyone caught driving ‘past’ any debris is ‘reminded’ later that safety starts with keeping the mine clean, regardless of how small a thing it (like picking up a piece of paper), may involve.

“I know that picking up small objects may sound like an exaggeration and a waste of time, but we feel that by instilling that basic responsibility into everyone on the site will carry over to the way they look at everything else they do.”

For example, Poliquin is proud of the care the company’s machine operators show towards the equipment. “All of the operators treat the machines as if they were their own and at the end of their shifts, they spend extra time cleaning them so (jokingly), they won’t become known as a ‘slob’ to the next driver.”

Light maintenance is also part of every operator’s daily routine and while Poliquin says there are a number of equipment distributors who provide contract maintenance for major servicing and repairs, it’s mostly the operators themselves who check and correct fluid levels, tire pressures, and look for signs of potential problems.

18 | Canadian Mining Journal • September 2013

“Maintaining the machines is obviously important to the production at the mine but it’s also in the way the machines are operated that has such an impact on the safety of the operation,” said Poliquin.

Graham Reid, the mine’s Safety and Training Supervisor, says he’s proud of the way the crews work with safety in mind but admits that it’s an on-going commitment to make sure that each and every person on site doesn’t get complacent in their duties, or with their surroundings.

“As of June 30th (2013) we’ve had 3,949,938 man hours worked without a lost-time injury and we’re proud of that! But that doesn’t mean we take safety for granted. Each month we conduct mandatory safety-themed workshops where we focus on different topics. In June, the safety theme was “Workplace Violence and Harassment” where each crew and (administrative) workgroup viewed a presentation on the company’s violence and harassment policies, said Reid.

“Every worker also filled out a risk assessment questionnaire which will be used to determine if there are problem areas in the workplace. The workers also viewed a video from the Ministry of Labour detailing the rights workers are guaranteed under the www.canadianminingjournal.com

Underground activity and inspection at Brigus Gold’s Black Fox Mine.

Ontario Health and Safety Act concerning violence and harassment.”

Far from the classroom but again, not from the focus on safety, Mike Wereszczynsky, Manager of Mining, says the Black Fox mine is a busy place with three excavators, six CAT 777 90-tonne haul trucks, and three drills, crushers, and ancillary equipment all working at once.

Like most mines in Canada, the Black Fox property had been in operation before. In fact, the property was first explored by Dominion Gulf in 1952 when it was known as the Glimmer Mine and then by Hollinger in 1962. In 1988, Glimmer Mine Inc put together a property package using a combination of Crown lands and private lands and in 1989 Noranda Exploration Company enter into a joint venture with Glimmer.

As a result of that agreement, Noranda held a 6o per cent interest in the property and during their ownership, Noranda merged with Hemlo Gold Mines Inc and in typical fashion within the mining industry, another player, Exall Resources Ltd, came along in 1996 and purchased 60 per cent of the property from Hemlo Gold and Glimmer Resources held the remaining 40 per cent.

The Glimmer Mine ceased operation in 2001 after producing

approximately 211,000 ounces of gold. A predecessor company of Brigus Gold purchased the property and mine in 2002 and renamed the property as Black Fox. “From 2003 to 2007, we completed drill programs of 504 surface diamond drill holes totaling 149,548 metres and 396 underground holes totaling 78,644 metres, and we supplemented that information with data from 286 surface and 707 underground holes drilled by the previous owners,” said Wereszczynsky.

In total, the Black Fox deposit has a high degree of geological data with more than 230,000 m of core, much of which still remains on site today. Black Fox still has great exploration potential as the orebody remains open for expansion along strike and down dip.

Orebodies in the region, along the Destor Porcupine Fault, often extend to depths of more than 1,000 metres. Drilling results from early 2013 demonstrate the excellent potential to significantly expand gold reserves and increase the life of mine at Black Fox. The Company also has excellent exploration potential just 4km away at its Grey Fox Property. In July of this year the Company announced an updated independent NI 43-101 resource estimate for the 147, Contact and Grey Fox South Zones. Brigus continues to drill these zones as they all remain open for future expansion.

September 2013 • Canadian Mining Journal |

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| Gold in Canada

Overall view of Black Fox Mine site showing open pit (top left) and surface operations and service and administrative facilities in the distance.

Given the close proximity to Black Fox, the Grey Fox property has great potential for near term growth.

Increasing production at Black Fox has been a top priority for Marc Bilodeau, Brigus Gold Vice-president, and his team. This past quarter the company announced that it will increase its production guidance to 95,000 – 105,000 ounces of gold for 2013 while at the same time focusing on cost management and safety.

What makes the Black Fox mine somewhat unusual in design is that the portal to its underground workings is located at the 235 m level of the pit which, according to Wereszczynsky, saved the company a great deal of money when it came to accessing the deeper gold deposits outside of the pit’s footprint.

During 2012, a total of 9,061 metres of development, a 15 degree ramp, lateral, and access to ore was done by on-site underground development crews. J.S. Redpath of North Bay also worked with the crews to help with the development on both east and west ramps.

Randy Demers, Redpath’s Area Manager, Timmins, said that in April of 2011, Redpath was awarded the development package that included approximately 3400 metres of ramp and lateral development in the East Main Ramp area.

“In May 2011, we began the mobilization of workers and equipment to site. A Redpath “Project Kickoff ” meeting followed, attended by our workers and management team along with representation from the Brigus management team to officially start this portion of the Brigus Black Fox Mine,” said Demers.

“By the end of the 18 month project, we achieved over 3800 metres of development while realizing a Zero Lost Time Injury frequency. This was soundly accomplished by experienced Heavy machines routinely maintain surface and pit roads to help ensure safe passage for all vehicles in and around the mine.

20 | Canadian Mining Journal • September 2013

underground workers, plus a good number of workers who were new to mining who required the basic fundamentals of mining training. Proudly, following the completion of this project, these same novice workers moved onto other projects within the Redpath group as experienced miners.”

While at the Black Fox Mine, Redpath was also awarded a raise project for 4 internal raises covering approximately 139 metres.

Not unlike the development ramp work, this additional work was also completed without sustaining a “Lost Time Injury.”

Demers said that over the duration of mine contracting for the Black Fox project, his company worked closely with the Wahgoshig First Nation to employ First Nation workers throughout the project.

“The relationship between the Brigus management team, the Wahgoshig First Nation, and Redpath was responsible for a very successful project for all three parties,” said Demers.

Thanks to the ramp and raise work, underground ore is being produced using long hole, cut and fill, and narrow vein mining methods and is expected to reach 1,000 tpd by Q4 of 2013.

Mike Wereszczynsky says, “Mining of underground ore is performed using all company-owned equipment and miners including four LHD units, two 50-tonne haul trucks, three 30-tonne push-box trucks, three jumbo drills, four scissor lifts for ground control installations, and several other pieces of support equipment.”

Backfilling is a combination of mine waste rock mixed with a Portland slurry mix done underground. Waste rock is also used as backfill in mined-out areas where cement is not needed.

Ore from both the open pit and underground mine is crushed Portal to underground workings is located part-way into the open-pit mine

www.canadianminingjournal.com

The Black Fox Mill, located 35 km from the mine, handles a steady stream of ore shipped by truck from the mine.

on site to -150 mm and transported by a fleet of highway haulage trucks a distance of 35 km west on Highway 101 towards Timmins.

Jim Montague, Manager of the Black Fox Mill, says, “The ore from the mine(s) is stockpiled at the mill site and fed via a conveyor system to the crushing circuit with a crushing capacity to a maximum of 160 tonnes per hour, where it is reduced from less than 150 millimetres through three stages of crushing to less than 10 millimetres.

“The crushed ore is then transferred to a 1500-tonne, fineore storage bin where it is then fed into a fine grinding circuit at a rate of 2200 tonnes per day through two stages of closed-circuit ball milling.”

Montague went on to explain that soluble gold is recovered by absorption upon granular activated carbon in CIC, CIL, and CIP trains at an efficiency rate of 90 to 95 per cent. Gold is recovered from the carbon in a high-temperature strip vessel in a closed circuit with electro-winning deposition.

Gold plate, says Montague, is further refined by induction smelting and cast in 1,000 ounce molds before shipment to the refinery.

Marc Bilodeau, Vice-president, Black Fox Mine and Mill Operations, says. ”I am very proud of the Brigus Gold Team. We have an extremely talented group of Managers, Supervisors and workers that help us maintain Safe Production at all times.

“Safe Production” is our motto we live by. At this time we are achieving record production and doing it safely.”

CMJ

A MINE OF SOLUTIONS Technical, economic and feasibility studies NI 43-101 technical reports Mine planning, design and simulation Plant design and simulation Project management EPCM projects Commissioning assistance Power generation Power transmission and distribution Process optimization and control

Historic and on-going drilling information provides Brigus Gold with plenty of encouraging information for the future of the mine.

bba.ca

BBA IS RECRUITING IN TIMMINS!

September 2013 • Canadian Mining Journal |

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| Gold in Canada

NEW GOLD

NEW AFTON NEW APPROACH

By Western Correspondent Tanya Laing-Gahr

W

hen the name of a corporation is New Gold Inc., and one of the key operations of that company is called New Afton, you can be certain that old ideas and old ways of doing business will not hold much water. So it’s fitting that Robert Gallagher, the president and CEO of New Gold, is helping set the standard in the mining industry when it comes to communication and community engagement. Gallagher has been a part of the mining industry for almost 40 years. In that time, he has worked with or led organizations such as Placer Dome Inc., Newmont Mining Corp and Peak Gold. He has also witnessed the industry making shifts in terms of its approaches to people and to the land. One of the areas in which Gallagher, New Gold and New Afton are leading the pack is in Aboriginal and community engagement. In the following interview, Gallagher explains his views on communication and relationships, and how paying attention to both is good for people and good for business.

I’ve heard you speak at mining and exploration conferences about the importance of community when it comes to mining operations. Can you expand on that?

I think the mining industry has to realize that when they go into particularly remote areas—and the people have been there forever and their families have been there forever—they have a long-established way of living. A big mining company comes in and they have huge impacts. When people think of mining, they think of ghost towns and maybe environmental issues and stuff from the past. For most people, when they think of miners, they think of gold panners. So 22 | Canadian Mining Journal • September 2013

when you go into a community like that, of a few hundred people, and you say you’re going to build a mine and spend $6 billion, the people who have lived there for a long time tend to be concerned.

Our approach is to tell people directly that we are going to have some impacts; that they’re largely going to be positive; that when we’re finished we’re going to clean everything up to the way it was; and that there won’t be any negative impacts on the community. But you’re making these huge promises to them and they don’t know who you are and what you’ve done in the past. So the first thing we do, like at our New Afton and Blackwater

projects, is sit down and develop a relationship. Unless they trust you, you’re not going to get very far. So I think what we try really hard to do when we get into an area is meet with the local people and say, “we don’t expect you to approve anything right now because you don’t know who we are, you don’t know us and you don’t know what our history is or what our plans are, but we’re going to have constant communication with you because we want to know what your aspirations are, what your concerns are, and we want to know what you want to modify and change because we want you to realize those aspirations. We want to know what is sacred to you because we don’t want to impact those areas.” It all comes down to a relationship of mutual trust.

That’s the one thing with the New Gold Participation Agreement. Officially, they’re called IBAs—Impact Benefit Agreements. I don’t like that name. A lot of us, including at New Afton, call them Participation Agreements, and they lay www.canadianminingjournal.com

New Gold’s New Afton Mine.

particularly when you’re dealing with community governments because those people can change. All of a sudden, you’ve got to start developing a new relationship with them. And we have our own leadership changes as well, such as who at the mine is leading community relationships.

By having a real protocol, you can have a continuity of relationship between the community and the mining company.

Robert Gallagher

Taking that a step further, how does that affect the way business is done? What do you think the impacts are?

out how we’re going to participate with First Nations. There are elements like commitments to training and hiring and economic involvement. Most Participation Agreements have these. But to me, one of the most important things we have is our

communication protocol—and that’s who talks to who about what and how often.

When the people who are talking can’t come to agreement, what happens? It’s really important that you have constant communication right from the early days,

It’s interesting in our industry. Most mines are relatively remote and they’re in more Northern regions. New Afton’s different because it’s near Kamloops, but most mines—including Blackwater, which is in central B.C.—tend to be a bit more remote. And as you’re hearing now from the premiers and from the Prime Minister, there’s a real skill shortage in mining.

You’re also hearing that in many of the First Nations villages that there’s a lack of September 2013 • Canadian Mining Journal |

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| Gold in Canada Haul truck moves material within the New Afton site.

On-site repairs and maintenance help the company control costs and increase productivity.

employment opportunities. You’re hearing about forestry—the pine beetle infestation in B.C., the downturn in the pulp industry in Eastern Canada—and there are a lot of people in the industry who are out of work. And we are building mines and building relationships, and we need people. We need good people. With so many First Nations people and people in the forest industry out of work, it’s just a natural fit. We can all benefit together.

Can you talk about some of the other social and environmental impacts of your operations, such as New Afton?

The New Afton Mine is called the New Afton because there was an open pit mine, the Afton, which Teck mined from late ’70s to early ’90s. Based on metal prices and the end of the open pit reserves, they decided it was no longer economically feasible and shut it down. We’ve now developed an underground mine there, so our environmental impacts are relatively minor compared to those of the historic open pit mine. Because we were primarily in an area that had already been subject to mining activity, we were in a very fortunate position in terms of the limited disturbance and impact we had, and that which we could control and mitigate.

But again, the real key thing we did early was get the people involved. People were concerned about water: the use of water and acid drainage that’s coming off waste rock disposal. So we have a mitigation plan 24 | Canadian Mining Journal • September 2013

and a closure plan. We have a joint environmental advisory committee and we have members of the community on that community. They jointly monitor it with us so they can see what the results of it are.

Shifting gears, how are current gold prices affecting business at New Afton?

We’re actually quite fortunate at New Afton that it is a relatively high-grade mine so our margins, even at prices well below where we are today, are quite healthy. We don’t see any impacts in terms of viability for New Afton. With these lower prices, there are fewer funds generated to build mines so we prefer to see higher prices in terms of flexibility in growing our business, but as far as New Afton, we’re fine with these prices.

Have you noticed any negative impacts operating in B.C.?

I think British Columbia gets a bit of a bad rap. People think it’s hard to permit mines in B.C. Then there are concerns with some new environmental acts that the regulators are more lax with permitting mines. And it’s not the case. The technical requirements are unchanged. The issues with permitting mines have mostly been related to community approval of mines.

If communities—both Aboriginal and non-Aboriginal—are struggling with the mine (or the pipeline, which is much the same thing), then the mine is hard to get permitted. And that’s the same anywhere.

That’s one of the things that New Gold’s been able to do, just by having that realization that we’ve got to have good old, trust-based, respectful relationships with people—where we start early and start often—and show them the positive impacts as early as you can. With Blackwater, about 70% of what we’ve spent is with local community contractors. At New Afton, about 22% of our workforce is Indigenous. We’re really focusing on maximizing our communications and benefits to local communities. That’s what you have to do to get community buy-in.

Some people call it the social license. At the end, if you’ve done the right thing through your operation, if the people that were there when you started and that are still going to be there when you leave can say, “Yeah, they were here for a while and we had a pretty robust economy when they were here but they’re gone, and we’re better off because they were here,” then you’ve done a good job. You’ll have success. You’ll be good for the local people, you’ll be good for the company, and good for the country or the province as a whole.

I like that because, for many companies historically, it has seemed the CSR (corporate social responsibility) has been a checkmark necessary to get permits.

This doesn’t sound like a checkbox; it sounds like a philosophy.

I’ve been at the business almost 40 years. My first job as an engineer was in Ontario and they were just coming off a www.canadianminingjournal.com

Royal Commission dealing with mine safety out there. Back then, mine safety was kind of a hot topic. It’s natural for us now. In the late ’70s, the environmental situation became more of a concern to people outside of the industry, and people inside the industry reacted and did a few things differently. So now most mining companies are pretty good and they know it’s part of your business. They just know to do the right thing. So the last phase, in the last 10-12 years, it’s social responsibility. So there’s been this kind of trend in my 40 years from safety to environment to social responsibility. I think that social responsibility is getting to be a natural part of business rather than just checking the box.

Investors provide us with capital to build mines in order to give them a return on their investment. We want to give them strong returns. The fact of the matter is, if you get hung up in permits because you don’t have effective or adequate relationships with the people, or they don’t trust you, or they protest against you, it’s going to delay getting your mine built, which is in no one’s best interest. So you might as well figure out how to get along. It is more than checking the box, it is doing good business. Those days when miners could just lay low and do what they wanted, they’re long gone. You can deal with First Nations communities effectively and still generate a strong return for investors.

CMJ

Underground drilling and new construction are on-going in the mine.

September 2013 • Canadian Mining Journal |

25

| Gold in Canada

‘Sweat of the

Sun ’ glisten makes region

By Eastern Correspondent D’Arcy Jenish

26 | Canadian Mining Journal • September 2013

www.canadianminingjournal.com

N

o metal on earth has the same tantalizing effect on mankind as gold. The ‘sweat of the sun,’ as the ancient Incas called it, has the power to quicken the pulse of the prospector or put a gleam in the eye of the miner.

Gold also inspires normally prudent newspaper editors to produce rapturous headlines, like this one from the Halifax Chronicle-Herald of November 29, 2012: “A glittering prize may flow from old veins.”

Nova Scotia has had three brief gold rushes dating back to the mid-19th century and mines located in the province yielded nearly 1.16 million ounces between 1862 and 1960. There hasn’t been any significant production since the 1940s, but as gold trended toward $2,000 an ounce in recent years, junior mining companies employing new and advanced exploration techniques rushed in to re-examine old deposits.

Juniors held 180 exploration licenses in November 2012, according to the Chronicle-Herald report, and the paper went on to note that: “Two proposed mines are well on their way to becoming realities at Moose River and Dufferin, near Sheet Harbour.”

One year later, Atlantic Gold’s Touquoy project on the Moose River system was tied in litigation over an expropriation dispute but Ressources Appalache of Rimouski, Que. expects to begin producing gold from its Dufferin Mine, located about 150 kilometres east of Halifax, by early in 2014.

Work at the portal prior to shotcreting.

Miners work the face of the underground mine.

“We will be the next gold producer in Nova Scotia,” says president and chief executive officer Alain Hupe. “We are 100 per cent owners, with no partnerships and no debt.”

Several other critical pieces of the puzzle are also in place. “Our mining lease is in good standing,” Hupe adds.

“Our environmental assessment is complete. We have underground access by decline ramp. We have a 300 tonne-perday mill and tailings ponds, all supported by a road network and electrical power provided by the province.”

Hupe, an engineer and geologist, cofounded Ressources Appalache in 1992 with Andre Proulx, who remains a director of the company. Their objective --as the name suggest--was to explore for mineral deposits within the Appalachian region which, broadly defined, covers parts of Quebec, Newfoundland and

Labrador, New Brunswick and Nova Scotia, as well as extending into the eastern U.S. In 2008, they came across the Dufferin property and moved quickly to acquire it and for good reason. It was nicely located near existing road and power grids and all the infrastructure necessary for production was already there.

In fact, a small, private company operated the mine for eight months in 2001, but it was unprofitable with gold trading at around $300 an ounce.

According to Hupe, the shareholders spent several years squabbling amongst themselves over the liabilities and the fate of their investments and the property languished until 2008 when a mining contractor agreed to pay off the debts in exchange for the right to process the mine tailings.

Ressources Appalache acquired the Miners and heavy equipment have clear passage at the portal.

September 2013 • Canadian Mining Journal |

27

| Gold in Canada

Working the quartz face prior to blasting.

property from the contractor for $4 million in 2009 and spent three years drilling it because the previous owners had done very little exploration. Instead, they had built a decline ramp and galleries and begun mining ore that was close to the surface. Hupe and his team re-drilled old holes and sunk new ones­—taking 11,600 metres of core samples—and they have delineated a resource that is 1.4 kilometres

28 | Canadian Mining Journal • September 2013

in length and 400 metres at depth.

The gold is found in a series of 18 vertically stacked, quartz vein structures known as saddle reefs, which are essentially shaped like inverted Us, each of them 20 to 40 metres apart. Hupe says that 75 per cent of the gold is coarse —nuggets in other words— and can be recovered through a gravity-circuit process. The balance is fine gold that is dis-

persed through the quartz and will have to recovered through a flotation system.

The previous owners constructed the ramp and galleries to a depth of 100 metres and Ressources Appalache will use them to extract ore from the first four saddle reefs.

The company plans to drill and blast and then haul the rock to the surface in trucks.

It expects to complete two rounds of blasting per day and in each round will yield 150 to 200 tonnes of material.

Ressources Appalache was able to begin moving toward production in the fall of 2012 after arranging $10 million financing from a U.S. bank, which will be repayable in gold.

The company began de-watering the ramp and galleries in May, 2013 and expects to begin production in 2014.

Hupe says the Dufferin mine hosts a highgrade deposit that should yield over eight grams per tonnes and he expects that the company will be able to produce 20,000 to 25,000 ounces per year.

Profits will be re-invested in further exploration aimed at drilling deeper into the formation and Hupe is confident that it holds additional saddle reefs. The company also plans to construct a second portal — though not necessarily a shaft and headframe — and will double the capacity of the mill to 600 tonnes per day.

Otherwise, Huppe adds, he and his partners might spend 30 years processing the ore they’ve found so far.

They are also looking at hiring locally.

They currently have 20 people working on site, but this will ramp up to about 70 when the mine is in full production and many of the employees will be hired from Sheet Harbour, a logging and fishing community of some 850 people that badly needs an economic shot in the arm.

Both of its principal industries have been in decline for a number of years and the population has dwindled and aged as well.

Indeed the website of the local Chamber of Commerce describes Sheet Harbour as a quiet community with a low crime rate and a low cost of living. The glittering prize locked in those old veins at the nearby Dufferin mine likely won’t affect either the crime rate or cost of living.

But Dufferin gold would undoubtedly add some sparkle to an otherwise dormant resource-based economy.

CMJ www.canadianminingjournal.com

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| Gold in Canada Placer miner Randy Miller.

LURE CALL THE

THE

Gold and the Wild Outdoors are two ingredients that make placer mining so attractive

By Western Correspondent Tanya Laing Gahr

P

lacer mining in B.C.’s north is more a calling than a career. At least, so it would seem when talking with placer miner Randy Miller.

Miller has been actively placer mining since 1992, and recently stepped down as the president of the Atlin Placer Mining Association after 17 intermittent years leading the organization. His career as a placer miner was his second career, one he followed after he retired and decided to invest in tenure held by his wife near Atlin, B.C. He admits that becoming a placer miner isn’t strictly logical.

“We’re not exactly sure why people do this,” said Miller. “It’s like a calling: they enjoy what they’re doing but not everyone’s a winner. It’s something that people keep asking me—how can miners lose money and keep coming back? And it’s just the lure of the metal, I suppose.”

The lure of the metal is often enough to overcome the inconveniences and 30 | Canadian Mining Journal • September 2013

headaches of a shifting regulatory framework in which a placer miner operates.

Miller said the industry is being heavily regulated to the point that the idealized notion of the independent placer miner operating in isolation and without outside pressures is far from the reality.

“Most miners have multiple claims to ensure that, should the property they are working may not be suitable, they can move to another property,” said Miller.

“Most recently, the government has raised the rates to hold tenures, making them unaffordable for most miners. It has been explained that this would ensure that there would be more tenures available, therefore more folks entering the industry—(but) this does not seem to have happened thus far in the Atlin area.”

In Miller’s region, the Atlin Placer Miners Association is in communication with the Taku River Tlingit First Nation, which recently completed and signed a

Land Use Plan with the B.C. Government.

One of the results of that signed agreement is the removal of more than 100,000 hectares that had previously been available for all types of mining, and placer mining in particular. Miller emphasized that the Taku River Tlingit First Nation have been excellent partners in the process, but he wondered if the government had the interests of operators in the North in mind when making decisions. He added that while protection of the wilderness was one of the primary goals of that action, he is concerned that there was no mention of protecting livelihoods.

It is the changing nature of the industry that has spurred Miller and the Atlin Placer Miners Association to work toward a best practices framework for the industry—a process that he said is close to completion and acceptance by the provincial government, and that he hopes will have a positive impact on the industry throughout B.C. www.canadianminingjournal.com

Temperatures may run hot or cold, but our equipment never does.

Randy Miller (centre) with Kevin Kruger, BC Minister of State for Mining, (left) and Wayne Klipperts, Ruby Creek Property near Atlin.

“Placer miners are adapting to new regimes, new controls, and new regulations in order to stay afloat—and we haven’t even discussed economics yet,” said Miller.

Like their hard-rock mining brethren, placer miners have been greatly affected by gold’s recent downward value. Because they are most often independent operators, there is very little margin when the cost of fuel increases and the price of gold falls.

“Placer miners do not have the option of simply shutting down when the price of gold goes down as is the case for lode mining exploration and, to a lesser extent, lode mining,” explained Miller. “Placer miners are more like farmers: asset rich and cash poor. They don’t have the option to shut down as they have payments to make on equipment and other investments they made for the long term.”

The continued slide in value for gold will affect the industry by limiting exploration, said Miller, and may ultimately push miners out of the industry altogether—a challenge that he said his organization is also addressing. Like Miller, many placer miners take up the task as a second career, and he said it’s important to bring younger entrepreneurs into the field.

The challenges are many. So once again, the question needs to be asked: why are you in this game?

“The best time of the year is every spring when I return to the Atlin area,” said Miller. “Every year, I see all the miners back on the creek—it’s a fraternity of sorts and we all just enjoy each other’s company. I don’t know of any rivalry in the Atlin camp. Anybody will help anybody and you get a different attitude just driving up Highway 37. I do.

“It’s nice to recover gold but I’m not sure that’s how people look at it, to be honest. It’s a call to the North that you just enjoy.” CMJ

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September 2013 • Canadian Mining Journal |

31

| Gold in Canada

FORTUNE’S FORTUNES shine brighter Aerial view of Fortune Minerals’ NICO site and an artists’ rendering of how the mine will eventually look when construction starts in 2014.

Staff Report

I

t’s been a long 17 years since the discovery of the NICO gold-cobalt-bismuth-copper deposit by Fortune Minerals Limited of London, ON, but the company has finally received approval to put more than a hammer and drill into the ground at the property located approximately 160 km from Yellowknife in Canada’s Northwest Territories.

Like all development projects, NICO had to be cleared by a number of authorities including the Federal Minister of Aboriginal Affairs and Northern Development Canada and the Tlicho (aboriginal) Government.

Both recently approved the NICO mine and mill allowing the company to complete the process to secure primary permits for mine development. The company is now conducting site preparations in anticipation of starting construction in 2014.

32 | Canadian Mining Journal • September 2013

Fortune’s effort through the comprehensive environmental assessment process demonstrates the importance the company places on sustainable development. One resulting initiative is the inclusion of a constructed wetland as part of its closure and reclamation strategy. Fortune is working with Contango Strategies Ltd. on this site-specific solution to stimulate natural existing environmental microbes to capture metals contained in water seepage at the NICO co-disposal facility. Work at site this summer included collection of materials for the development of a dem-

onstration wetland to confirm the water treatment technology.

With more than $110 million already invested in NICO, Fortune Minerals says it’s now ready to become a “new” Canadian-based producer of gold, cobalt and bismuth and by-product copper.

The deposit has proven and probable mineral reserves totaling 33 million tonnes containing 1,085,000 ounces of gold, 82 million pounds of cobalt, 102 million pounds of bismuth, and 27 million pounds of copper – positioning NICO to provide an important supply www.canadianminingjournal.com

Photo courtesy of Cameco

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side diversification for two critical specialty metals with constrained supply.

Underscoring the importance of NICO as a secure Canadian source of cobalt is the fact that over half of global cobalt supply is from the Congo. Demand for cobalt from the rechargeable battery sector continues to grow – primarily from its use in lithium ion batteries contained in smartphones and other portable electronics, but increasingly in batteries used to power electric vehicles that are produced by all major automobile companies.

Bismuth is seeing increased use as an environmentally safe replacement for lead – benefiting from legislation such as the ban on the use of lead in solders for electronics by the European Union as a result of lead-toxicity concerns. With 15% of global bismuth reserves, NICO is of significant interest to consumers of this commodity as China accounts for 70% of bismuth production.

Fortune’s Canadian focus and potential supply security has supported its effort to secure project financing through the formation of joint ventures with strategic partners. The company has successfully focused on Asia, attracting South Korea’s POSCO as partner for their metallurgical coal project in B.C. Fortune also recently announced that Procon Resources Inc. has taken a 19.4% stake in the company. Procon is majority owned by China CAMC Engineering Co. Ltd., a leading provider of international engineering, procurement and construction services based in Beijing.

The company views this as the first step towards securing complete project financing for NICO later this year.

Mining will be done primarily by open-pit methods with underground ores also contributing mill feed during the first two years from the existing underground workings that were established from previous test mining conducted by Procon.

The ores will be processed in a concentrator at the site, using simple flotation to produce a bulk concentrate for shipment to a refinery for additional processing to high-value metal products.

At a planned mill throughput rate of 4650 tonnes of ore per day, the mineral reserves will sustain operations for almost 20 years, providing about 200 jobs annually and legacy infrastructure for northern Canada.

CMJ

September 2013 • Canadian Mining Journal |

33

| New Mining Technology

THE OPERATOR-LESS BENCH Autonomous drilling system from Sandvik Mining brings a solution to Canada’s need for additional labour.

Staff Report

T

he mining industry has brought growth and prosperity to Canada, accounting for almost five per cent of the country’s GDP. New mineral deposits are consistently discovered, allowing for additional economic growth. Canada’s growth and success, however, has left in its wake a need for highly skilled workers across several industries. According to the Mining Industry Human Resources Council (MiHR), the Canadian mining sector will require more than 100,000 skilled new hires in the next decade to sustain even slight growth. Local mining companies face many labour hurdles including: difficulty attracting and retaining candidates, a general lack of skills recognition, increased competition for top talent among industrial sectors and countries, a lack of labour market and an aging workforce. To the last point, across

34 | Canadian Mining Journal • September 2013

almost all skill sets, there are two to five times the amount of mining workers over the age of 50 than those employees below the age of 30.

In order to sustain its status as a leading player in the global mining industry, Canada might consider implementing new technologies that remove the need for human interaction, allowing equipment to work on its own. Automated technology is the answer to this challenge. In addition to providing a solution to the lack of available labour, automated mining technology is an inherent next step for the mining industry and provides benefits such as addressing safety issues, reducing costs and making operations more productive and efficient.

Forward-thinking mining companies are already implementing automated mining systems, and the rest of the industry is sure to follow. To meet evolving

needs of its customers, Sandvik Mining recently launched an automation system for rotary drill rigs, known as AutoMine® Rotary Drilling.

AutoMine Rotary Drilling is offered in three levels of autonomy. At the highest level, the supervising operator composes the drill plan from an offsite command centre. And, the command centre does not even need to be in the same country. That’s right. A single employee working in Canada can operate up to five drill rigs at one time in Australia. In fact, in addition to the operator-less bench, AutoMine Rotary Drilling offers another industry first in its operator-less drill rod changeover.

www.canadianminingjournal.com

Here’s how it works. High-precision Real Time Kinematic (RTK) GPS receivers allow for autonomous tramming between blast hole locations. Operators can pinpoint obstacles in the drill’s path through hazard avoidance cameras (HazCam), and the drilling area is surrounded by a geo fence perimeter to keep the drill from traveling into hazardous terrain. When in position, the rig levels ups, sets the mast angle to the required position and begins drilling. The machine autonomously adds drill rods to achieve the desired hole depth, and then removes them. Lastly, the drill retracts its jacks and travels to the next hole.

Throughout the operation, the machine is collecting production data such as geology, drilling times and penetration rates.

AutoMine Rotary Drilling allows for mining companies to do more with less and to do it faster. Additionally, because of the steady, controlled usage of automated mining equipment, the expected lifetime is longer than manually operated technology. The wear and tear is easily managed and the cost effect can also be controlled.

Automated technology’s simple remote monitoring capabilities provide valuable information on how the equipment is used and how efficient operations are.

Additionally, the fleet is managed by one to two operators who are located in the control room out of the production area. This allows for around-the-clock operations, where the remotely located operator(s) can supervise the process and intervene when and if disturbances occur. The technology provides less interaction with personnel, reduced manual repetitive work and improved working conditions. Further, Sandvik’s safety system has never failed within the last 10 years – meaning no accidents or incidents in operations that involve Sandvik’s AutoMine technology.

Today, Sandvik Mining has a fully functioning autonomous D90KS multi-pass rotary drill at a customer site in Australia, and a number of drills to be deployed in 2013. In addition to improved safety conditions, Sandvik’s customers can expect raised productivity through real-time process control and production monitoring functions that improve utilization, reduce risk of damage to the machine due to operator error and reduce downtime – all of which lower operational costs.

To develop its AutoMine Rotary Drilling solution, Sandvik Mining partnered with Flanders Electric, a privately owned, third-generation manufacturer of motors, power systems, and automation solutions. AutoMine Rotary Drilling is part of Sandvik Mining’s autonomous offering that covers underground and surface drilling equipment. Sandvik Mining offers a

family of automated solutions, including: AutoMine Loading, AutoMine Hauling, AutoMine Drilling, AutoMine Crushing & Screening, AutoMine Process Management, AutoMine Draw Control and AutoMine Lite. To learn more about Sandvik Mining’s equipment and tools, service and technical solutions for the mining industry, visit www.mining.sandvik.com.

CMJ

September 2013 • Canadian Mining Journal |

35

CSR and Mining

Escalating Social Risk around mining

By Marketa D. Evans

M

iners are in the business of managing risk. In recent decades, great strides have been made in areas of Risk Management related to health and safety, environment, and operations. In the management of social risk, including the risks of community conflicts and social opposition, the industry has so far taken more limited measures, even though increasing evidence suggests that social risk constitutes a material risk to mining operations.

The industry’s relationship with society is both critical and under pressure. Rising levels of public opposition and social conflict are already having impacts on operations around the world, but industry still has time to shape the future direction of this social engagement.

To its credit, the mining sector began thinking about these issues over a decade ago during the MMSD (Mining, Minerals and Sustainable Development) project. Today, there are clear signs that the challenges MMSD identified around securing social license to operate are increasing in both magnitude and consequence.

Among many other recommendations, 10 years ago the MMSD report pressed for new and constructive ways to channel community concerns and social opposition. “Without clear and effective methods of expressing grievances,” the final report noted, “they will emerge as they often do now – before institutions that are not well equipped to handle them, in social protest movements, in media campaigns and with no clear mechanism for demanding that some kind of action be taken where it may be sorely needed.”

Industry’s response, however, was inconsistent; research shows that by 2011, only 17 of the world’s 46 largest publicly traded mining companies had a grievance mechanism in place.

Social opposition, and the severity of its impact on costs and operations, appear to be on the rise, and certainly garner more media attention. In Burma, monks and villagers resist a Chinese copper project over destruction of landscapes, and fears of pollution and birth defects. Plans for a large quarry in Southern Ontario are withdrawn after broad public mobilization and opposition. Six years after three Bangladeshis died during protests against a British coal mine, the project remains stalled and protesters disrupt the annual general meeting in London. Even the appearance of more people and communities publicly mobilizing in opposition to mining projects could present a significant risk to the industry – in terms of reputation, cost inflation, 36 | Canadian Mining Journal • September 2013

Marketa Evans is the Government of Canada’s Extractive Sector CSR Counsellor. The CSR Counsellor is a special advisor to the Minister of International Trade. The Counsellor has no policymaking role and does not represent Government of Canada policy positions.

choices about land use, politicization, investor skittishness, regulation, more costly project approval conditions.

There is no question that mining investment can be a positive catalyst for improvement of livelihoods, bringing much needed investment, wealth creation, jobs, and government revenues.

However, in order to thrive in the new global social context, the industry must, as the World Economic Forum notes, recognize the difficulties communities and countries may have in adjusting, particularly in places with limited exposure to modern mining. A traditional regulatory and legal compliance lens is insufficient. Immense, rapid disruptions to traditional ways of life generate fear, mistrust and dislocation. Fears of losses and negative impacts - even fears the industry would label “unfounded” - are often stronger than faith in promises of positive benefits. For many communities, the risks are all local; the benefits are all distant. When governments fail to translate new wealth into social services and sufficient improvements in living standards, or provide robust avenues to address concerns and share information, it should be no surprise that tension results.

Public trust is critical to 21st century mining. Trust builds credibility of scientific data, resilience when things go wrong, partnerships to tackle joint problems. But there are few short-cuts to trust building. It needs continuous disclosure, information sharing, openness to engagement and dialogue. Trust-building will slow some projects down. Perhaps this explains why trust in the industry remains low. Disconcertingly, lack of trust is evident even in countries with long histories of mining and with good governance. A recent Australian poll found mining to be among the sectors least trusted “to act in the public interest,” with 60% of respondents expressing none or not much trust in the sector.

Distrust, coupled with a void of digestible information, allows rumour and misinformation to spread. Without social license and public trust, projects are subject to higher risks of conflict and resistance even if they are fully compliant with all host country laws. There is an opportunity now for industry to take the lead in understanding and addressing these issues. Building a foundation of trust through greater information disclosure, and permanent stakeholder dialogues (at both the project and the macro levels), would be excellent first steps.

CMJ email: csr-counsellor@international.gc.ca www.canadianminingjournal.com

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Unearthing Trends

Secure the present, sustain the future Zahid Fazal is a partner at EY and the firm’s Quebec mining and metals leader. He is based in Montreal.

By Zahid Fazal

G

old has been hit hard over the last few months with the price falling to its lowest price point in more than two years. We’ve seen gold prices partially recover since then, but still sit below the $1,500 per ounce. Gold miners are now faced with squeezed margins and an uncertain outlook.

Current market conditions and commodity prices are leading to cost reduction efforts, delays in discretionary capital expenditures and exploration projects and active cash management within the sector.

The key question mining companies need to address right now is how to balance between cost reduction activities and maintaining enterprise value, long term strategy and competitive advantage. Companies must act now to protect margins and to reduce exposure to current and future cost increases. This will allow them to ride out the downturn and be profitable in the current market conditions while benefiting from future commodity price booms.

According to EY’s report, Business risks facing mining and metals 2013-2014, margin protection and productivity improvement was the second biggest business risk facing miners — jumping from fourth to second in just a year. Given the decade of

higher prices, this risk was not even on the radar of mining and metals companies as little as six years ago. But today, they need to protect margins and reduce exposure to current and future cost increases. Focusing on internal cost reduction initiatives is priority for many but a number of companies are also considering divestment and other transaction opportunities to increase their access to capital.

For example, the plunge in gold prices has forced high-cost producers or those with single assets to seek partners to mitigate a potential cash crunch. On the other end of the spectrum, miners under pressure to rein in capital spending are considering spin off of assets rather than chasing acquisitions. Many miners are looking to turn assets that do not fit their portfolio into cash, and then using that cash to fund other developments.

At the end of the day it’s about reducing cost while at the same time generating cash.

Companies should consider the following initiatives to weather ongoing uncertainty: REDUCING OPERATING COSTS

•R eview investments that will drive operational improvements • P rioritize operational improvements that address high cost operations

• F ocus on high grade assets • P rioritize improvements within the supply chain • L ook at strategic sourcing and consolidate spending • Cancel or reduce supplier costs • L ook at potential partners to share in infrastructure investments • Consider business process improvement • E valuate alternate low-cost delivery models for back-office functions

ACTIVE CASH MANAGEMENT / CASH GENERATION

• Optimize inventory • I ncrease working capital management • I mplement debt reduction strategies •C onsider divestments of non-strategic or noncore assets

Understanding what cost reductions need to be focused on, how quickly they can be implemented, what the payback period is, and how long they can be sustained are all part of a well-managed framework that can respond to changing conditions. Companies that address the current market conditions and drop in gold prices by adopting a margin protection and productivity improvement program will be best positioned to survive in the near term, and better placed to thrive when the price of gold begins to rise again, as it inevitably will.

CMJ

Canada’s Power House in Mining Generator Systems Largest OEM fleet of in-stock systems in Canada for immediate sale, lease or rent • Standby and prime power systems custom-built from 12 kW to 2 MW • Natural gas or diesel • Mobile or stationary • Pit, underground, camp applications • Dual voltage systems • Turnkey service and maintenance contracts available 1911-173I CMJ 7x2.25 4C.indd 1

38 | Canadian Mining Journal • September 2013

1.800.690.2396 www.sommersgen.com Authorized

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18/01/13 10:21 AM

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