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Departments 5 Editorial

This month Editor Russell Noble talks about the life and death of mining companies and how the industry’s image is being clouded in the eyes of future miners thanks to the recent instability of some mining companies.

7 Investing

Ned Goodman’s regular ‘Investing’ column looks at ‘debt’ and how the world’s economy is volatile, uncertain, complex, ambiguous and “quite scary” from an investment perspective.

8 Law

Norton Rose Fullbright Canada’s Adrienne Oliver discusses tax considerations for Canadian mining companies working abroad.

29 Company Profile This month American Vanadium

Corporation of Vancouver is the featured company in CMJ’s company profile department.

42 Unearthing Trends

Bruce Sprague, a partner and EY’s National Mining and Metals Practice Manager in Vancouver, looks at the New Year by talking about Risk Management.

CANADIAN Mining Journal CONTENTS

Coast-to-Coast-to-Coast (A look at some of Canada’s more rugged sites)

9 Only the strong survive

An introduction to some of Canada’s more adventurous mining companies.

10 Arctic miners

Canada’s 162,000 km of Arctic coast line is home to dozens of companies currently working in this harsh and unforgiving part of the country.

16 Hot prospects in cold place

Baffinland Iron Mines gets closer to iron ore production at Mary River site on Baffin Island.

20 Water is key to

Arctic success

Water management, like anywhere in the world, is a key to successful mining in the Arctic.

24 Yukon mine steps out

Minto Mine continues to grow in Yukon’s mining district near Carmacks, about 250 km from Whitehorse.

32 Busy times in

Newfoundland

A look at exploration and mining around the island. ’

CANADIAN Mining Journal c

January 2014

www.canadianminingjournal.com

ABOUT THE COVER This month’s cover graphically depicts the ‘glow’ of activity that’s taking place on or near Canada’s three coasts.

38 AME BC

One of Canada’s more important mining-related events takes place in Vancouver this month

COAST-TO-COAST-TO-COAST

MINING A look at some of Canada’s more rugged sites

PLUS:

HERE’S A LOOK AT WHAT’S HAPPENING

B.C.’S MINERAL EXPLORATION ROUNDUP

Coming in February

Canadian Mining Journal will take a look at “Mining in Ontario.”

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

January 2014 • Canadian Mining Journal |

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Editorial

CANADIAN Mining Journal January 2014 Vol. 135 — No. 1 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

Too many Obituaries, not enough Want Ads By Russell Noble

bituaries, unlike Want Ads, are taking up more space in our newspapers lately and sadly, so too are the Circulation Manager number of deaths involving mining comCindi Holder 416 442-5600, ext. 3544 panies and subsequently, the job opporcholder@bizinfogroup.ca tunities they once offered to skilled and Publisher willing workers. Robert Seagraves 416 510-6891 Barrick Gold’s and Cliffs Resources’ rseagraves@canadianminingjournal.com recent issues involving their grand projSales ects in South and North America respecWestern Canada, Western U.S.A. Bonnie Rondeau tively are perfect examples of ‘death-and416-510-5245 hope’ situations (much like Obituaries brondeau@canadianminingjournal.com Toll Free Canada: and Want Ads) because they have result1-800-268-7742 ext 6891 or 5245 ed in headlines around the world that Toll Free USA: 1-800-387-0273 ext 6891 or 5245 have not only cast doubt on the individGroup Publisher ual companies, but they have also caused Doug Donnelly disappointment within the ranks of President Vice-president shareholders and future investors alike. Bruce Creighton Alex Papanou And by ‘future investors’ I don’t mean Established 1882 Canadian Mining Journal provides articles and information of practical people with money to gamble on mining use to those who work in the technical, administrative and supervisory aspects of exploration, mining and processing in the Canadian mineral exploration and shares, but people in our schools right mining industry. Canadian Mining Journal (ISSN 0008-4492) is published 10 times a year by Business Information Group L.P. BIG is located at now who are contemplating their futures 80 Valleybrook Dr., Toronto, ON, M3B 2S9. Phone (416) 442-5600. in careers that once included mining as 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 an industry offering a lifetime of opporfor 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 tunities. obtain the permission of the owner of the copyright. For further information Fortunately for the most part, it still does please contact Russell Noble at 416-510-6742. Subscriptions — Canada: $47.95 per year; $76.95 for two years. USA: US$60.95 because as we all know, the industry isn’t 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. going to dry up and blow away like many of GST registration # 809744071RT001. the jobs at Barrick and Cliffs did recently. 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 But, I am afraid that as mining 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; approaches its seven-year cycle between E-mail: privacy officer@businessinformationgroup.ca; Mail to: Privacy Officer, recession-and-recession (2008 and 2015, Business Information Group, 80 Valleybrook Dr., Toronto, ON, M3B 2S9. Publications Mail Agreement #40069240. PAP Registration No. 11000. We as predicted), next year’s graduates will acknowledge the financial support of the Government of Canada through the Publication Assistance Program towards our mailing costs. Return undeliverhave to make some really tough deciable Canadian addresses to: Circulation Dept., Canadian Mining Journal, 80 Valleybrook Dr., Toronto, ON, M3B 2S9. E-mail: bigcirculation@bizinfogroup.ca sions in their final year before entering Canada Post: Publications Mail Agreement PM40069240. Please forward the workforce as to where they want to Forms 29B and 67B to 80,Valleybrook, Toronto, ON M3B 2S9. go when they get their degrees. Canadian Mining Journal, USPS 752-250. US office of publication: 2221 Niagara Falls Blvd., Niagara Falls, NY 14304-5709. Periodicals Postage Paid at Niagara Falls, As more and more students go for NY. US postmaster: Send address changes to Canadian Mining Journal, PO Box 1118, Niagara Falls NY 14304. their MBA’s, or other Master’s degrees in We acknowledge the financial support of the Government of Canada through the Canada Magazine Fund toward our editorial costs. one field or another, their sights may change drastically because of the everincreasing number of headlines they read about mining companies folding, or as in cases of Barrick and Cliffs, pulling in the reigns and putting their business plans on hold. It may take these companies a few years Canadian Business Press Indexed by Canadian Business Periodicals Index roduction Manager Print Production Manager P Steve Hofmann Phyllis Wright

to get their houses back in order, and they most likely will, but in the meantime, what’s the future of mining hold for those students on the verge of making one of the bigger decisions of their lives? Many students studying mining today probably have mining buried somewhere in their roots and thankfully for their parents or grandparents, they’ll see through the questionable future that mining is offering them right now and they too, will make a living from some aspect of mining. However few will become true miners because, quite honestly, most students nowadays don’t want to get dirty at anything they do. And that goes beyond mining. In fact, most of the university graduates I’ve met recently have no intentions of working “in the field” of their chosen field, per se. They’ll gladly work on dirty jobs from the comfort of a desk and computer but when it comes to wearing boots and overalls, that’s often beyond any realm of consideration. Sure there are exceptions to every rule but I find those exceptions are the kids who grew up and still live in some of the more remote parts of the country. And here’s why. Rural kids, especially those from communities hundreds, even thousands of kilometers away from urban centres, tend to appreciate things more, and by things I mean just about every….thing(s). Sorry about the grammar, but you know what I mean. Rarely does anything come easy to people living in rural communities and while it’s often no picnic for many living in urban centres either, by and large it’s tougher up north and like I alluded to earlier, that toughness is a way of life and one that I feel makes for better miners. And that is why I think the kids of the north are better suited for mining. Like the mines themselves, they are part of the land and Canada is richer for both. CMJ January 2014 • Canadian Mining Journal |

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Investing

A scary look at investing Ned Goodman is President and Chief Executive Officer of Dundee Corporation

By Ned Goodman

ne of the lessons of history is that a country that can achieve technological innovation and profitable geopolitical expansion can somehow grow its way out of a mountain of debt. The current confusion that best describes the state of the world’s economy in which we live – is volatile, uncertain, complex, ambiguous and quite scary from an investment perspective. There are some who feel that we are living in a “new normal” of volatility and total uncertainty of the global economies and the interconnected financial markets. We are working hard to adopt and develop pockets of profitable opportunities and creativity and entrepreneurship have become necessary on a daily basis, but do we worry enough about and plan for the deflation which is currently obvious or inflation which is a certainty sometime in the near future? The global economy is undergoing a large change and for many in the traditional West, it will not be for the better. We should expect a crisis that could be as severe as the 1933 end of the gold standard, and the fixed exchange rates and change of gold backing for the U.S. The build up of debt in the last 40 to 50 years will have profound global economic effects. The choice for the debtors to either Inflate; Stagnate; or Default is all that is left for the world to consider. A well-worn joke about financial economists is that: “If you ask any three about the future course of business activity, you

will get about four different answers.” However, today’s discussions about economic forecasts usually leads to the supposition that we are coming out of the recession that really started in 2000 and burnt us badly in 2007 and 2008. Despite the overall abundance of U.S. domestic, fiscal and monetary uncertainties as well as many unanswered questions related to Obamacare, infrastructure, taxes and whatever, business economists show a surprising unanimity of opinion that seems to indicate that the U.S. economy’s rate of expansion will be robust in 2014. This, and almost this general view alone, is what is keeping the U.S. stock market in a positive and illusionary mode. There is today an unfortunate investment view that seems to assure the bullish types that the U.S. Federal Reserve will continue on an uninterrupted basis. There is, overall, no thought being given to the thought that at some stage, 10-year bond yields will return to the 4% to 5%” or more range at which point the U.S. Fed’s balance sheet will display remarkable losses on a market to market basis. The Bullish believe that the country can just keep on printing even through the Federal Government already owns more than 60% of all the 10-year U.S. debt. The problem also gets magnified because vast amounts of money are flowing into mutual funds at a pace not seen since the last major market top. Mutual fund investment managers are coaxed and ordered by their large financial institutions to make sure that their

funds participate in a rising market. In addition, their bogey is always “be sure to be at the index level or above.” Mutual fund inflows are at record highs and the money is creating higher and higher bubble-like index numbers which to the writer is remindful of former major market tops which would be a third and final major top rather than a breakout to new much higher levels. The US stock market is a portfolio of illusions. As a Chartered Financial Analyst I look at countries in the same manner that I study businesses. Any country’s currency valuation is similar to a company’s stock price and the U.S. dollar is going down and its debt and deficits are going up. Its income statement is not supportive of the country’s needs and thus they absolutely need to print currency through quantitative easing. The U.S. balance sheet leaves a lot for an analyst like me to be concerned about how they can keep their reserve currency status, without which they will not be able to sell their bonds on a global basis and raise the deficit required money. They do not look so good when you look at household debt as well. The largest item on the balance sheet is the education loans taken out by a host of unemployed 20 year olds who have no jobs or ability to ever repay. In fact, many of them might not even complete their University studies and remain part of the falsely stated unemployment numbers existent in the U.S. and that leaves a lot to be desired as well. CMJ January 2014 • Canadian Mining Journal |

Law

Tax considerations for cross-border work Adrienne Oliver is a Partner and National Co-chair, Tax, Norton Rose Fulbright, Toronto.

By Adrienne Oliver

hen Canadian employees of Canadian mining companies work abroad, a number of tax issues arise for both employer and employee. With advance planning, and a combination of tax, employment law and immigration advice, the risks can be managed. So what are the top tax issues that should be considered by Canadian mining companies sending Canadian employees on temporary cross-border work assignments?

1. RESIDENCE: Canadian employees considering a foreign assignment must understand the personal tax implications. The key issue will be determining whether the employee will remain a Canadian tax-resident or will become a tax-resident of the country in which the employee will temporarily work (the host country). Both domestic tax laws and any income tax treaty between the two countries must be considered. Generally, the country in which the employee is considered a tax-resident will have the right to tax the employee on the employee’s worldwide income, while the other country will have the right to tax any income “sourced” from that country. Employment income will generally be sourced from a country when the employee physically performs employment services in that country. For example, if an employee working temporarily for a period of 6 months in the US is considered a Canadian taxresident, and a non-resident of the US, the employee will be subject to Canadian tax on the employee’s worldwide income, and will pay US tax on the employee’s US-source income. 8 | Canadian Mining Journal • January 2014

2. TAX CREDITS: Without any relief, the employee in the example above would be subject to tax in both Canada and the US on US-source employment income. But under Canadian tax laws, residents are generally entitled to a foreign tax credit (FTC) in respect of any foreign tax paid. The employee in this example would generally be required to file a US tax return and pay US taxes on the US-source employment income— and then file a Canadian tax return claiming an FTC. The employee would ultimately pay tax at the higher of the tax rates applicable in Canada or the US. Canadian-residents working abroad for a Canadian employer for at least 6 months in certain industries, including mining, may also be eligible for an overseas employment tax credit (OETC). However, the OETC is being phased out and will no longer be available after 2015. 3. PAYROLL WITHHOLDING OBLIGATIONS: An employer of a Canadian-resident employee is generally required to withhold Canadian income tax from the employee’s pay, regardless of whether the employee is working inside or outside Canada. The employer may also be required to withhold host-country income tax where an employee is working abroad. This can result in cash flow issues for the employee because the employee’s “take-home” pay throughout the year may be reduced by withholdings in both jurisdictions. Employers may also be required to make Canadian payroll deductions (Canada pension plan and employment insurance) and similar host-country deductions. Relief from double-withholding for

income tax and payroll deductions is available in certain circumstances, but the process of seeking such relief takes time. 4. TAX REIMBURSEMENT ARRANGEMENTS: It is common for employers asking employees to go on assignments abroad to offer a tax reimbursement arrangement. Typically, such arrangements would reimburse the employee for any taxes payable by the employee in excess of what the employee would normally be liable for in Canada. 5. TAXATION OF EMPLOYER: A Canadian employer sending one or more employees abroad must also consider the tax implications to the corporation. An employer may find itself liable to file tax returns and pay income tax in countries where its employees work. Each country will have its own rules for determining when a corporation is subject to income tax, but generally, a corporation may be taxable in a country in which it carries on business. An employer can generally be considered to carry on business in any place in which its employees are located, therefore, it will be important for an employer to consider its compliance obligations and tax liability in an employee’s host country. Canada’s income tax treaties may provide relief from foreign taxes in such circumstances. Canadian mining companies sending an employee abroad must address the corporate and personal tax implications of the foreign work arrangement on a timely basis. With advance planning, an employer can minimize the chance of any surprises and maximize the likelihood of a successful arrangement. CMJ www.canadianminingjournal.com

| Coast-to-Coast-to-Coast Mining

STRONG

Where only the

SURVIVE A look at some of the more remote mines in Canada

By Russell Noble

oast-to-Coast-Coast mining in Canada is the main theme of this issue and while the projects featured on the following pages range in nature from mature to infant in their various stages of development, the commonality between them all is their location. From the picturesque shores of Labrador and Newfoundland, to the remote and hostile settings in the Arctic, to the mountainous and wind-swept B.C. coast, the projects in this issue are all located in somewhat isolated places that have required foresight and physical risk to develop.

In fact, many of the projects are in places that most Canadians are unfamiliar with because they’re in parts of Canada that rarely get mentioned outside of documentaries focusing on the environment or endangered wildlife. Mining projects on, or near Canada’s three coasts are equally worthy of documentaries because of their locations alone, but for those involved with working at these remote sites know, words and photos cannot tell the full story of what it’s like to work and live under some of the more extreme conditions Mother Nature has to offer. The bitter cold and high winds of win-

ter, followed by driving spring rains and hot and bug-infested summers, capped by 24 hours of darkness as the calendar reaches its last page, are contrasting elements that only those hardy men and women who work the mines can truly describe. Working under these extreme conditions is a true test, but it’s a test that Canadian mining companies pass with flying colours. The following projects are just a sample of what’s going on in the far reaches of this country to help ensure that the rest of Canada and the world for that matter, have a steady supply of minerals needed to keep economies strong. CMJ January 2014 • Canadian Mining Journal |

| Coast-to-Coast-to-Coast Mining

ARCTIC HORIZONS

FRIGID ARE GETTING LESS

NEW RESOURCES EMERGE BECAUSE OF DIMINISHING ARCTIC ICE PACK By Northern Correspondent Bill Braden

he resource environment along Canada’s 162,000 kilometres of Arctic coast line, the lion’s share of it along Nunavut’s mainland and island archipelago, is daunting to say the least, but thankfully the wind-chill factors aren’t as brutal as they used to be. At least that’s what you’d gather by the hardy few who are now proving the Arctic coastline is finally thawing on several fronts; including the emerging resource surge thanks to the diminishing Arctic ice pack. It is paradoxically a sobering sign of global warming and a welcome boost to the viability of Arctic shipping, unlocking what geologists have always said is the world’s next great storehouse of minerals and energy. But it gets complicated. The support systems needed for Arctic mines and mariners - weather and ice monitoring, rescue and recovery assets, political jurisdiction, insurance - are still being sorted out here in Canada and on the international political stage. Nevertheless, shipyards are already building new ice-ready hulls commissioned by carriers anticipating new polar customers. The NWT and Nunavut now count only five producing mines, but coastal projects alone in the next three years could potentially add another three. Following is a survey of the front runners, and a few of the long shots, on the Arctic horizon. 10 | Canadian Mining Journal • January 2014

www.canadianminingjournal.com

A look at where companies are working.

Photo by Peregrine Diamond Mines.

January 2014 â&#x20AC;˘ Canadian Mining Journal |

| Coast-to-Coast-to-Coast Mining COAL:

DIAMONDS:

Peregrine Diamonds Limited’s blockbuster news of early December, 2013, vaulted it into the stratosphere as the one of the world’s richest diamond finds yet. Boasting 2.7 very high-quality carats per tonne from its CH-6 strike, it makes the Chidliak cluster, which so far numbers 67 kimberlites six of them potentially economic - a prime candidate for future production. Just 120 kilometres northeast of Iqaluit, and even closer to tidewater on its eastern flank, Chidliak too will depend almost entirely on coastal transport. Peregrine still has a ways to go to actually prove it is a mineable resource, advising that over 201415, field programs will take the pipe to the feasibility stage and more bulk sampling. It was welcome news for the diamond hunter, as De Beers Canada in October pulled out of an earn-in and joint venture agreement on the Chidliak project. Peregrine now has to raise the cash to replace De Beers’ deep pockets, a chal-

Bulk samples from Peregrine.

lenge no doubt made somewhat easier by the sparkling results from CH-6. From base metals on the borders of Northwest Territories and Yukon, to gold and iron ore on the northern extremes, to diamonds at the eastern-most part of Nunanvut, Canada’s Arctic contains riches beyond calculation. The minerals in this massive part of

Nunvut’s longest of its long-shot projects might be Canada Coal Incorporated’s play on Ellesmere Island, where exploration going back 30 years suggests a world-class coal resource exceeding 20 billion tonnes. The project is perhaps decades from economic viability. Among the challenges is that it has barely two months of open water. Equally difficult is winning the support of local Inuit. The island’s sole community of about 140 people in Grise Fiord has staunchly opposed future exploration over wildlife and archaeological concerns. That’s precisely what the company needs to do: find out just how much of the deposit is high-value metallurgic coal and define an NI 43-101 compliant resource. Efforts to resolve the impasse continue.

Canada are the envy of the world and thanks to the companies mentioned in this article, and the others working on projects in the Arctic, Canada’s reputation as a leading mining country remains intact.

A diamond drill plumbs MMG’s Izok prospect in Western Nunanvut. Photo by MMG Limited.

BASE METALS: After changing hands numerous times in the past decade, the Izok Lake massive zinc-copper zone on the NWT/Nunavut border now belongs to Australian multinational MMG Limited. Even though it’s 350 kilometres inland, Izok’s bulk product has to have ocean-going transport to be viable. And that makes it enormously complicated; MMG has scoped out Gray’s Bay, just west of Bathurst Inlet, for its deep sea port and a very long all-weather road across storm-blown Barrenlands. That’s a feat that’s never been attempted at that scale. 12 | Canadian Mining Journal • January 2014

The complexity, size and cost of the venture caused MMG to put a hold on its environmental review to late 2014, as it looks at alternative engineering options and more exploration. It has already outlined plans for a two million tonne per year concentrator, feeding 10 to 15 ships a year in an 80-day summer and fall window. Junior explorer Darnley Bay Resources Limited has recently emerged from the shadows with news in October, 2013, of another massive geologic anomaly on its 14 million acres south of Paulatuk, 400 kilometres east of Inuvik.

Darnley Bay is still trying to figure out just what it has. It does know, from geomagnetic and gravity surveys and 1994 Geological Survey of Canada assessment, that it hosts massive signatures similar to copper-gold-nickelplatinum fields such as Ontario’s Sudbury, Russia’s Norilsk and Newfoundland’s Voisey Bay. It has also found evidence of diamonds, and has an options agreement with Diadem Resources Ltd. for future diamond development. It hopes to continue further geotechnical surveys of the intriguing ground. www.canadianminingjournal.com

Remote drilling and working conditions.

Aerial view of TMAC Resources’ Hope Bay gold project.

GOLD:

Nunavut’s sole operating mine is the Meadowbank gold property, the 360,000 ounce per year producer owned by Toronto-based Agnico Eagle Mines Limited. While it’s some 300 kilometres inland from Hudson’s Bay, it is supplied by ship and barge, and is the model for how to develop a sister gold deposit, the Meliadine, a mere 25 kilometres from tidewater at Rankin Inlet. Economical ocean transport, plus the modern infrastructure and workforce in Rankin Inlet, gives the Meliadine project enormous advantage over most start-ups in Nunavut. Agnico Eagle has built progressive social and business relations with the region, an investment that should pay off when it starts to pour the Meliadine’s estimated 3 million ounce gold reserve. The company has not said when that might be, and is now focused on definition drilling over its 80-kilometre-long strike zone, permitting, and ramp development. TMAC Resources picked up the Hope Bay gold-silver find early in 2013, 25 years after BHP Billiton found it and just months after Newmont Mining walked away from its $1 billion-plus investment in favour of more attractive options. A seasoned team of miners formed TMAC exclusively to take on Hope Bay, raised cash and restarted research and drilling programs. In November, 2013, it released what it called a “robust” preliminary economic and resource estimate.

Robust indeed: the Doris, Madrid and Boston pockets carry an estimated 2.25 million ounces, to be mined over 10 years starting in 2016. It has applied to re-permit the Doris operation and start mining this year. The project, 160 kilometres southwest

of Cambridge Bay, has extensive infrastructure already in place along with land and ice routes linking it with Robert’s Bay, 40 kilometers from the Arctic Coast. Fuel and drygoods will be freighted and barged in and stockpiled for winter delivery to site.

January 2014 • Canadian Mining Journal |

| Coast-to-Coast-to-Coast Mining IRON: Baffinland Iron Mines Corporation’s Mary River project, (featured in the article on Pages 16-19) is 1,000 kilometres northwest of Iqaluit in north Baffin Island and is set to be a social and economic game changer for the whole region. The lure is four ore bodies of incredible purity: Deposit No. 1 alone holds 350 million tonnes grading 64 per cent iron, rich enough to feed European smelters without processing. Last year, Baffinland radically trimmed initial plans to invest $4 billion in development, including a 100-kilometre railway to tidewater and an ore carrier departing every two days. The more modest $740 million plan, announced in September of 2013, calls for open-pit mining and trucking 3.5 million tonnes a year starting in 2015. That will ramp up to 20 million tonnes a year by 2020 once rail and expanded port facilities are built. The company completed its 2013 sealift in October, with 12 ships landing 32,700 dry tonnes of construction supplies and 33 million litres of fuel. Weekly crew change flights by Boeing 737 started that month from the KitchenerWaterloo airport, via Iqaluit, with Quebec-based Nolinor. Advanced Explorations Incorporated’s combined Roche Bay and Tuktu deposits on the Melville Peninsula in central Nunavut could easily rival Baffinland’s. With inferred and indicated resources of over 1.3 billion tonnes, the find has considerable transportation advantages -- it’s at tidewater with a natural deep water port and a very fortuitous nine-month shipping window. AEI is aggressively assessing the two deposits, planning a drill program for 2014 to pinpoint where the most profitable direct-ship ore can be found. A $50 million definitive feasibility study is expected sometime in 2014. The company has secured off-take and partnership agreements with two Chinese buyers, and projects a $1.37 billion investment that could see ore shipped as soon as 2017. The start-up calls for 5.5 million tonnes a year growing to 8 million over at least 20 years. A first for the Arctic could be to use LNG (liquefied natural gas) instead of diesel energy plants typical of remote mines. It is also looking at modular plant and site buildings, prefabbed off-shore and brought in by ship.

Power projects need people power www.valard.com

14 | Canadian Mining Journal • January 2014

Photo by Baffinland Iron Mines.

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| Coast-to-Coast-to-Coast Mining

HOT

PROSPECTS IN A

COLD CLIMATE

By Russell Noble

t’s the largest island in Canada, the fifth largest in the world*, and it contains some of the most beautiful land and seascapes on the planet, but Baffin Island is also one of the harshest and most unforgiving places on earth when it comes to Mother Nature and her weather conditions. It’s a place where trees can’t grow, songbirds are rare, and perhaps most of all, it’s an extremely cold place where the sun comes in seasonal divides. From November to January, the island experiences nearly 24 hours of darkness with less than two hours of twilight. On the flip-side of the calendar, there is continuous daylight from May to August. During the spring and fall months, it’s a gradual fade from dark to light and light to dark, respectively. At first glance, Baffin Island seems to be an uninviting place, *The four islands larger than Baffin Island are Greenland, New Guinea, Borneo, and Madagascar.

16 | Canadian Mining Journal • January 2014

but look a little closer at the more than 11,000 people who live there because they love this massive rock at the top of the world that they have always called “Our Land.” It’s the only home they know, because most of the residents represent generations of Inuit people who have always lived on the island. Much like their surroundings, the Inuit of Baffin Island are a rugged and stoic bunch. More recently, Baffinland Iron Mines of Toronto is demonstrating the same characteristics, having persevered since 2005 working on its Mary River Iron Ore Project in the northwest part of the island. Located about 3100 km north of Toronto and just 500 km west of Greenland, the Mary River mine site is, to put its location in perspective, about as far north as Guatemala is south of Toronto. It is, as Baffinland’s President and CEO Tom Paddon says, “The first large open-pit mine planned within North America at this latitude.” He goes on to say that, “The climate conditions www.canadianminingjournal.com

Two images clearly show the harsh and bitterly cold conditions that both men and machines must endure during the winter at Baffinland’s Mary River iron ore site on Baffin Island.

Safety First, Always Because of the Mary River mine site’s location and often limited access thanks to seasonal weather conditions, Baffinland lives by its Health and Safety motto, ‘Safety First, Always.’ Since the company arrived at the site, it has been working diligently with federal and territorial authorities to develop a formal Project Plan that would make safety a priority, both for people and the environment. In terms of healthcare, in November, Baffinland signed a Memorandum of Understanding with the Government of Nunavut’s Department of Health covering such topics as Air Ambulance Medical Evacuation, medical examinations, and an on-site Health services plan amongst other things.

play an important role in the planning and execution of this project as the area experiences very cold temperatures that average minus 30 degrees Celsius in the winter.” These extreme conditions are typical of Arctic environments, and Paddon adds that they require a great deal of consideration in the planning and logistics relative to almost everything that goes on at the site, but especially from a safety perspective for the people who work there. Tom Paddon says, “The Mary River Project will not be a fully operational mine for some time yet. The advantage of this time frame, in terms of health and safety, is a clean slate for developing a culture that embraces the belief that zero harm is possible. We have the opportunity to embed this culture of safety right from the planning stage and we want every person who works for us and with us, now and in the future, to be fully compliant with the highest of safety standards.”

First Discovery Getting to Baffinland’s current point in the development schedule for the Mary River iron ore mine – the construction phase – has been a monumental task to which many mining companies can relate. Like all projects, it started with a vision, dating back to 1962 when prospectors Murray Watts and Ron Sheardown discovered, through airborne reconnaissance, a massive high-grade iron ore deposit of world-class proportions. Located exactly at 71o 19’24”N, 079o 12’38”W, the Watts/ Sheardown discovery had a total strike length of about 4 km and contained a resource estimate, in measured and indicated categories, of more than 350 million tonnes at an average grade of 64 per cent. Since that time these numbers have only grown, both in terms of overall size and grade. It was a huge discovery and since 1962, the property has gone through periods of interest and dormancy as iron ore prices rose and fell. While the future price of iron ore is obviously important to the project, what has really changed in the last few decades is the knowledge and experience of the mining industry in terms of unlocking remote sites and bringing projects to development safely, responsibly and on budget. Paddon and his team have a proven track record which they are bringing to the Mary River Project. Because of its geographical location, mine development has required early and extensive planning and coordination between equipment operators, surveyors, mine planners and geologists. January 2014 • Canadian Mining Journal |

| Coast-to-Coast-to-Coast Mining Mary River camp with Deposit #1 in background.

Plane landing at night at Mary River.

Heavy machines at work at Mary River .

One of many sealifts at Milne Inlet.

Under Baffinland Iron Mines, the Mary River Project underwent an extensive environmental impact assessment lasting for five years, which culminated on December 28, 2012 with the Nunavut Impact Review Board issuing a Project Certificate. The receipt of the Project Certificate paved the way for the Class A Water License process that was completed with the Nunavut Water Board in July 2013. “With the Inuit Impact Benefit Agreement and Commercial Production Lease in hand, Baffinland was able to safely and effectively make its first sealift of materials to the site,” said Paddon. “And this was no small lift.” he added. In fact, Ron Hampton, Baffinland’s Vice-president and Project Director said: “In total, nine dry cargo and three fuel vessels were utilized, safely transporting 32,700 tonnes of cargo, 33 million litres of Arctic diesel and 2.1 million litres of Jet A fuel.” In order to complete the enormous mobilization effort, Baffinland contracted two majority Inuit-owned companies: 18 | Canadian Mining Journal • January 2014

Nunavut Sealink and Supply and Nunavut Eastern Arctic Shipping to oversee the shipping and delivery of materials. “With over 200 million dollars worth of materials and equipment now on site, construction activities are well underway and continuing through this winter at both Mary River and Milne Port in anticipation of the first ore production in 2015.” Early Revenue Phase The company’s initial Project consisted of mining iron ore from the reserve at Deposit No. 1 at a production rate of 18 Million tonnes per year (Mt/a). The Nunavut Impact Review Board (NIRB) issued the Project Certificate for this Project on December 28, 2012. On January 13, 2013, Baffinland informed the Nunavut Impact Review Board (NIRB) that, due to various global business drivers, Baffinland was proposing to make changes to the schedule and specific activities in the initial stages of the development associated with the Mary River Project. An Early Revenue Phase (ERP) at a lower production rate has since been started, although at more than $750M, it’s still an impressive initial investment. Initially, for the Early Revenue Phase, 3.5 Mtpa of iron ore will be mined, transported by trucks to Milne Port and shipped to markets from Milne Port during the open-water season. As global markets improve, Baffinland will turn its attention to the construction and operation of the larger Approved Project which includes a railway link for the transportation of ore to Steensby Port and, the construction and operation of a year-round port facilities at Steensby Inlet for the shipment of iron ore. The key advantages of the ERP approach include; the reduction of initial capital requirements and the generation of early revenue and open water shipping during the Early Revenue www.canadianminingjournal.com

A daylight look at soft camp and runway.

Work continues on road to Mary River.

Phase, while enabling Northern communities to adjust to training, jobs and business opportunities. The existing Tote Road will be upgraded to enable transportation of ore by truck from the mine site to Milne Port where further work will take place to accommodate a 3.5-million tonne ore stockpile, an ore dock, maintenance facility, and associated infrastructure for the operation of the port facilities and the shipping of iron ore during the open water season. The road to a fully operating mine The nature of the mining industry is such that it requires high upfront investment, contains a notable level of risk and a relatively long period of time to market from the exploration phase. For the Mary River Project it is no different – the execution of the Approved Project requires a large financial undertaking by Baffinland and its owners (50% ArcelorMittal and 50% Nunavut Iron Ore (NIO), with Baffinland as Project Operator). Although the financial returns generated by this investment could prove very attractive, the Approved Project, as planned in the Project Certificate, has two main risks; the funding requirement is large, with 4 years of construction prior to revenue, and there have been global market and economic uncertainties in the minerals sector. The Approved Project will be fully executed if/when infrastructure debt financing becomes available and markets improve. In the meantime, the infrastructure developed for the Early Revenue Phase will serve in part for the construction of the Approved Project. “Baffinland is committed to building and operating the Mary River Mine,” say CEO Tom Paddon. “Right now, the Early Revenue Phase is a good solution that keeps the project progressing while giving us more time to consider all aspects of the

More cargo arrives by ship.

operational mine and its impacts. Our vision remains to safely and efficiently identify and develop resources within Baffin Island, unlocking their wealth-generating potential to the benefit of all stakeholders. As an undertaking based on the principle of mutual benefit, we firmly believe that the Mary River Project will contribute to the development of infrastructure, skills training, employment and business opportunities for the people of Nunavut.” Editor’s Note: In keeping with Baffinland’s motto: “Safety First. Always” it should also be noted that an advanced thermal treatment system for handling solid and liquid waste has been designed and installed at the site by Eco Waste Solutions of Burlington, ON. And, of further interest, the company and its ECO Mobile units were recently named the winner of the prestigious Deloitte Technology Green 15 Award. The Award recognizes companies that create technological solutions that reduce environmental impacts while improving operational performance and productivity. CMJ January 2014 • Canadian Mining Journal |

| Arctic Mining

WATER RIGHT IS

ESSENTIAL FOR SUCCESS IN THE

ARCTIC By Emily Moore*, Lisa Babel* and Tony Trollope*

f all the issues facing mining operations in the Arctic — punishing distances and extreme cold among them -- one of the biggest factors differentiating a project from becoming a “success” or a “costly learning experience,” is the management of water. As new projects are located in more marginal areas and regulations are increasingly tightened for existing mines, the use and management of water is becoming an ever more critical concern for mine viability and profitability. As a result, consideration of water issues early in project development is essential for project success. This is especially true for mining in the Arctic, where water issues are compounded by water availability, water management, water treatment and discharge to pristine receivers, and changing water regulations. Many mining companies have found 20 | Canadian Mining Journal • January 2014

that water issues loom ever-larger in their operations in the North. Arctic-specific water management issues mean that mining companies in the North that fail to take water seriously may find that costs increase, timelines stretch, and both financing and profitability evaporate. Subsequently, their relations with regulators, political leaders and local community members may become strained. What are some of the key water management issues in the Arctic?

NEAR-DESERT CONDITIONS: Anyone

flying over parts of the Arctic, seeing a lake-covered landscape, might think it is a water-rich area. However, due to the low temperatures (low evaporation), the ground conditions of permafrost (low infiltration) and minimal vegetative cover (low transpiration), this is not the case. In

fact, the water in these lake features is not representative of sustainable water supply sources, and is more a function of limited natural losses. Most riverine systems cease flowing during the winter and in the majority of cases – freeze to bottom.

FLOOD FLOWS AND PEAK FLOOD CONDITIONS: Conversely, due to the perma-

frost (low infiltration), minimal vegetative cover and the seasonal accumulation of snow; flooding peaks can be quite high during the spring freshet (melt season) which lead to flood flows that do not seem to be reflective of a near-desert environment. Consequently, these conditions require significant planning for stormwater conveyance and storage features. Seasonal water availability: With most of the water frozen for up to ten months of the year, it is difficult to access surface water, partly because many lakes and www.canadianminingjournal.com

watercourses freeze to the bottom. In addition, environmental regulations in some jurisdictions place tight limitations on how much surface water can be extracted from larger lakes in order to ensure that there is always sufficient water to maintain aquatic habitat.

LIMITED GROUNDWATER SUPPLIES:

In permafrost, groundwater flow is negligible to non-existent. The permafrost can be up to 500m thick. In addition, groundwater contained in sub-permafrost zones is usually of low quality due to high total dissolved solids (TDS) and limited quantity. On the other hand, this is not always the case as “talik” zones (areas of non-permafrost soils) can be found underneath existing lakes. These zones need to be assessed for their potential intersection with underground mine operations.

COLD CONDITIONS: Extremely low tem-

peratures make it difficult and expensive to operate and maintain pump, intake, pipeline and treatment systems during winter. Furthermore, the design and sizing of conveyance channels, impoundments and outfalls need to account for ice buildup, ice damming, aufeis (anchor ice formation), snow accumulation and freezing of water within the system, thereby removing effective conveyance or storage. Additionally, the design of mitigation measures has to include the assessment of the increased cost of excavation in permafrost and the need to limit the extent of potential environmental impacts.

TREATMENT: The treatment of waste

water and the subsequent discharge to the environment are particularly difficult in the North. Given the fact that most of the water receivers are frozen during the win-

ter, water may need to be stored on-site until the weather is warm enough to allow it to be discharged. In addition, because the water in the receiver is pristine, the requirements for treatment are stringent. This does not even take into consideration the operational issues associated with operating and supplying (reagent) for an effluent treatment system in the North.

NATIVE CONCERNS: Adding to these

operational considerations is the fact that water is a key component in the lives of people living in the North. To quote from the Conference Board of Canada’s January 2013 report, “The Future of Mining in Canada’s North” “Land and water resources are integral to many communities’ way of life, culture and, in some instances, subsistence … Northern communities in general are also economically reliant on the land and January 2014 • Canadian Mining Journal |

| Arctic Mining Only the hardiest survive.

water. Residents use the Northâ&#x20AC;&#x2122;s rich flora and fauna resources as part of the traditional wage economy: hunting, trapping, and fishing still provide employment opportunities for Northerners.â&#x20AC;?

REGULATORY REQUIREMENTS: Due to

the pristine nature of the natural watercourses and the sensitive nature of these features to potential impacts, the regulatory environment has stringent water management requirements from both a sourcing and discharge perspective. These regulations are constantly under review and

22 | Canadian Mining Journal â&#x20AC;˘ January 2014

there have been recent moves to implement even more stringent regulations. As a result, it is necessary to assess water management options through the full life of mine cycle with particular emphasis on the ability to manage water during operations as well as closure. Water-related skills provide competitive advantage Experience working on a wide range of mining projects in the Arctic points to several water-related key approaches that

Water is scarce under these conditions.

need to be taken into consideration in order to ensure a cost effective and successful water strategy.

INTEGRATED APPROACH: Consideration

of water in all aspects of the project including mine layout, mine plan, tailings design (dry stack, thickened, slurry), tailings closure, waste rock siting and design, diversion, conveyance, storage and treatment need to be included throughout the entire mine operation cycle. Water management is a critical part of the project economics and needs to be accounted for as such.

www.canadianminingjournal.com

The guiding principle is to impact the natural water environment to the minimum extent practicable, and this can only be accomplished if water is a forethought not an afterthought.

DESIGN FOR WATER DURING THE CONCEPT PHASES AND ALL SUBSEQUENT PHASES: In essence, consider-

ation of design for water early in the mine development process cannot be overlooked. Be aware early of any water management limitations that the proposed site may experience. Assess options for siting key project elements (tailings facility, waste rock impoundment, associated water management features) so as to limit the need for water management elements (diversions, conveyances, pumps, pipelines, treatment, etc.). Look for opportunities to consolidate site layouts. Mining companies should design for closure and the potential for future expansion at the beginning of the development. A thorough site wide water balance should be developed to assess the interconnected nature of the water management elements and to provide a platform for assessment of water management alternatives.

Design for Climate Change Closure planning needs to include the long term affects of climate change in the North. This is especially the case where the Arctic is seeing the most extreme changes which include warming temperatures, precipitation and evaporation rate variability. Engaging water professionals with an

understanding of the complexity and interrelatedness of the water issues in the Arctic early in the development/conceptual design stages will go a long way to ensuring a viable, permitable and operable mine. CMJ *Emily Moore is Global Director Water; *Lisa Babel is Water Director North America; *Tony Trollope is Water Resource Management Lead North America for Hatch; all are based in the Mississauga ON office of Hatch.

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WATER SOURCING: Given the difficulty

of developing a year-round sustainable water supply from sourcing in the natural environment, it is necessary to develop methods for limiting water demand, recycling water and potentially developing water supply reservoirs to allow for the accumulation of sufficient water during the open water season to provide a yearround water supply.

DESIGN FOR CLOSURE: Closure can be a difficult item to address. Limited availability of cover material, limited precipitation, freeze-thaw cycling, long term metal leaching and acid generation are all factors that need to be addressed in designing closure options for tailings and waste rock dumps. Long term, perpetual treatment of mine water runoff may be prohibitively expensive. Managing water early, limiting aerial extent of exposure, utilizing topographic features to limit run-on and in-pit disposal are all items that may be used to minimize the generation of impacted water.

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| Coast-to-Coast-to-Coast Mining

Getting

BIGGER Minto mine steps out in productive fashion By Gwen Preston*

hen Sherwood Copper of Vancouver started the Minto mine in 2007, it was an open-pit coppergold-silver operation with a projected four-year mine life and a 1,600-tonne-per-day throughput. Located in a growing mining district near Carmacks, about 250 km northwest of Whitehorse, Sherwood was convinced that its Minto mine had the potential for

Machinery goes deeper into the ground as Minto gets bigger.

24 | Canadian Mining Journal • January 2014

more than 1,600 tpd and so did Capstone Mining, also from Vancouver, and in 2008, the then-small copper producer inked a deal to merge with Sherwood. Following the merger, Capstone continued what Sherwood had started and through subsequent exploration and expansion, today the Minto mine churns through 3,850 tonnes per day and has a mine life stretching to 2019, with milling to 2022. Minto is partway through its sixth expansion, and this time the mine is expanding downwards, adding an underground component to its operation. To house the accompanying surge in workers, a new camp is under construction and midst it all, exploration continues at the central Yukon site. Hypogene copper-sulphide mineralization at Minto occurs in lenses. Some are stacked vertically and others have been laterally displaced by faulting. The result is a property that still offers good exploration potential, eight years after mining got underway and almost 40 years after the site’s first feasibility study. Minto is a conventional mine in most senses: ore is mined, crushed, ground and floated to produce a copper concentrate bearing gold and silver credits. The concentrate is thickened and dewatered before being loaded onto trucks and transported to the Port of Skagway in Alaska. From there it is

Aerial of the Minto Mine clearly shows how the mine is growing and how much more room there is for expansion.

shipped to smelters across the Pacific. The copper goes to various buyers while Silver Wheaton buys Minto’s precious metals, pursuant to a streaming deal signed before the mine started operating. Minto does have one unusual characteristic. To get to the mine, one drives the Klondike Highway as far as Minto Landing, which is on the east side of the Yukon River. The mine is on the west side. How — or whether — one gets across the river depends on the time of year. During the summer months, a barge ferries vehicles across the river. In the winter, vehicles drive across an ice bridge. And for six weeks each fall and spring, during freeze-up and thaw, there is no way across the river. During that time Capstone stockpiles concentrate at the mine site until the ice either solidifies or disappears, and the Yukon River is again crossable. Geologically, Minto is part of the north- to northwest-trending Carmacks copper belt, which hosts several intrusion-related copper-gold mineralized www.canadianminingjournal.com

hydrothermal systems. At Minto, a granodiorite pluton hosts hypogene coppersulphide mineralization, primarily in stacked, shallowly dipping lenses. Mineralization at Minto is dominated by chalcopyrite, with lesser bornite and chalcocite, and minor pyrite. These sulphide minerals occur as disseminations and stringers along foliation planes within the deformed granodiorite. Coarse gold sometimes occurs where chloriticor epidote-lined fractures cut through a sulphide lens. The Minto property has seen more than 1,100 drill holes over 16 sq. km. That body of work identified almost a dozen mineralized zones. Area 2, Area 118, Copper Keel and Wildfire are all reasonably close together, and as such are collectively known as Minto South. As the name implies, this resource lies south of the Minto Main deposit, which is mined out. Several other deposits are a bit more distanced. Ridgetop is located 300 metres south of Minto South, Minto North sits 700 metres north of Minto Main and

Minto East lies 200 metres east of the south end of Minto Main. Two more recent discoveries, dubbed Fireweed A and B, sit just east of Minto East and are likely related. At the end of 2012, the deposits hosted 51.6 million measured and indicated tonnes grading 1.11% copper, 0.41 gram gold per tonne and 3.88 grams silver per tonne, plus 16.2 million inferred tonnes averaging 0.92% copper, 0.34 gram gold and 3.17 grams silver. Minto’s resources translate into just over 13 million proven and probable reserve tonnes. Of those tonnes, 9.2 million are proven and probable open-pit reserves carrying an average grade of 1.39% copper, 0.52 gram gold and 4.48 grams silver. The other 4.4 million tonnes comprise the underground reserve, which bears an average grade of 1.86% copper, 0.76 gram gold and 6.77 grams silver. Those underground reserves were defined in the Minto mine phase-six feasibility study, which was completed in early 2012. Near year-end 2012, the company was ready to start underground

development. The underground work is contractor operated, though Capstone plans to move to owner-operated underground operations soon. Since the reserves at Minto are spread out amongst several zones, it took some doing to prepare an efficient mine plan. The plan Capstone came up with for Minto involves three portals, developed sequentially, to access five different zones. Underground operations are starting in the 118 zone. While that area is mined, the ramp will be lengthened to reach the Minto East area. These two zones will keep the first ramp active until late 2014. While Minto East and 118 are in production, the ramp crew will start on another portal and drive towards Copper Keel. Once that decline is complete the crew will drive another decline into the Wildfire deposit. The underground operation as outlined in the phase-six plan will produce 4.36 million tonnes over a sevenyear mine life. Developing three short adits instead of one long, winding decline would cut out January 2014 • Canadian Mining Journal |

| Coast-to-Coast-to-Coast Mining 600 metres of underground development. The staggered timeline is also efficient, in that the portal- and decline-development crew and equipment will finish one job, and move onto the next. By last August, Capstone had completed 900 metres of underground development. A month later, in early September, the decline reached the ore zone. Steady mining has to wait until workers have completed the ventilation raise — a 600foot shaft from the decline to surface that doubles as an emergency exit. In the meantime, initial ore-development work is confirming grades and geometry. That is what is going on underground at Minto, but the mine’s phase-six expansion plan also outlines how and when Capstone plans to mine the various openpittable resources remaining at Minto. The Area 2 pit is being mined and will stay active until year-end. Next, Capstone will develop an open pit at the nearby Area 118 deposit, followed by a pit at Minto North. The exact order after that

will depend on permitting, but the plan is to return to Area 2 and complete a push back, after which operators will tackle the resources at Ridgetop. The open-pit aspects of the phase-six expansion require only limited capital expenditures. The underground expansion is pricier. Underground mining equipment is expected to cost $33.4 million while underground development work to access the ore zones will cost another $34.8 million. Ongoing upgrades to the process plant will cost $10.3 million, and infrastructure upgrades demand another $18.7 million. However, those costs should be worthwhile. Not only will the mine operate for longer, it will produce 40 million lb. copper annually, which is a couple million pounds more than before the expansion. And the feasibility study for the phase-six expansion forecasts the expansion will generate a 31% after-tax internal rate of return. The underground mine is expected to produce 2,000 tonnes of ore each day.

These tonnes will be mixed with feed from the open pits to create 3,850 tonnes of homogeneous mill feed daily. The mixing requires constant assaying, as the nature of Minto’s mineralization — stacked lenses — means that mining moves between high-grade lenses and lower-grade zones. When both the underground and openpit operations are tapping into good ore zones, the mine will produce more ore than the mill can manage and the excess will be stockpiled. Once active mining is complete in 2019, the mill will continue operating for another three years, fed by just over 4 million tonnes of stockpiled ore. That is the end of the mine plan to date. However, Minto is now in the midst of its sixth expansion and the current mine plan only involves those 13 million tonnes of reserves, whereas Minto’s total resource tips the scales at more than 60 million tonnes. No one would be surprised if Capstone reveals plans for a Minto phase seven.

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CHANGING AND GROWING Mines adapt as circumstances change, and Minto is no exception. For example, late last year Capstone encountered stability issues with the west wall of the Area 2 pit. They stabilized the problem area, but the process prompted changes to the mine’s drilling and blasting protocol. Capstone now monitors the active face with a radar that detects sub-millimetre movements. But movement is not a concern — in an area of active drilling, blasting, digging and hauling, the rocks are always going to move. Instead radar operators look for movement accelerations, as quickened movement could indicate mounting instability. The tailings system at Minto has also changed. Sherwood Copper built a dry-stack tailings facility at Minto and until a year ago, tailings were pressed to remove water, trucked to a cleared area near the plant and stacked. Dry-stack tailings are easier to manage from an environmental standpoint, because they’re solid and they stay put. However, the dry-stack process at Minto required employees, electricity and trucks — in other words, it cost money. As such, once mining was complete in the Minto Main pit, Capstone applied for permission to shut down the dry-stack facility and instead pipe slurry tailings into the pit. Late last year the Yukon government granted the needed water-

licence amendment, so tailings are now being deposited in the pit. Other changes are afoot. Adding an underground operation at Minto boosted the number of employees on-site, to the point that camp accommodations filled up mid-year, and Capstone had to use travel trailers to temporarily provide more space. Now the company is working on a new camp at Minto that will be able to house 300 people. The old camp accommodated 240. The evolution of the Minto mine is like a microcosm of the growth of its owner, Capstone Mining. When Capstone merged with Sherwood to acquire Minto, the company was producing 26 million lb. copper annually from one operation, the Cozamin mine in Mexico. In 2014 Capstone expects to produce 250 million lb. copper. Minto added some of those pounds, as did an expansion at Cozamin, but most came from Capstone’s latest acquisition: the Pinto Valley copper mine, which it bought from BHP Billiton for US$650 million. The deal, announced in April, closed in October, adding a third mine to Capstone’s roster — and a big one at that. CMJ

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| Company Profile

DESERT SOLUTION TO AN ARCTIC PROBLEM A

Discovery of vanadium in desert enough to power batteries for use by miners in the far north By Eastern Correspondent D’Arcy Jenish

ill Radvak is used to it by now; the question, that is, about Vancouver-based American Vanadium Corp. Is it an energy storage company or a mining venture? The question has been raised often enough that it now ranks number one on the company-issued FAQ sheet for investors and other interested parties. Truth is: American Vanadium is a bit of both. The company is currently developing the Gibellini vanadium property located near the unincorporated community of Eureka, population 610, in east central Nevada, and Radvak forecasts production by early 2016. The company also holds the U.S. Master Sales Licence for the vanadium-based CellCube energy storage systems manufactured by Gildemeister AG, a 150-year-old German company. “The foundation of the relationship is our ability to produce a projected 11 million pounds of vanadium per year once we’re in production,” says Radvak, President and Chief Executive Officer of American Vanadium. “We’re looking at a mine life of 10 years, but we believe there’s a fair amount of room to expand that because there are multiple occurrences on the property.” The property in question is on a hillside about half-a-mile long and 300 to 400-feet high in most places and it holds a low-grade, but unconventional deposit.

A technician works the Gibellini vanadium property in Nevada.

Vanadium is usually found in magnetite deposits that contain anywhere from 15 to 50 per cent iron. Indeed, Radvak says that some two-thirds of current world production of vanadium is a byproduct of iron mining, but American Vanadium’s property is a shale deposit that can be strip mined and requires minimal processing, compared to conventional deposits. Radvak says that the ore resides at surface and for the first two or three years there will be almost no waste. Only 20 per cent of the shale rock will require crushing. The balance will go through a screening process and will then be sent straight to a heap leach pad and doused with sulfuric acid, which will dissolve the vanadium and collect it in so-called pregnant solution ponds. “It’s a unique way to produce vanadium,” he says. “We have a low-grade deposit and if it were in magnetite, it would be uneconomical.” Radvak says that the company’s applications for permits are January 2014 • Canadian Mining Journal |

| Company | Department Profile Here

virtually sailing through the approvals process. Local residents are supportive for a couple of reasons. First, very little water will be required, and water is a scarce and valuable resource in hot, dry, parched Nevada and secondly, a mine means jobs and tax revenues — both of which are big pluses in an isolated community like Eureka, which straddles a highway known locally as “the loneliest road in America” because the nearest communities in either direction are located more than 100 km away. State and federal authorities have looked favourably on the project largely because vanadium is seen as a “green” metal that is of considerable strategic value. Russia, China, South Africa and Brazil produce the vast majority of the world’s vanadium (there is almost none produced in the U.S.) and most of it is used in steel production. “Two pounds of vanadium in a ton of steel increases its strength by 100 per cent,” says Radvak. “It allows you to reduce the amount of steel used in beams and rebars by 30 to 40 per cent, yet you can maintain the strength. You can also get a much lighter building. You use much less iron ore, along with all the energy and environmental costs. It’s the green metal.” In recent years, another major market for the metal has appeared; vanadium-flow batteries, which bear no resemblance to the batteries found at supermarket and drug store checkout counters and used to power hundreds of portable consumer products. Vanadium-flow batteries are very large energy-storage devices that can cost anywhere from $100,000 to $10 million and can be used by public utilities, renewable power producers and remote communities to store, manage and dispatch electricity efficiently. Radvak expects that about half the production from its Gibellini property will be sold domestically in the U.S., likely to steel producers, while a significant portion of the balance, perhaps all of it, will go to Gildemeister, the world’s leading producer of vanadium-flow batteries. The German company has field-tested its CellCube energy storage systems over the past five years and over the past two has installed 50 of its systems commercially. Bulk storage of electrical energy is seen as one of the critical factors necessary to increase the use of renewable sources such 30 | Canadian Mining Journal • January 2014

as wind and solar and to reduce the developed world’s reliance of fossil fuels. “At the present there is really no best battery,” Radvak says. Core samples from “It’s really a case of what the drilling operations various types of batteries are indicate positive best at. Over the past 10 to 15 results at the compayears, vanadium-flow batteries ny’s Nevada site. have come to be seen as one of the top technologies for mass energy storage. They work best when you need to store energy from four to eight hours.” Radvak says that Gildemeister’s vanadium-based CellCube technology could solve some of the energy woes of more than 300 remote, northern Canadian communities, including dozens of impoverished First Nations communities that are located beyond the reach of electrical grids. Such places generally rely on diesel-generated electricity and in most cases, diesel must be flown in from late spring to late fall or hauled on ice roads during the winter. Generating power from diesel is also extremely costly, noisy and produces high volumes of emissions. “The federal government is under great pressure to replace diesel because the cost is killing them,” says Radvak. “We’re talking five to 10 times as much as it costs to produce power in the south.” Windmills or solar farms might be the solution, provided that the energy produced during peak periods can be stored and distributed after the sun has set or the wind has died, but a hillside in remote, isolated Eureka, Nevada may hold a motherlode that makes such dreams possible and it’s a Canadian company that is working to make it happen. CMJ

Head office. www.canadianminingjournal.com

| Coast-to-Coast-to-Coast Mining

THE ISLAND OF NEWFOUNDLAND: AN EMERGING

GOLD DISTRICT ON CANADA’S EAST COAST

Open pit at former Hope Brook mine. Photo by Coastal Gold Corp.

By Phillip Saunders and Sean O’Brien, Mines Branch.

lthough iron ore and nickel continue to dominate news from the mining sector in Labrador, exploration and development for gold is gaining momentum on the Island of Newfoundland. Much of the recent and current production of the precious metal is linked to the beginning of modern gold exploration, led by Noranda and a host of juniors. This exploration which peaked in the 1980s, quickly resulted in significant gold discoveries, many of which are associated with major crustal structures across central Newfoundland’s greenstone terranes. Richmont Mines’ Nugget Pond and Hammerdown Mines and BP-Selco‘s Hope Brook Mine were the direct result of these early finds. Since that time, exploration has been sporadic, carried out by local junior miners and prospectors, supported by government surveys. Nevertheless, key gold dis32 | Canadian Mining Journal • January 2014

Mineralized quartz-tourmaline-pyrite veins at Valentine Lake. Photo by Marathon Gold Corporation

coveries have been made in a wide range of environments prospective for worldclass deposit types. These occurrences include well-documented examples of high- and low-sulphidation epithermal deposits, bulk tonnage intrusion and sediment-hosted deposits, and gold-rich vol-

canogenic massive sulphide deposits. These highly prospective yet underexplored environments represent opportunities for significant new discoveries, in what is becoming an emerging gold district. The following projects reflect some recent success stories in this region. www.canadianminingjournal.com

Exploration and Development Highlights Rambler Metals & Mining plc is producing from newly defined high-grade copper and gold lenses from a historic Au-rich VMS deposit in the Baie Verte mining district of northeastern Newfoundland. The company completed its first full 12 months in commercial production at the Ming Mine, as of October 31, 2013. The company milled 193,056 dry metric tonnes and produced 20,393 tonnes of copper concentrate with 5,909 tonnes of copper metal, 4,792 ounces of gold and 35,828 ounces of silver. Recent drilling has succeeded in extending the high-grade copper and gold zones, indicating potential to increase reserves in both areas. Rambler has aggressively reduced its debt, and also expanded its exploration portfolio through property acquisition and other investments (for example, a joint venture with Thundermin Resources Inc. on the Little Deer Project). Elsewhere in the Baie Verte district, Anaconda Mining Inc. is operating the open-pit Pine Cove mine, a mesothermal (orogenic) gold deposit associated with a major structural feature, the Baie Verte Line. The company processed 287,747 dry tonnes of ore, and sold 14,879 ounces of gold in the fiscal year ending May 31, 2013. Anaconda is working to expand its resource base through an aggressive exploration program around the mine site and with new property acquisitions in the area. Anaconda completed bulk sampling of auriferous quartz veins at the Romeo and Juliet prospect and diamond drilling on other targets around the mine site, with encouraging results, including the discovery of a new gold-bearing zone termed the Balcony Zone. More recently,

Artist’s impression of Vale’s Long Harbour plant. Courtesy of Vale.

A CLOSER LOOK AT WHAT’S HAPPENING AROUND THE PROVINCE • Vale announced a decision to proceed with underground development at the Voisey’s Bay Ni-Cu-Co mine • Vale announced they had achieved “Phase 1 mechanical completion” of their Long Harbor hydromet nickel facility. IOC production (Q1,2) for 2013 increase • about 20% over the comparable 2012 quarters. Nameplate capacity at IOC is now 22 million tonnes annually. • Tata Steel Minerals Canada has advanced its Direct Shipping Ore Project to the production stage; commercial sales will soon follow. • Alderon’s Kami Project in final environmental assessment stage: company ordering long-lead items for mine development • Century Iron completes consolidation of its Attikamagen Project and announced PEA on the Joyce Lake deposit • Major new infrastructure developments, includ-

ing hydro power and port expansion, will support future growth in the Labrador iron district • Atlantic Minerals limestone-dolomite quarry produced about 3 million tonnes in 2013 with plans to expand to 4 million in 2014. Entered European markets and initiated year-round shipping • Minco plc and Canadian Zinc consolidating ownership of significant base metal resources in central Newfoundland • New resource estimates reported on several advanced gold projects in central and southern Newfoundland; Preliminary Economic Assessments are in progress • New mineral resource announced by Canada Fluorspar Inc. at the former St. Lawrence fluorspar mine • Altius announces new joint venture with Anglo American to explore Ni-Cu-PGE discovery in southern Labrador

Aerial view of Pine Cover operations. Photo by Anaconda Mining Inc.

Portal at Ming Mine operations. Photo by Rambler Metals & Mining.

January 2014 • Canadian Mining Journal |

| Coast-to-Coast-to-Coast Mining

Aerial view of Valentine Lake camp. Photo by Marathon Gold Corporation.

the company announced the acquisition of two related orogenic gold prospects in the area, Deer Cove and Stog’er Tight deposits, both containing historic (non43-101compliant) gold resources. On another crustal-scale structure, 200

km farther south, Marathon Gold Corporation is rapidly advancing its flagship Valentine Lake Project. Marathon recently reported total measured and indicated resources at the Leprechaun Deposit of 10.5 million tonnes grading

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34 | Canadian Mining Journal • January 2014

Tailing pond at Pine Cove mine. Photo by Anaconda Mining Inc.

2.28 g/t gold for 775,000 ounces of gold and 1.5 million tonnes at 2.79 g/t for 140,000 ounces of gold. The company also signed a subscription agreement with Rambler Metals and Mining Canada Limited to finance ongoing exploration at the project, and is now working toward a Preliminary Economic Assessment. The extensive property contains widespread orogenic gold mineralization hosted by quartz-tourmaline-pyrite veins in granite, including the Leprechaun and Victory gold deposits, and the J. Frank Zone as well as many smaller occurrences. Marathon has steadily advanced the project, adding “ounces in the ground” at the main Leprechaun Deposit, while making significant new discoveries, such as the recently reported high-grade Sprite Zone. Importantly, much of the property remains unexplored. In the southwestern edge of the greenstone belt, Benton Resources Inc. has assembled a large land package covering the highly prospective Cape Ray Fault Zone. Benton now owns six separate deposits having either 43-101 compliant or historic resources totaling more than 448,000 ounces of gold, with silver and base metal credits. Ongoing exploration programs and compilation of previous work has resulted in new targets for future testing. Benton is currently studying the economics of a shallow open pit mine to exploit the resource and to produce onsite a saleable metal concentrate. The company recently conducted metallurgiwww.canadianminingjournal.com

Panoramic view of Pine Cove open pit. Photo by Anaconda Mining Inc.

cal testing on a 150 kg mini-bulk sample and reported encouraging results. In the historic Springdale mining district, Maritime Resources Corp. is exploring the Hammerdown and Orion orogenic gold deposits, and several other gold zones. An initial Independent NI 43-101 compliant Mineral Resource Estimate released in June 2013 estimates the property to contain more than 400,000 ounces of gold in the measured and indicated category and over 600,000 ounces in the inferred category, both at a 3 g/t cut-off grade. The Hammerdown gold deposit was successfully mined by Richmont Mines from 2000 to 2004. During its operation a total of 291,400 tonnes of ore were mined and milled, at an average grade of 15.83 g/t Au, recovering a total of 143,000 ounces of gold. All of the ore was processed at the Nugget Pond mill, now owned and operated by Rambler Metals, with an average gold recovery of 97.1%. Mining concluded in 2004 due to low gold prices with considerable gold mineralization remaining. The Orion gold deposit consists of two main vein systems, both of which are open along strike, up and down plunge. Maritime succeeded in extending the Rumbullion vein system through trenching in 2013, and initiated environmental baseline studies to be used in a future environmental submission for the project. The company also conducted metallurgical testing on core samples from the Orion deposit and achieved 96% gold recovery from preconcentration test work.

Coastal Gold Corp. is exploring the historic Hope Brook gold mine on the south coast of Newfoundland. Hope Brook represents a well-preserved example of an ancient high-sulphidation epithermal gold deposit. The company is evaluating gold-bearing zones that were not economic under prevailing gold prices during mining in the early 1990â&#x20AC;&#x2122;s. An updated NI 43-101 Mineral Resource Estimate released December 2013 reports 19.9 million tonnes indicated at 1.93 g/t Au for 1,239,000 ounces of gold and 1.3 million tonnes inferred at 3.22 g/t for 138,000 ounces of gold. A recently completed tailings vibracore drilling program indicates that the tailings contain widespread gold and copper mineralization significantly above the historic reported tailings grade. Coastal is working on a Preliminary Economic Assessment,

expected for release in early 2014. Despite the current weakness in financial markets, greenfields gold exploration continues on the Island of Newfoundland, with significant results. Notable amongst these has been the recognition of new areas of widespread epithermal gold mineralization in eastern Newfoundland by Silver Spruce Resources and a private company, Puddle Pond Resources. In addition, bonanza-grade, gold-bearing quartz veins were found by a local prospector in a little-explored silicic volcanic terrane on the Baie Verte Peninsula. These have since been optioned by Bowmore Exploration. These grass roots discoveries, in easily accessible areas which had seen little previous exploration, highlight the potential for new opportunities, close to home, in a mining friendly jurisdiction. CMJ

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| Coast-to-Coast-to-Coast Mining

MEETING MIDWAY:

THE KEY TO SUCCESSFUL ENGAGEMENT By Western Correspondent Tanya Laing Gahr

t’s rare to open the paper or watch the news without finding a story about conflict between the resource industry and Aboriginal communities. Witness the anti-fracking protests in New Brunswick, the escalating disagreement about Alberta’s oil sands, the disputes over hydroelectric dams, and the controversy over proposed pipelines through Aboriginal territory in B.C. Potential mining operations such as Taseko’s Prosperity Mine project are also in question because of unresolved conflict with Tsilhqot’in communities. However, engagement consultants Dan George and Keith Matthew stress that it doesn’t have to be this way. George is a member of the Wet’suwet’en Nation, and is the president of Four Directions Management Services Ltd., a company specializing in engagement, negotiation and communication between resource industries and Aboriginal communities. One of his key projects currently is facilitating agreements between liquid natural gas companies and local First Nations communities. Matthew is a former chief of the Simpcw First Nation, and has been part of many notable negotiations between mining and exploration operators in his home territory and elsewhere. He is also currently on the board of advisors for Yellowhead Mining. Both George and Matthew believe that while many operators have been getting it wrong, there are ample opportunities to get it right in a way that benefits both First Nations and industry—but it begins with industry taking steps to build positive relationships that open the door to greater understanding and communication. “I wish companies would think of First Nations as a business imperative and not a 36 | Canadian Mining Journal • January 2014

business impediment,” said George. Many Aboriginal communities are open to managed development within their territory, or at least to understanding the impacts and benefits. George spoke of some of the difficult social and economic situations on reserves across Canada, the bulk of which can be traced back to both poverty and cultural disconnection. And as economic situations become increasingly dire in these communities, Aboriginal people must move away from their home territory to find employment, which increases the disconnection in both the individuals who leave and the communities they leave behind. “If we have a healthy, vibrant, prosperous community, maybe some of our young people will move back home and contribute to the Nations they come from,” said George. So recognizing that there are benefits to both community and industry, how can meaningful partnerships be created and maintained? George recalled a story of a skilled negotiator who understood that building a relationship took precedence over finalizing a contract. “On his first visit to the community, he went fishing,” said George. “On his second visit, he went hunting. On his third visit, he participated in a community sweat. In his fourth visit, he participated in a community function—a wedding. Suddenly, a year had gone by and the chief looked at him and said, ‘we better get a deal going.’” This approach demonstrates the potency of sincere efforts to build relationships with Aboriginal communities. This sincerity remains a powerful filter when companies approach George looking for engagement advice. His primary concern in these early conversations is to understand the motivation of the operators and their com-

mitment to getting it right. Regardless of his advocacy for the energy industry, his first allegiance is to his elders and community. So his first question to potential clients is whether or not they’ve done their homework: do they know the First Nation communities they need to engage with? Do they know the territory? The tribal affiliations? The leadership? What George is looking for is proof that the operators are serious about engaging. “If you do those things, it doesn’t guarantee success, but it sets the conditions for success,” he said. Negotiation of economic benefits is vital, said Keith—knowing what the community is going to receive in terms of financial and/ or educational benefits and how an agreement will impact Aboriginal title and rights. But just as or more importantly, in building relationships, operators begin to understand the importance of the Aboriginal worldviews—the traditional ways of knowing, being, seeing and doing. Within this worldview is the understanding that First Nations people are in relationship with their territory and everything within it, and they take their responsibility to the land very seriously—and that responsibility is not abdicated simply by offering large sums of money as compensation. “A lot of our people still live off the land,” said Matthew. “We hunt. We fish. We conduct our spiritual activities on the land. So the environment is always the key and that’s what the First Nations community is going to grill you on because they have to live with it. The company doesn’t have to live with it—we do.” That said, the responsibility for successful engagement doesn’t rest solely with the operator. Keith said that successful business partnerships between induswww.canadianminingjournal.com

try and First Nations require both sides to come to the table. I think a big part of the problem is in educating First Nations about the mining industry and major projects in general,” said Keith. “What I see happening in some of our communities is they have very, very limited capacity in dealing with mining or oil and gas. When you don’t have capacity, knowledge, economic development or an engagement strategy around development... the default position is to say no. And that doesn’t do anything for industry, and it doesn’t do anything for those First Nations.” This was an important consideration for Matthew when he was Chief of the Simpcw First Nation. It was his contention that by understanding the goals and processes involved in mineral exploration and mining, the community would be better able to make an informed decision about how they could participate as partners in development. More importantly to many members of his community, they could see these partnerships as still being in step with their traditional teachings. “The Old Ones sent Coyote to us,” said Keith, referring to his people’s creation stories. “Coyote’s a mythological character but he’s real in our minds. Those stories talk about Coyote taking a lot of different forms and adapting to the current situation and there’s a lot of value in those teachings today. We need to embrace those creation stories that tell us that to be healthy and happy and all of those good things, we need to adapt and change.” George agreed that there is greater room for exploration of opportunities when First Nations communities understand that mining, resource and economical development, and environmental protection do not have to be either/or scenarios. Energy, he said, is the most important conversation of our time and we need to get it right. Communities and environmental groups that refuse to engage in the dialogue keep the conversation from advancing to one where everyone can benefit. “We’re in a global economic footrace running against a global economic headwind and most of these opportunities have a limited shelf life,” he said. “Imagine how we could change the conversation if we moved from ‘no’ to ‘how?’” CMJ

A LOOK AT SHALE GAS A LITMUS TEST FOR CANADA: SHALE GAS EXTRACTION IN B.C. By Iliad Nazhad*

hale gas extraction in B.C.’s Horn River Basin north of Fort Nelson has “the potential to be Canada’s first largeBish Cove. Photo by Chevron. scale commercial shale gas operation.” At least that’s what The Canadian Association of Petroleum Producers says LNG project site is located at Bish Cove, while the National Energy Board has sum- near Kitimat, and will be the first LNG marized the estimates by adding: “Having export facility in British Columbia. regard for the inherent uncertainty in estiApache Canada Ltd (Apache) commating geological prospects and predicting menced the project, and they have gas potential, the agencies estimate the remained the most active shale gas operaultimate GIP in the Horn River Basin to be tor in the Horn River Basin since 2003. 10 466 109m3 (372 Tcf) to 14 894 109m3 The Pacific Trail Pipeline (PTP) was origi(529 Tcf), with the expected outcome of 12 nally proposed as the Kitimat – Summit 629 109m3 (448 Tcf).” Lake Natural Gas Looping Project, and And industry estimations and lan- was approved by the Canadian guage have been more optimistic. Environmental Assessment Agency in The Kitimat LNG export facility web- 2009, which concluded the “project is not site, for example, mentions that the Horn likely to cause significant adverse environRiver Basin has been referred to as the mental effects.” “crown jewel of Canada’s unconventional Unlike the Northern Gateway pipeline, natural gas industry,” and some analysts the Pacific Trail Pipeline has avoided comare “predicting over 650 Trillion Cubic parable controversy. Feet of unconventional gas resource On the administrative front, Apache potential in British Columbia.” has received the appropriate federal and It should be noted that estimations of provincial environmental certifications, recoverable resources such as these are consulted with and signed a benefit agreedependent on advances associated with ment with the First Nations Limited horizontal drilling techniques and hydrau- Partnership, and received approval for a lic fracturing procedures, and the figures crucial 20-year NEB export licence. are therefore subject to significant readSince December 2012, Apache has justments. Furthermore, the interests of secured the financial and technical capacthe estimator, and relatedly the working ity of Chevron Canada Limited. Chevron definition of ‘economic viability,’ and the Canada will operate the LNG plant and timeframe of the estimate will all influ- the Pacific Trail Pipeline, while Apache ence institutional projections. Canada will continue to operate the However, what is important to take upstream assets in the Horn River Basin. away is that despite the current low cost of More specifically, $405 million in pronatural gas, these massive gas resources, ceeds were received from Chevron Canada established and emerging, are driving Ltd. in the joint venture agreement. The market activity and development in B.C.. project is in the preliminary front-end engiBritish Columbia will, therefore, set the neering design (FEED) stage. CMJ standards and frame the ongoing discussion regarding the emerging Canadian * Iliad Nazhad is a BCL/LLB Candidate at the McGill Faculty of Law, Montreal. Note: This article is a préunconventional natural gas industry. cis of his paper: “A litmus test for Canada; shale The processing facility of the Kitimat gas extraction in B.C.” January 2014 • Canadian Mining Journal |

| AME BC Roundup

FORGING AHEAD DESPITE INCREASING CHALLENGES

global demand and compete for international investlthough most metal prices have remained at ment. As such, this past summer, AME BC reinitior near 10-year averages throughout 2013, ated discussions with the B.C. Government about its many members of the Association for Mineral tax policy, including relative tax competitiveness Exploration British Columbia, particularly between jurisdictions. the juniors, have continued in survival mode due to Since the B.C. Mining Exploration Tax Credit was the historic and unprecedented downturn in the venfirst introduced in 2000, and the B.C. Mining Flowture capital market. Through Share tax credit was established in 2001, For many in the industry, the year 2013 will B.C. mineral exploration expenditures have grown define their ability to build strategic partnerships; By Gavin Dirom from $32 million in 2001 to $680 million in 2012. raise venture capital and private equity; enter into President & While the overall growth in expenditures is posijoint agreements; and successfully explore – not just Chief Executive Officer, AME BC tive, most of those expenditures are occurring at here in B.C. – but anywhere in the world. advanced mineral and coal exploration and developAs eternal optimists, these difficult times also present an opportunity for our members and for AME BC to ment projects and not in grassroots exploration projects. As those in the industry understand, mineral exploration, step up even more as leaders and advocates for the mineral exploration and development sector in important public policy especially work undertaken by junior companies, is the lifeblood areas such as taxation, land access and security of tenure, per- of the mining industry. Sustained investment in grassroots exploration and geoscience is required to discover new deposits. These mitting and community and Aboriginal engagement. Importantly, the Notice of Work permitting backlog in B.C. will lead to advanced projects and ultimately new mines in British has been reduced by 80 per cent and the average Notice of Columbia, such as Mt Milligan, a $1.5-billion open pit copper and Work permit turnaround time has been reduced from 110 days gold mine developed by Thompson Creek Metals Company that to 63 days. And more improvements to the permitting process employs 350 people north of Prince George. Construction of the mine started in late 2010, and the first are needed and expected. But given the ongoing challenge to raise venture capital, this ore was processed in August and shipped in September. So it’s is a critical time for AME BC to champion the investment, true that the widely held dream of so many explorers of moving exploration and development potential of B.C. and to strength- a promising discovery through exploration and permitting into en and reinforce strategic connections with government, busi- construction and production is becoming a reality in B.C. In 2011 for instance, the Copper Mountain mine re-opened ness and industry leaders. Indeed, the B.C-.based mineral exploration and develop- just outside of Princeton and in 2012, New Gold re-opened the ment industry must continuously work to reduce red tape, seize New Afton Mine near Kamloops. 38 | Canadian Mining Journal • January 2014

www.canadianminingjournal.com

FIVE MORE MINES ARE UNDER CONSTRUCTION OR PERMITTED:

• Red Chris Mine, near Dease Lake • Roman Mine, near Tumbler Ridge • Quintette Mine, near Tumbler Ridge • Bonanza Ledge Mine, near Barkerville • Treasure Mountain Mine, near Hope AND MAJOR EXPANSIONS AT SIX EXISTING MINES:

• Highland Valley Mine, near Logan Lake and Kamloops • Huckleberry Mine, near Houston • Quinsam Mine, near Campbell River • Elkview Mine, near Sparwood • Endako Mine, near Fraser Lake • Gibraltar Mine, near Williams Lake

AME BC is also looking to address the increasing cost of consultation with First Nations during all phases of exploration, even though it is the duty of the Crown to consult with First Nations. In fact, a recent sample study by Ernst & Young found that the weighted average of consultation costs borne by representative companies as a percentage of their total exploration expenditures in 2012 was estimated at over 21 per cent. This increasing cost of consultation is not currently defined as a qualifying expense under the B.C. Mining Exploration Tax Credit, unlike expenses incurred in the course of prospecting, carrying out geological surveys, trenching, digging test pits or preliminary sampling. Given this, AME BC has recommended that the B.C. Continued on Page 40

30 YEARS OLD AND STILL GROWING By Jonathan Buchanan, Director of Communications and Public Affairs, AME BC

his month, Roundup marks its 30th anniversary and returns to The Westin Bayshore, Vancouver, from January 27 to 30, 2014. The original Cordilleran Geology and Exploration Roundup in 1984 attracted 700 registrants from government, industry and service and supply sector to the Holiday Inn Harbourside in Vancouver. The conference had its roots in 1982 as a conversation on a ferry between BC & Yukon Chamber of Mines (now AME BC) Managing Director Jack Patterson, President Bob Cathro, and soon-to-become Second-vice President Nick Carter. Back then, like now, the exploration sector was facing a challenging time and the Association’s executive members saw a need to pull together all those who had an interest in the survival of mineral exploration in B.C. The following year, the Chamber staff, executive and volunteers developed a program which included highlights such as a Core Shack to display core from varied projects and a collaboration between the British Columbia, Yukon and Canada geological surveys. To this day, Roundup has continued the tradition of highlighting geoscience and prospecting through its technical sessions, core shack, map tent, poster session and prospectors’ tent – all guided by the Roundup Organizing Committee chaired by Vicki Yehl with Kendra Johnston as vice-chair. And how Roundup has grown – the 2013 conference attracted more than 7,800 participants from 44 countries and Roundup continues to grow as it continues to demonstrate innovation in the mineral exploration sector. For example, Roundup 2013 saw the introduction of the Gathering Place, a venue for Aboriginal and industry leaders to share their journeys to reach mutually beneficial agreements that have facilitated mineral exploration and mine development. This year will be the final year for Roundup at its long-time home, The Westin Bayshore, as the conference moves to a larger venue at the Vancouver Convention Centre East at Canada Place in 2015. However, before that happens, let’s focus on this year and at the time of writing, preparations are well underway for AME BC’s

Mineral Exploration Roundup 2014 conference, to be held January 27 to January 30, 2014. This will be our 30th anniversary of Roundup and once again, the program looks outstanding with a list of confirmed keynote speakers including; Derek White from KGHM, Martin Murenbeeld from DundeeWealth, Robert Quartermain from Pretium Resources, Walter Heneghan from Canadian Helicopters, Duncan Trapp from CHC Helicopter and Anthony Hodge from International Council on Mining and Metals. Full information on Mineral Exploration Roundup 2014, including a link to registration, and listings of sessions, events and exhibits, please visit us at www.amebc.ca/roundup and we look forward CMJ to seeing you in Vancouver. January 2014 • Canadian Mining Journal |

| AME BC Roundup Government change the definition of qualifying expenses eligible under the mining exploration tax credit to include expenses incurred as a result of consultation with local and First Nations communities. Also, the B.C. mining flow-through share tax credit expired on December 31, 2013, and AME BC has recommended that the B.C. Government extend this tax credit to December 31, 2016, and consider making it permanent to encourage exploration in British Columbia. Aboriginal relations and engagement continues to be a top priority area for AME BC and we are busy preparing to host another Aboriginal Engagement Forum and Gathering Place Pavilion at Mineral Exploration Roundup 2014. As well, the completion of AME BC’s new Aboriginal Engagement Guidebook will be a key deliverable for our membership. In fact, outsiders are turning to us in B.C. for advice on how to respect aboriginal interests, how to address land use conflicts, how to build capacity in local communities – and how to improve socio-economic conditions through sharing resource development revenues. Some examples include the agreements between the B.C. Government and First Nations to share mineral tax revenues generated by the Mt. Milligan, Copper Mountain, New Afton, Mount Polley and Highland Valley mines. AME BC fully supports the certainty and shared prosperity that these agreements bring to everyone. It’s why the B.C. mineral exploration and development sector works proactively to build relationships with aboriginal communities, leaders and organizations. Thankfully, mineral development and mining is well positioned because we already employ more aboriginals than any other private sector across B.C. and in Canada. Only government can claim more aboriginal employees. And with the largest concentration of geoscientists in the

40 | Canadian Mining Journal • January 2014

world and expertise in technical, legal, accounting and financial matters, British Columbia is renowned as the global centre for mineral exploration and development. As a province rich in minerals, metals and coal, B.C.’s fundamentals are strong and it is very well positioned to take full advantage of its geographic position on Canada’s Pacific coast and access to Asian markets. We have enjoyed great success in B.C.; having explored, discovered and developed what has amounted to over $700 billion in mineral, metal and coal revenues over the last century. And those revenues are new dollars into the economy, not recycled money exchanging hands. B.C. has become home to the largest business cluster of mineral exploration, development and supply companies in the world. Many of these companies are juniors that are dependent on venture capital and are burdened by excessive red tape and costs to maintain public company status and attract investors. Essentially what we are seeing happen to the junior market, the critical “hatchery” for our sector, is “strangulation by regulation” as they try to raise capital and keep the entrepreneurial spirit alive in B.C., not to mention in Canada. Just like small, business-minded people everywhere, prospectors, mineral explorers and developers share the dream that with lots of hard work, smart and timely decision making and a bit of luck, the so-called “little guy” can be successful in their venture; build their company, hire employees, support their family and contribute to their communities and country. As commodity price takers competing in global markets, B.C.’s explorers and developers have also weathered the many commodity cycles and economic downturns….as well as survived periods of unsupportive public policies and excessive red tape. But explorers and developers are optimistic and resilient in nature and are constantly seeking ways to improve their situation and create opportunities. CMJ

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Advertisers Index Bel-Ray.................................................... 4............................................ www.belray.com BTI Breaker Technology....................... 6................................. www.rockbreaker.com CGIS....................................................... 43...................................................www.cgis.ca Fournier Industries Inc........................ 41....................... www.fournierindustries.com Carlo Gavazzi........................................ 35..............................www.GavazziOnline.com Galaxy Broadband............................... 23........................... www.galaxybroadband.ca Golder Associates............................... 34............................................www.golder.com Government of Newfloundland & Labrador........... 31.......www.gov.nl.ca/nr/mines/investments/ investment.html Hard-Line............................................... 44.......................................www.hard-line.com

Mechanix Wear...................................... 2................................www.mechanixwear.ca Minesight Applications....................... 40......................................www.minesight.com NUNA Logistics.................................... 22............................... www.nunalogistics.com PowerFlow Engineering...................... 41.............................................www.pfeinc..net Sprung Structures............................... 27............................. www.sprung.com/mining SRK......................................................... 13..................................................www.srk.com Target Logistics.................................... 28..............................www.TargetLogistics.net United Rentals...................................... 15...................... www.UnitedRentals.com/cmj Valard..................................................... 14............................................www.valard.com Yukon Government............................... 26................................www.MiningYukon.com

MINING INDUSTRY

Established in 1960 “Fournier Industries Inc.” is a leader in the mining industry. Design • Detailed Engineering Fabrication • Installation • Turnkey Projects > Leach Tanks

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Phone: 418 423-4241 www.fournierindustries.com

On time, On Budget

Unearthing Trends

Ringing in the New Year with risk management Bruce Sprague is a partner at EY and the firm’s National Mining and Metals Practice Leader. He is based in Vancouver.

By Bruce Sprague

ver the past year, we’ve seen companies struggle with the twin capital dilemmas of capital allocation decisions and finding access to financing. This is the result of two years of weak metal prices, labour unrest and rampant cost inflation, all of which have put pressure on earnings. At the same time, pouring peak levels of capital expenditure into major growth projects has left companies with squeezed margins and lower rates of return on many projects. Shareholders began to question the scope for increased capital returns without a decisive change of strategy by management, and available financing seemed to disappear quickly. These issues topped EY’s annual Business Risks Facing Mining and Metals 2013-2014 report after sitting in the eighth spot in the prior year. We’ve already seen the effects of these challenges play out in the industry in the form of delays of capital projects, divestments, mergers and acquisitions. Companies that take a proactive approach to portfolio optimization and seek alternative — and creative — sources of financing will best weather the current capital strike. This isn’t the only challenge facing mining and metals companies. Effective risk management means addressing all of this year’s top 10 risks in the sector. Margin protection and productivity improvement The market is shifting its focus on growth towards long-term optimization of capital with sector-wide redundancies, mine closures and divestments of non-core assets in an effort to address the challenge of margin protection and productivity improvement. Resource nationalism Resource nationalism — our number-one 42 | Canadian Mining Journal • January 2014

risk in 2012-13 — has moved down the list as companies have become more adept at managing this risk. Leading companies are building stronger relationships with governments and effectively communicating positive industry impacts. Social licence to operate Earning a social licence to operate is becoming increasingly important as regulators seek to fill the gap between community expectations and existing laws. The key to maintaining and achieving a licence is to communicate the concept of shared value to all stakeholders. Skills shortage Skills shortage has fallen down the list this year as mine closures have reduced the need for skilled workers. As projects ramp up, so will the need for skilled workers. Companies can take steps to mitigate this risk by adopting creative and innovative approaches to access new pools of talent, leveraging technology and retaining existing skilled workers. Price and currency volatility Demand for commodities driven by rapid-growth economies has outstripped supply, fuelling higher prices and change in supply. This has caused an increase in price volatility. This risk is becoming a challenge for many commodities, specifically gold and nickel. Documenting the volatility of critical cash flow elements and improving planning are steps companies can take now. Capital project execution Over the last two years we’ve seen a number of highly publicized mega-projects cancelled, with others delivered late or over budget. Now with capital challenges

knocking at the door of majors and minors alike, companies are increasing their focus on portfolio management, project selection, size and scoping decisions. Sharing the benefits Today’s risk-averse stakeholders are demanding greater returns despite falling commodity prices and higher costs. Miners can address stakeholder concerns by increasing transparency when it comes to stakeholder benefits. Infrastructure access To meet infrastructure demands, companies must reassess their needs and revise their strategies, especially in light of recent high costs and capital constraints. A new model of risk transfer and retention will be necessary to unlock badly needed financing for infrastructure projects. Threat of substitution Substitution is a growing threat for singlecommodity organizations, or organizations where one commodity dominates the product mix/profit share — and is a new addition to our risks list this year. Mitigating this new risk begins by keeping an eye on government regulations and actively participating in sector discussions around policy changes. Moving forward Despite an increase in the risk environment over the last year, conducting regular risk assessments and proactive scenario planning will enable your company to develop a better understanding of the issues and opportunities to come. CMJ Visit us at ey.com/ca/mining and follow us on twitter @EYCanada. www.canadianminingjournal.com

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