By Chris Beaumont-Smith, Minerals Policy and Business Development, Manitoba Mineral ResourcesCurrent as of November 12, 2015
The mining and mineral exploration sector in Manitoba continues to show resilience as it copes with persistent low metal prices and challenging equity markets. This has taken the form of continued capital investment and a modest increase in exploration activity. The decline in exploration and deposit appraisal expenditures experienced following the global recession in 2009 is slowly reversing. The drop in expenditures from $140.0 million in 2011 to a low of $28.0 million in 2014 appears to have been reversed in 2015 with exploration spending projected to increase to $36.4 million, an increase of 30% over 2014 expenditures.
The rise in exploration spending can, in part, be attributed to the acquisition of several advanced exploration projects by established mining companies with the intention of advance the projects towards production decisions. These transactions have provided a modicum of optimism towards improving economic conditions. The cautious optimism extends to both the base and precious metal sectors as both sectors are seeing increases in activity.
In spite of persistent low base metal prices, Manitoba is experiencing renewed interest in base metals. Some of the interest reflects the acknowledgement from the sector that HudBay Minerals and Vale Canada have demonstrated the prospectivity of the Flin Flon–Snow Lake greenstone belt and Thompson nickel belt, respectively, through their significant discoveries.
Base metal development activities in Manitoba are highlighted by HudBay Minerals, which commissioned two new mines in the Snow Lake region in 2014. This is the culmination of a historic level of capital investment in HudBay’s Manitoba operations. The commissioning of the Lalor and Reed mines reflects their exploration successes and replaces base metal production lost through the recent closures of the Trout Lake and Chisel North mines.
Construction of the Lalor mine is complete at a cost of $441 million and commercial production was achieved the end of the third quarter of 2014. Mine production of 2700 tonnes per day (tpd) is processed at HudBay’s recently upgraded Snow Lake concentrator. To aid in the treatment of Lalor ore, HudBay purchased the Snow Lake assets of QMX Gold Inc., which includes the past-producing New Britannia gold mine and mill complex.
HudBay is studying the potential of refurbishing the 2000 tpd New Britannia mill tpd to treat gold zone ore from the Lalor mine. The purchase of the New Britannia mine and mill will preclude the construction of a new concentrator at the Lalor mine.
HudBay anticipates additional gold resources will be delineated at the Lalor mine with further exploration conducted from underground. To achieve this, HudBay has commissioned the development of a 1025 metre level exploration drift to provide a platform to explore the deep gold zones at Lalor. The Copper-Gold Zone holds the greatest potential to add significant resources to the project. A recently completed 4500 metre drill program returned impressive results and is being followed up with an additional 8500 metre drill program.
Although HudBay has no immediate plans to re-open the New Britannia mine, the mine produced 858,000 ounces of gold between 1995 and 2005, and 760,000 ounces of gold between 1949 and 1958 as the Nor Acme mine. The current reserve estimate stands at 336,700 ounces of gold grading 4.43 gpt and total inferred resources are estimated at 451,000 ounces of gold grading 4.04 gpt. Surface and underground infrastructure have been maintained since the closure of the New Britannia mine in 2002, making the potential re-starting of mine production possible, a future option that has not been ruled out.
HudBay’s second new mine is the 70 per cent-owned Reed mine project (30% VMS Ventures), located 80 kilometres (km) south of Snow Lake. The Reed mine achieved commercial production in the second quarter of 2014. The Reed mine development was completed on schedule and under the $71 million budget, with the budget surplus applied to underground development. The copper-gold mine will produce 1,300 tpd at full production, with the ore being trucked to Flin Flon for processing.
In support for the Reed mine, HudBay’s partner VMS Ventures is exploring their large land package surrounding the Reed Mine. VMS is conducting a 4,000 metre diamond drill program, testing geophysical anomalies in the vicinity of the Reed mine. A total of seven target areas have been selected for evaluation.
The completion of the Lalor and Reed mines will allow HudBay to increase base metal production in the near term and significantly increase precious metal production in the longer term with the eventual development of the gold and copper-gold zones at Lalor. These two new mines have off-set the loss in production resulting from the recent closures of the Trout Lake and Chisel North mines.
Recent exploration efforts around HudBay’s 777 mine in Flin Flon have not yielded the positive results that could potentially impact the projected remaining mine life. Exploration drilling focussed on the “War Baby” claim, recently acquired from Callinan Royalties, which represents the down-plunge extension of the 777 deposit, has not returned the anticipated results.
Exploration for VMS deposits continues despite poor copper and zinc prices. This exploration is largely focussed in the Flin Flon-Snow Lake greenstone belt. The most active explorer is Callinex Mines with their large Pine Bay project east of Flin Flon. The Pine Bay project includes a number of VMS deposits and approximately 10 km of favourable VMS geological horizons. Callinex is focussing on the southern Sourdough area adjacent to HudBay’s past -producing Centennial Mine. Callinex recently announced the discovery of new exhalative VMS stratigraphy. The “New Horizon” stratigraphy was not tested by previous exploration and returned assays over 7.4 metres grading 1.58% copper equivalent (total base and precious metals reported as copper) hosted by a 174 metre extensively altered chlorite-sericite zone.
South of Snow Lake, Solvista Gold Corp. (previously Rockcliff Resources) is advancing the Talbot properties north of Grand Rapids. Solvista optioned the Talbot project from HudBay Minerals and has committed to earning 51 per cent in the project over a six year period. Solvista’s 5,000 metre diamond drill program is focused on four areas comprising the Talbot deposit and adjacent untested geophysical anomalies. The first drill hole returned 9.13 metres of 6.1% copper and 5.0% zinc and 8.2 g/t gold.
Solvista’s other advanced VMS project in the Grand Rapids area was recently purchased by Akuna Minerals Corp., a private company. Akuna has committed to advance the Tower project through feasibility study and the extraction of a bulk sample by December 31, 2017. The Tower project consists of two mineralized zones, the T1 deposit located west of Highway 6 and the T2 zone located east of Highway 6. An initial NI 43-101 compliant-resource estimate for the T1 zone contains 1.1 million Indicated tonnes grading 3.73 per cent copper, 1.05 per cent zinc and 0.55 gpt gold, and 1.3 million Indicated tonnes grading 2.0 per cent copper, 1.02 per cent zinc and 0.27 gpt gold.
Manitoba’s other major base metal producer is nickel producer Vale Canada, with mining, milling and smelting operations located in Thompson. Notwithstanding poor nickel markets, Vale is proceeding with feasibility studies of the Thompson Footwall Deep project. The Footwall Deep project contains 11 million tonnes of nickel mineralization forming a deep, north plunging continuation of the Thompson deposit. The feasibility-level assessment of the Thompson Deep project was initiated in 2014 and continues with engineering, technical, environmental, financial and operational assessments. The assessment will be conducted through 2015, and if successful, will result in the development of a new mine that will sustain the Thompson operation for up to 15 years.
Renewed interest in Manitoba nickel exploration is demonstrated by the recent entry of Wolfden Resources into the Island Lake and Snow Lake regions. Wolfden acquired through claim staking, two nickel properties previously held by Vale Canada that host significant nickel resources. The Rice Island deposit in Wekuslo Lake east of Snow Lake is currently the focus of a diamond drill program and Wolfden intends to follow-up their recent airborne geophysical survey of their Nickel Island property in the Island Lake area with a diamond drill program in the New Year.
Persistent low nickel prices have contributed to the continued suspension of mining operations at CaNickel Mining Ltd.’s (previously Crowflight Minerals Inc.) Bucko Lake mine near Wabowden. Production was suspended and the mine was placed on care and maintenance in June 2012. CaNickel has successfully increased the Proven and Probable reserves at Bucko to 3.71 million tonnes of 1.45% nickel. The company is also having considerable exploration success on the nearby M11A and Bowden Lake deposits. CaNickel continues to explore its large portfolio of properties in the Thompson Nickel Belt. Current activities involve geophysical surveys in the southern portion of their property portfolio south and east of the Bucko mine in advance of follow-up diamond drill testing.
Elsewhere in the Thompson Nickel Belt, Victory Nickel Inc. has deferred the development of their Minago nickel and frac sand mine. Victory received an Environment Act licence in 2011, authorizing the construction and operation of the Minago project north of Grand Rapids. However, Victory hasn't been successful in securing financing for the initial development stages of the nearly $600 million mine. Victory established a frac sand subsidiary Victory Silica to market frac sand to the petroleum industry. Initial frac sand production from their Seven Persons facility in Medicine Hat, Alberta, utilized sand from Wisconsin with plans to transition to Minago sand once production from the Minago mine became available. Unfortunately, the recent decline in petroleum drilling and development has resulted in Victory Silica suspending procession at its Seven Persons facility.
In southeastern Manitoba, Mustang Minerals Corp. continues exploration and development on its Makwa and Mayville deposits near Lac du Bonnet. Mustang released the results of a Preliminary Economic Assessment (PEA) outlining the co-development of the Makwa and Mayville deposits with processing infrastructure located at the Mayville site, 43 km from Makwa. The PEA estimates capital costs at $209 million and a pre-tax Internal Rate of Return of 17 per cent. Total Makwa and Mayville Indicated resources are estimated at 33.8 million tonnes grading 0.27 per cent nickel, 0.33 per cent copper, 0.6 gpt platinum and 0.19 gpt palladium. Current exploration activities are focused on geophysical surveys on their Mayville property in advance of diamond drill testing.
Other nickel exploration projects include Corazon Mining Ltd.’s assessment of the past-producing Lynn Lake nickel mine and Victory Nickel’s Mel project north of Thompson. Corazon is evaluating the Lynn Lake and El nickel mines originally operated by Sherritt Gordon Mines. Using advanced exploration techniques and technology, the company have discovered new mineralization and expanded remaining resources at the Lynn Lake mine. Victory Nickel continues to advance the Mel project.
Precious metals exploration and development activities have been dominated by the bankruptcy of San Gold Corporation, the only primary gold producer in the province, and significant acquisitions of two advanced exploration projects by established, Canadian-based gold producers. This reflects the challenges faced by emerging producers during challenging markets and the opportunity for acquisition presented by low share prices of junior explorers.
The sharp decline of gold markets and the general deterioration of precious metal prices have taken their toll on Manitoba gold mining. The casualty of the rapidly changing economic environment is San Gold Corporation. The challenges of achieving profitable operational performance in a declining commodity market eventually caught up with San Gold and resulted in the Corporation’s bankruptcy in June of 2015. Attempts to restructure San Gold were unsuccessful and the assets of the company came under the control of the major creditor. The private successor, Shoreline Gold has placed the Rice Lake mine under care and maintenance while an assessment of the future of the mine is undertaken.
The news was better for junior gold explorers Carlisle Goldfields Ltd. and Mega Precious Metals Inc. with their respective transactions with established gold producers. Carlisle reached agreement with AuRico Gold Corp. to acquire 60% of the advanced exploration holdings within their Lynn Lake gold project. The joint venture includes the MacLellan and Farley Lake properties and commits AuRico to advance the two properties through feasibility study during the first three years of the agreement. AuRico also committed to providing up to $2.0 million per year to Carlisle to fund regional exploration in the Lynn Lake project area beyond the feasibility study properties. These funds will be matched by Carlisle, which has assembled a portfolio of past-producing gold properties previously operated by Blackhawk Mining and acquired through staking a large portion of the Lynn Lake greenstone belt.
Carlisle has successfully explored the MacLellan, Burnt Timber and Farley Lake mine sites and adjoining properties to assemble a resource base of more than 4.8 million ounces. Following the approval of the joint venture transaction, AuRico merged with Alamos Gold Inc. Alamos is now the operator of the joint venture.
In a similar vein, Mega Precious Metals attracted the attention of Yamana Gold Inc. with their Monument Bay project southeast of Thompson. The project includes the Twin Lakes gold deposit within a large regional exploration property. Yamana acquired all outstanding shares of Mega in June and is proceeding to advance the Monument Bay project towards feasibility study. Yamana plans to continue with an aggressive infill and exploration drill program at Twin Lakes. A significant component of the exploration program is the sampling and analysis of drill core generated by previous project operators. An important and somewhat unique aspect of the Twin Lakes deposit is the association between gold and tungsten throughout the deposit. The close association led Mega to include tungsten in the resource estimate, significantly increasing the value proposition of the project. The revised resource estimate contains an open pit-constrained Measured and Indicated resource of 2.9 million ounces of gold at 1.3 gpt, with an additional 700,000 ounces of inferred resources grading 1.2 gpt. Yamana is preparing an upgraded gold-tungsten resource estimate in advance of the commissioning of prefeasibility studies.
The northern Superior Province in Manitoba represents the western strike-extension of proven, gold-producing geology in Ontario. It is viewed by explorers as an under-explored, accretionary terrane having the potential to host a number of gold deposits that form a regional camp. The geological environment and the success of the Monument bay project has led Puma Exploration Inc. to significantly increase its property position in the Little Stull Lake area, adjacent to Yamana’s Monument Bay project. Puma’s property contains the Little Stull Lake deposit that has a historical resource in excess of 250,000 ounces of gold grading 10 gpt.
In the Trans Hudson Orogen, efforts to reopening the past-producing Puffy Lake mine near Sherridon by Minnova Corp. (previously Auriga Gold Corp.) are proceeding through regulatory review in advance of the finalization of a renewed environmental license. The recently released PEA for the Maverick project outlined robust economics to resume production of 48,000 ounces of gold per year over an 11 year mine life at a cash cost of $798 per ounce. The low capital costs of $18 million and relatively short 18 month payback period further demonstrate the feasibility of the Maverick project. Current project resources support the processing of 2.5 million tonnes at a grade of 6.53 gpt for a total 483,000 ounces of gold over the life of mine.
Uranium exploration activity has been rekindled in northwest Manitoba. The region hosts the northeast extension of the Wollaston Domain in Saskatchewan that exploration companies believe was overlain by Athabasca Basin sediments prior to glaciation. This represents the same geological environment that hosts a number of significant, basement-hosted uranium deposits in neighbouring Saskatchewan.
CanAlaska Uranium, Northern Uranium and East Resources currently hold dispositions covering the known extent of the Wollaston Domain in northwest Manitoba. Northern Uranium has completed initial geochemical and geophysical surveys on their Northwest Manitoba project and is undertaking a major drill program to follow up on a number of significant anomalies. East Resources recently acquired their Kasmere project from CanAlaska and is planning an initial airborne geophysical survey in advance of an exploration program.
Exploration by Northern Uranium on their Northwest Manitoba project has returned very encouraging results, and on the strength of these results, Northern has exercised its right to acquire an increased interest in the project from CanAlaska Uranium. Northern Uranium has agreed to incur an additional $5.6 million in exploration expenditures over the next two years to increase their interest to 70% of the project.
Manitoba’s consolidation of the convention minable potash resources in southwestern Manitoba has renewed interest in potash. The Manitoba Potash Corporation (MPC) controls the Russell-McAuley area of southwestern Manitoba, the largest land holdings with sufficient thickness and grade to sustain potentially economic underground potash mining. In January 2015, MPC, assisted and advised by Micon International Limited and Manitoba Mineral Resources, initiated the divestiture process to sell MPC and its assets in the Russell-McAuley area. The phased divestiture process for MPC is ongoing. Micon has received a number of Expressions of Interest from interested parties, which will be assessed, taking into consideration criteria such as industrial experience, capability, financial capacity, proposed exploration and resource evaluation, project development and marketing strategy and expected contribution to the economy of the province of Manitoba.