Production decision nears for Nugget Pond project

While many Canadian gold miners are flocking to mammoth, low-grade properties in faraway lands, partners Richmont Mines (TSE) and Noveder (ME) don’t mind being out of step with the times.

The juniors’ Nugget Pond project on Newfoundland’s Baie Verte Peninsula may not be huge, but in it they see potential for a profitable, high-grade gold mine.

Minable reserves at the site stand at 389,000 tonnes grading 13.76 grams per tonne. The partners are looking to January, 1996, for a production decision, with actual production expected to start in late 1996.

The project, which The Northern Miner recently visited, had originally been developed between 1987 and 1989 by Bitech (ASE). It got its name from the small body of water just north of the deposit, which was named by Bitech after the panning of high-grade soil samples in its waters yielded small gold nuggets.

Bitech’s first 16 holes, drilled into the core of the deposit, showed tremendous numbers. The results impressed Placer Dome (TSE) subsidiary Equity Silver Mines, and a joint-venture agreement was promptly signed. But Equity Silver dropped its option in late 1989 when it became clear that the tonnage was not, as it had hoped, in the millions.

Bitech, too, eventually lost interest, handing over the property (including a 2% net smelter return royalty to the original owners) to Noveder for $1.2 million and 2.9 million common shares of Noveder. Noveder also signed a joint-venture agreement with Bitech, enabling it to earn a half-interest in the Betts Cove and Tilt Cove properties which straddle Nugget Pond.

Says Noveder’s exploration manager, Vincent Jourdain: “Noveder did not come here looking for that big, big one. But we looked at the economics of the project and were satisfied.”

Jourdain sees the Nugget Pond deposit as simply the first of several concentrations of gold he expects will be found along a sedimentary horizon bearing the deposit’s name. The horizon runs the length of the Betts Cove ophiolite complex and consists of disseminated pyrite in a siliceous band associated with sedimentary rocks at the top of a pillow lava sequence. The volcanic rocks within the ophiolite complex host several base metal showings, including the past-producing Betts Cove mine (1875-1886) and Tilt Cove mine (1957-1967).

In May, 1995, Richmont acquired an 60% interest, essentially taking over the payroll and becoming project operator. Noveder was released from all funding of Nugget Pond until production, and was thus able to refocus its financial resources on the search for other Nugget Pond-type deposits on the property, which boasts 25 gold showings.

“We’ll have a producing mine here that will be generating cash flow for that exploration,” says Jourdain. “We hope that, within four years, we’ll have some feed ready.”

Progress has already been made exploring both ends of the Nugget Pond sedimentary horizon. At Tilt Cove, 8 km northeast of Nugget Pond, the Castle Rock showing was uncovered by trenching this summer. Stripping enabled Noveder to follow the horizon for 27 metres in this location, and four out of six grab samples collected within the horizon returned significant gold values of 2.16, 21.05, 43.92 and 111.49 grams per tonne. Channel sampling in the area returned values of 11.6 grams over 0.5 metres, 24.4 grams over 1.1 metres, 8.2 grams over 1.1 metres, 0.9 gram over 1 metre and 5.6 grams over 0.6 metre.

In addition, six of 13 surface samples from a copper showing in the Betts Head area, 5 km southwest of Nugget Pond, yielded copper values of between 1.08% and 18.8%.

Richmont has a right of first refusal on all of Noveder’s exploration projects within a 100-mile radius of Nugget Pond.

Three zones outlined

Meanwhile, Richmont presses on at Nugget Pond, where the summer has been spent driving an incline past the deposit’s three mineralized zones, down as far as 750 metres. Thus far, 1,400 metres of core have been pulled for analysis.

Much of the 1995 program has been devoted to drilling most of the deposit on 12.5-metre centres, explained Steve McAlpine, general manager of the project for Richmont, “So when it comes time to make a production decision, we’ll have a very high level of confidence in what the orebody is.” McAlpine is impressed with both the deposit and expertise demonstrated by the contracted miners who have been busy defining it.

“It’s exceptionally dry . . . and ground conditions have been excellent all the way through.”

All development has been screened, and there have been no accidents since work began in June.

In addition, he said, “The contacts were such that the geologists and the miners can follow them very well. We were able to shape the hangingwall to minimize dilution and follow the ore right through.”

As for the quality and quantity of work performed by the 35 miners and geologists on site (most from the Baie Verte area), McAlpine said: “We’ve met all of our expectations, maybe even some of our optimistic ones. By the end of August, we had done 114% of our scheduled work and spent 95% of our planned dollars.”

Development work will wrap up shortly, and diamond drilling will be finished by the end of the month. Metallurgical tests and environmental permitting are ongoing.

The likelihood of shipping the ore elsewhere has decreased, said McAlpine.

“I think at this point, the project is strong enough to warrant its own [milling] facility. There’s good grade, it’s going to be very minable and treatable, and it’s a good environmental setting where we can do the job and still maximize the protection of the environment. And we think we’re in an area where we will be able to add to mill feed, either from an exploration success or an acquisition.”

Richmont plans to construct a mill with a capacity of 400 tonnes per day, or perhaps more, he said.

A straightforward flowsheet will incorporate crushing, grinding, a gravity circuit, carbon-in-pulp leaching and electrowinning to produce gold-silver dore bars. The mill would yield half an ounce of silver for every ounce of gold produced, although Richmont does not consider the silver to be of economic importance.

About 50,000 oz. gold will be produced per year, beginning in 1997. All of the waste rock produced will be used as backfill.

Once in production, Nugget Pond will employ 100 people.

According to a prefeasibility study completed in April, the base-case preproduction capital cost of Nugget Pond will be $15.2 million, while the overall operating cost of the mine per ounce of gold is projected at US$143. After-tax cash flow is expected to be slightly less than $21 million.

The project is covered by provincial legislation giving it a 10-year sales tax and corporate income tax holiday.

Certain environmental permits for the mill will have to be sought in the aftermath of a production decision, but, overall, the project has received government approval at the local, provincial and federal levels.