Dec '06/Jan '07

Ontario

Ontario exploration and development highlights 2006

By Ontario Ministry of Northern Development and Mines staff

Ontario’s renowned geology and mineral endowment, combined with the provincial government’s ongoing work to provide geoscience information and to maintain favourable taxation policies and a stable regulatory environment, are helping the province maintain its standing as Canada’s top non-fuel mineral investment jurisdiction.

Preliminary estimates for 2005 indicate that the value of Ontario’s mineral production in the two commodity groups (metals and nonmetals) was $7.22 billion. This was the second year in a row that production exceeded $7 billion, as the production of industrial minerals remained strong, and higher metal prices kept the value of nickel over $2 billion. The contribution of metallic minerals to the 2005 Ontario total was $4.79 billion, and $2.42 billion for nonmetallic minerals. In 2005, Ontario produced 36 per cent of Canada’s metallic minerals and 23 per cent of Canada’s nonmetallic minerals.

Gold, diamonds, copper, nickel, platinum, palladium, and zinc are the primary focus of the exploration industry in Ontario. Gold remains the leading mineral sought but base metals are approaching the levels of gold as higher prices for base metals have spurred exploration across the province and are advancing projects in the Sudbury area. Diamond exploration continues to grow in Ontario as the search for diamonds widens across much of northern Ontario.

Exploration and deposit appraisal expenditures in Ontario for the year 2006 are expected to reach $340 million, exceeding $300 million for the third year in a row.This is a 6 per cent increase from $321 million in 2005. Exploration levels approached historical highs in 2005 due to the availability of flow-through shares and higher prices for most of the metals and many of the secondary minerals. In 2005, Ontario accounted for 25 per cent of Canada’s exploration expenditures.

At the end of 2005, the number of mining claims in good standing in Ontario was 212,738, an 8 per cent Ontario exploration and development highlights 2006 increase from 2004. This is the highest level ever attained in Ontario.The number of claims cancelled is down as more claims remain active.

Construction began this year at De Beers’ Victor diamond project near Attawapiskat in the North.The $982 million project will create 375 full-time jobs during operations and will have a cumulative GDP effect on the province of $6.7 billion. The project is also viewed as a successful partnership with the First Nations as more than 300 First Nations people have worked on the project and over $67 million dollars in business development opportunities has been created for the community.

Goldcorp’s purchase of Placer Dome’s Ontario assets has led to the integration of the Campbell mine with Goldcorp’s Red Lake mine into one operation that is now referred to as the Red Lake Gold Mines and is expected to produce more than 800,000 ounces in 2006. The Red Lake complex is in the process of completing a new 1,924 metre (6,312 foot) deep shaft to access ore reserves at depth and the Campbell complex is developing the DC zone also at depth. Underground connections of the two complexes will give access to new exploration platforms, resources, and reserves. This mine merger also provides synergies which will help decrease operating costs so lower grade ore can be profitably mined.

St. Andrew Goldfields became Ontario’s newest gold miner earlier this year when production began at the Stock Gold complex near Timmins. Measured and indicated resources at the project are 149,400 tonnes at a grade averaging 8.08 g/t containing 37,100 ounces of gold and an inferred mineral resource of 529,000 tonnes at 6.49 g/t containing 110,300 ounces of gold.The company expects to produce 40,000 ounces of gold in 2007 and an aggressive underground drilling program is underway.

FNX Mining Company Inc. became the third company to mine in the Sudbury Basin when their McCreedy West mine began production in 2003. The company has become a mid-tier mining company and development work at the Levack mine project and the Podolsky project will increase production. The Levack project is expected to begin production in 2007 and currently has measured and indicated resources of 4.9 million tons at 1.0% copper and 2.0% nickel. The Podolsky project has indicated resources of 3.2 million tons grading 3.4% copper and 0.3% nickel as well as platinum group metals. Extensive work continues on both projects.

Goldcorp Inc. acquired Placer Dome’s share of the Porcupine Joint Venture in Timmins, in May 2006. The PJV consists of the Hoyle Pond underground mine, Dome underground mine (re-opened in January 2006) and the Pamour open pit mine.The PJV also controls an extensive land package within the Timmins camp that includes 10 individual deposits that have collectively produced over 1 million ounces of gold. In 2006, the joint venture planned 74,000 metres of underground drilling at the Hoyle Pond mine and an additional 26,500 metres of exploration drilling on other targets. Diamond drilling has successfully defined new resources at the Pamour North Contact that will provide an alternate source of higher grade ore. Exploration drilling at the Hollinger property has been accelerated with five surface diamond drills operating with the objective of calculating a new resource estimate by the end of 2006.

Xstrata Nickel recently announced a growth strategy for the Sudbury area including working with Inco’s new owner to find synergies.The company has begun construction of a new recycling plant at the Sudbury smelter that will double their capacity and allow it to take in a wide variety of feedstock. The company also views the Nickel Rim project as an important part of the mix for their growth.The Nickel Rim project has an inferred resource of 13.4 million tonnes of mostly nickel, copper, platinum, and palladium and should begin annual production of 1.25 million tonnes of ore annually in 2010. The company is currently sinking shafts below 1,500 metres and most of the major surface buildings and the hoisting plant have been completed. Development and exploration work continues at the Fraser-Morgan property and other Sudbury area mine properties.

CVRD’s takeover of Inco in the fall of 2006 should not lead to major changes in the way the company operates as Inco continues to report record profits. Inco had committed to the re-opening of the Garson Ramp mine, closed in 1994 due to poor economic conditions. The $30 million project, adjacent to the Garson mine, is expected to provide 30 new jobs in Sudbury. First phase production, guaranteed for three years, is targeted to begin early in 2007 with full production achieved by the second quarter. The Garson Ramp is expected to produce 500 tonnes of ore per day and supply almost 20 per cent of Inco’s precious metals production from Sudbury operations. Precious metals content of these orebodies has proven to be higher than anticipated. The company is also commissioning a new state-of-the-art facility to reduce sulphur dioxide (SO2) emissions by 34 per cent from Sudbury operations. Known as the Fluid Bed Roaster Abatement SO2 Project, the facility will be equipped with off-gas scrubbing technology which will lower emissions from the current limits of 265 kilotonnes to 175 kilotonnes annually. Inco has spent almost $1 billion to reduce Sudbury’s emissions of sulphur, nickel, copper, arsenic, and lead by 80 to 100 tonnes per year. Improvements planned at Inco’s Clarabelle Mill to separate 30 per cent of the copper in bulk nickelcopper feed would allow production increases of 15 per cent and the processing of more nickel through the smelter. The Creighton mine, in operation since 1901, has produced 155 million tonnes with an average grade of 1.59% nickel and 1.23% copper. Diamond drilling in three holes from the 2,380 metre level to the 3,050 metre level has intersected a zone of mineralization interpreted to be an extension of the known inferred mineral resource associated with the 400 orebody and could represent a potential mineral deposit 150 metres along strike and 250 metres down-dip. A fourth drill hole intersection, interpreted to represent an extension to the 461 orebody, extends high-grade mineralization approximately 175 metres along strike and 200 metres down-dip.

The newest data collection program undertaken by the Ontario Geological Survey is the current Far North Geological Mapping Initiative, being implemented in collaboration with several remote aboriginal communities. This three-year, $15 million program of mapping initiatives includes airborne geophysical surveys and on-the-ground geochemical surveys in the under-explored far northern part of the province.

The Ontario government believes that by building a strong and prosperous economy and as a major driver of Ontario’s economy, mining has a vital role. That’s why our government is working to keep Ontario as one of the foremost destinations for mineral and mining investment in the world.

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