Dec '09/Jan '10


An upswing in Ontario

By B. Greenwell

Mining activity gets underway as production commences at Apollo Gold’s Black Fox open pit gold mine near Matheson, Ontario.

Over the last century, Ontario’s metal production has totalled over $360 billion. All of the provinces 28 metal mines are located in the North. Ontario’s Far North also boasts a world-class diamond mine, while southern Ontario is home to 13 major industrial operations. The province is a world-ranked producer of nickel and platinum group metals (PGM).

In 2008, the total value of provincial mineral production was $9.6 billion, down from the 2007 record of $10.8 billion. The decline is largely attributable to a decrease in the value of metallic minerals production from $8.3 billion in 2007 to $6.6 billion in 2008.

Base metal production values are expected to decline further in 2009 due to lower metal prices and the suspension of operations at 14 different mines during the year. With production falling below half of its 2008 level, the 2009 value of nickel production will likely miss the $1 billion mark for the first time in over a decade. PGM and copper production will also fall significantly due to the suspension of various mining operations. The decline in nickel will be partially offset by the increased value of gold production in 2009 as gold prices remain high and new production is added.

Non-metallic mineral production values climbed from $2.6 to $3 billion in 2008 with the inclusion of value of diamonds from the Victor Mine. With most of the non-metallic minerals being used in the depressed construction industry, their production values will remain flat.

Since late 2008, mining and exploration employment have also dropped, along with base metals demand, due to a slowing economy. This has had a negative impact on equipment and service suppliers and some mining communities. To avoid producing below cost, some base metal producers suspended mining operations and reduced workforces. However, gold producers have increased employment by over 15 per cent and have a good outlook over the next two years.

The upcoming year looks more positive. Metals demand should increase with the economic recovery and there is a renewed optimism in the mining community. During the last boom, there was a skills shortage and enrolment in geology and mining-related educational programs increased as students sought to meet demand. The labour market should therefore have a supply of educated and skilled workers eager to participate in the recovery.

Ontario is among the world’s top ten jurisdictions for exploration spending. This is attributable to its high-quality infrastructure, diverse and unexplored geology, accessible and reliable geoscience information, stable regulatory environment and favourable taxation policies, including a permanent flow-through share program for exploration.

There were around 340,000 active claim units in Ontario in 2009, down from last year’s record of 367,000, but well above historical levels. Base metals and chromite discoveries in the McFaulds Lake area led to Ontario’s largest claim-staking rush ever. A followup of extensive exploration work is expected over the next few years.

Exploration spending in Ontario exceeded expectations in 2008 and 2009. Final figures reached $799 million in 2008, up from the originally estimated $667 million. Revised 2009 figures have increased from $422 million to $576 million. Junior companies’ share of this spending continues to rise — it climbed from 45 per cent of the total in 2007 to 66 per cent in 2009. The differing fortunes of gold and base metals prices are reflected in exploration targets. Exploration spending on precious metals climbed from 59 to 69 per cent of the total in 2009, while expenditure on base metals exploration declined from 32 to 22 per cent. Gold remains the primary focus of exploration because of Ontario’s rich history of gold mining, prospective geology, buoyant gold prices and a stream of new discoveries.

The McFaulds Lake area remains Ontario’s most exciting exploration play. In 2002, De Beers discovered a base metal deposit (volcanogenic massive sulphide mineralization) while seeking diamonds on claims belonging to Spider Resources and KWG Resources. Local drilling led to numerous discoveries, including base metals and chromite. The region’s key players are Noront Resources, Freewest Resources, KWG Resources, Spider Resources and Probe Mines. In April 2009, Freewest estimated their chromite resource at 74 million tonnes (40 per cent Cr2O3 at $300 per tonne). Despite its size being unestimated, the base metal deposit shows great potential and new drilling continues to expand the resource. Noront’s recent drilling results indicate a distinct new gold zone on their McFaulds Lake property. Some of the area’s companies are starting to look at mine logistics. KWG has engaged a firm to provide engineering services for the construction of a rail line to the McFaulds Lake area. Noront has retained SNC-Lavalin to complete an infrastructure and transportation study.

Mine development

During 2009 and into 2010, mine development work is expected to be focused largely on gold. About 75 kilo­metres east of Timmins, Apollo Gold brought its Black Fox gold project into production in June 2009. The 170-employee mine has probable reserves of 1.33 million ounces of gold.

Kirkland Lake Gold reported substantially increased reserves at the recently discovered South Mine Complex Zone adjacent to its Macassa gold mine. The company will continue drilling and underground development to define the resource. The strong gold price outlook should help propel the more advanced projects forward.

Xstrata Nickel closed its three operating Sudbury area mines during 2009. However, mine development continues on the $1 billion Nickel Rim South project, which should reach full production (18,000 tonnes of nickel from 1.25 million tonnes of ore annually) in 2010.

Vale Inco closed the Copper Cliff South mine in early 2009 and suspended other Sudbury-based operations in June due to low base metal prices and a labour dispute. The company is still exploring in the area and construction work is underway at its Totten project. Fortunately, the improving near-term base metal price outlook should help reopen some of Ontario’s base metal mines.

Exploration and development

Ontario’s gold sector is seeing extensive exploration and development. Production is increasing in traditional areas such as the Abitibi greenstone belt. Lakeshore Gold’s updated prefeasibility report at the Timmins Mine gold project, about 20 kilometres southwest of Timmins, indicates reserves of 812,000 ounces of gold. Commercial production is targeted for the end of 2010. Detour Gold continues advancing the Detour Lake gold project, 200 kilometres northeast of Timmins. The project boasts Canada’s largest gold reserves. The 8.81 million ounces of open pit gold reserves are low grade, but the company is actively looking to improve project economics.

Also in the Abitibi greenstone belt, southwest of Kirkland Lake, is Northgate Minerals’ Young Davidson gold property. Here, recent drilling intersected 2.92 g/t Au over 10.5 metres. Proven and probable reserves of 2.8 million ounces of gold should provide a 15-year mine life with average annual production of 170,000 ounces. Northgate hopes to start construction in 2010 and achieve full production in 2012.

Rainy River Resources recently released drilling results near Fort Frances in northwestern Ontario, which included 15.6 metres of 6.46 g/t Au intersected in the ODM17 Zone. Infill-drilling confirmed the grades and widths projected from the model, prompting the addition of a fifth drill rig and moves towards preparing a scoping and feasibility study.

Goldcorp continues to develop the Red Lake gold property, which includes the integrated Red Lake and Campbell mines. The Bruce Channel gold discovery that it acquired last year is being evaluated to determine the best development method. Goldcorp is also very active on other local projects such as the Cochenour Willans Mine.

Red Lake area exploration also includes Rubicon Minerals’ five drills operating on the Phoenix gold project as part of an 80,000-metre drill program to expand the F2 gold system over a 1,000-metre strike length, to a depth of 1,500 metres.

In the Beardmore-Geraldton area, Kodiak Exploration is exploring the Hercules Gold property, where high-grade gold has been found in multiple quartz-carbonate veins cutting through the 31-square-kilometre Elmhurst Lake intrusion. The principal target is the Golden Mile with its five-kilometre trend of gold-mineralized quartz veins. Gold mineralization was traced along strike for 400 metres with an average grade of 20.2 g/t Au over an average width of 3.8 metres.

As reported in the November 2009 issue of CIM Magazine, the modernization of Ontario’s mining act will strengthen the mining industry by establishing a framework for improved social responsibility. The focus will be on a graduated regulatory approach for exploration; Aboriginal consultation throughout the mining sequence; exploration impact reduction; introducing map staking and modernizing the way companies stake and explore claims and consult private land owners and Aboriginal communities. These initiatives will help further Aboriginal communities’ economic and social aspirations and provide the certainty of rules and the process timelines that industry needs to make investment decisions. With Royal Assent being received, the next step is regulations development.

Although many mining and exploration economic indicators are negative, Ontario is weathering the storm. New discoveries are driving new investment, and our base metal producers are poised to meet increased demand as the global recovery commences.

Under the aegis of the Ministry of Northern Development, Mines and Forestry, the Ontario Geological Survey provides extensive information on Ontario’s geology and its world-class mineral resources. Geological data are available at GeologyOntario, a comprehensive website offering access to geoscientific data including maps, publications and assessment reports.

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