Online extras: naturalresourcesmagazine.com NR43

Something old, something newTwo junior mining companies find there’s profit to be made in breathing new life into closed mines in Atlantic Canada

By Darren Campbell

Production

“Mother Nature creates geochemical and geophysical anomalies,” Cook says. “There are millions of these scattered across the world and some show characteristics of possibly being related to a mineralized deposit. But all the things that have to come together to make it economic are so unique that not many of them work.

That’s just the way it is.”Given the long odds of one of these

anomalies eventually becoming a producing mine, and given the challenges mining firms are having these days raising the money to turn an exploration prospect into a mine, wouldn’t it be wiser for companies to focus some effort on identifying

shuttered mines that have enough resources to possibly be exploited again?

What follows are the stories of two junior mining companies who have taken that strategy to heart. Call it the mining industry’s version of recycling. Or call it what it really is – good business.

Turning a mineral deposit into a mine is a rare event. With over 30 years of experience in the industry, Utah-based mining analyst Brent Cook knows this truth as well as anyone.

Natural Resources Magazine / Vol. 16 No. 2 2014NR44

There’s gold in that thar’ old mine

In April, Québec-based Ressources Appalaches reached a major mile-stone. It began mining operations at the Dufferin gold mine on Nova Sco-tia’s eastern shore, extracting ore and stockpiling it at the site. “Starting a mine is very rare and we’re proud to have put it into production in Nova Scotia and done it as rapidly as we have,” says Alain Hupé, the compa-ny’s president and CEO. “I think five years from exploration to installation is pretty fast.”

Indeed. A pure exploration play might take a decade, and sometimes much longer, to go from a concept to a producing mine. But the speed with which Ressources Appalaches was able to go from acquiring the Duf-ferin property in 2009 from a private company for $4 million to producing ore this spring speaks to the advan-tages of re-starting production at old mines – if you can.

A big advantage is infrastructure. Old mines already have it, so much

of the infrastructure needed to get a mine up and running doesn’t have to be built and paid for by the propo-nent. That saves companies time and millions of dollars in capital. “The road is built. The power line is there. The buildings are there. There are a lot of advantages,” Hupé says.

Those advantages have Hupé and Ressources Appalaches busily ramp-ing up production to full capacity of 300 tonnes of ore per day. But the company doesn’t plan to stop there; its goal is to double production to 600 tonnes per day by 2016. The mine,

which will employ 70 people, pro-duced its first batch of gold in May and plans to produce between 20,000 to 25,000 ounces of the precious metal annually.

Hupé says there are enough defined resources on the mine site to keep producing gold for three years. However, he says there is potential on the site to mine for nine years. The company will spend the next year doing a combination of exploration and definition drilling. It also has four other mining properties to the east of the Dufferin site. Hupé says the company intends to do explora-tion drilling on those properties with the hope of finding more gold veins that could keep the mine producing even longer.

The company estimates during the mine’s first year of operation it will cost $800 to produce an ounce of gold. With spot gold prices aver-aging US$1,240 in early June, Res-sources Appalaches stands to make a tidy profit from reviving production at this mine, located 150 kilometres northeast of Halifax. “A lot of the uncertainty is gone because we have

70The number of people

employed at Ressources Appalaches’s Dufferin

gold mine

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a lot of old infrastructure that we’ve restarted. We know it’s worked in the past and there are no problems any-where,” Hupé says. “The access to underground by galleries is cheaper. And the skilled labour we have been able to find in Nova Scotia, namely experienced miners, helps us to maintain a really low cost of the operation.”

Ressources Appalaches’s recycling strategy seems to have resonated with fickle investors. In May of 2013 it secured a US$10 million loan from New York-based Lascaux Resources Partners LLC. The loan gave the Que-bec company the capital it needed to complete the refurbishment of the Dufferin mine and advance the project to the production stage. In late May, the com-pany announced it had raised another $1.2 million through a private placement of shares. The company says it will use the cash to extend and define resources at the Dufferin mine.

While Ressources Appalaches is busy with the Dufferin mine, the company has to look to the future as well. Someday there will be no more gold to extract from Duf-ferin, and the mine is the only one in the company’s portfolio. If the com-pany wants to grow and increase its share price, it will have to find new prospects to exploit. With the success his company has had re-opening the Dufferin, Hupé says the company may revisit the strategy.

“We are not looking for other properties right now. But with the experience we’ve acquired to bring the Dufferin mine into production I already have eyes on other prop-erties,” Hupé says. “I cannot name them, but I think there are at least three or four other properties like Dufferin in Nova Scotia.”

Back from the dead For nearly three decades, the Ming

copper-gold mine on Newfoundland and Labrador’s Baie Verte Peninsula was a deserted industrial site. From 1962 to 1982, miners had extracted ore from the ground. Then they ran out of running room on the mineral claim and the mine was shut down.

However, there was still plenty of ore left – if only a company could consolidate the properties in the dis-trict under one owner. In 2001, Altius Minerals did just that. Then Rambler Metals and Mining PLC was formed through Altius and a London consor-tium. Rambler was off to the races.

In November of 2012, the Baie Verte-based junior mining company announced the Ming mine was back in pro-duction. “What attracted us to the project was the high grade nature of the gold and copper, the unexplored miner-alization in the ground and also the big expan-sion potential. That was always the carrot,” says Peter Mercer, Rambler’s vice-president.

Since starting produc-tion at the Ming mine,

Rambler had produced 9,717 tonnes of copper, 7,951 ounces of gold and 59,789 ounces of silver, according to its 2014 third quarter update. Ram-bler currently mines 630 tonnes of ore per day at the site. It has far grander plans, however, and wants to increase that to 1,000 tonnes per day and eventually bump that up to 3,500 tonnes per day.

With six quarters of production behind them, Mercer says Rambler is essentially debt free and got there quickly without having to build the mine from scratch. Certainly the existing infrastructure at the Ming site was a big advantage for Rambler as it tried to bring the mine back from the dead.

“ The road is built. The power line is there. The buildings are there. There are a lot of advantages.”

Alain Hupé, president and CEO, Ressources Appalaches

9,717tonnesThe ounces of

copper produced from the Ming

mine since production was

re-started in November 2012

Natural Resources Magazine / Vol. 16 No. 2 2014NR46

“ What attracted us to the project was the high grade nature of the gold and copper, the fact there is mineralization in the ground and also the big expansion potential.”

Peter Mercer, vice-president, corporate secretary Rambler Metals and Mining PLC

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But Mercer says another advantage to re-starting production at their old mines is the permitting was quicker. Because infrastructure such as roads, power lines, tailings ponds, and in the case of the Ming mine, a wharf and pier facilities, are built, much of the permitting was already in place at the mill. This can make for a much quicker regulatory process, which allows the company to re-start production earlier and start making money.

At the current pace of production, Rambler says Ming has a fi ve to six year mine life. But the Ming site con-sists of fi ve mineral zones and the company believes one of them – the lower footwall zone – has over 18 mil-lion tonnes of resource that could add another 10 to 15 years to the mine’s life. However, that is only if Rambler can fi nd a way to mine it economically. The company is working on that.

The strategy of investing in shut-tered mines and bringing them back into production seems to suit Ram-

bler. Besides the Ming mine, the com-pany holds ownership interests in the Hammerdown gold mine and the Lit-tle Deer/Whales Back copper mines, three former producing mines also located in Newfoundland and Labra-dor. And with the Ming mine on its resume, the interest of investors could be piqued by the next project Rambler looks to develop.

“In terms of fi nancing in a conser-vative market, you really have to have a good plan and one that’s under-standable, believable and you have to have a track record that shows you’ve done this in the past,” Mercer says. “We brought Ming mine into produc-tion and we’ve got these other oppor-tunities we continue to advance. So when we go in and talk about Ham-merdown or Little Deer, we don’t have to convince them we are capa-ble of doing what we say we can do. We’re beginning to develop that track record and recognition in the indus-try.” |nrm

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