Kinross throws in towel at Macassa

The Macassa mine in Kirkland Lake, long Canada’s deepest mine and still the country’s deepest gold mine, has closed its doors at the ripe age of 66.

The mine’s operator, Kinross Gold (K-T), will continue to process stockpiled ore and tailings from the nearby Lake Shore mine at its Macassa mill. This process is expected to last three to four months. About 160 employees will be laid off.

The mine had faced production problems since April 1997, when a series of rock bursts damaged the mine’s No. 3 shaft. Kinross was forced to enlarge the shaft pillar, the body of rock surrounding and beneath the shaft that must remain unmined in order to support the workings; the extension of the pillar deprived the mine of as much as 100,000 oz. gold.

Mining resumed above Macassa’s 5025 Level (1,532 metres) a few months after the rock burst, and production over the balance of the year was good. Kinross also took a US$35.7-million writedown (US$24 million after taxes) on the carrying value of the mine.

Kinross’s chairman, Robert Buchan, praised the operation’s effectiveness “under very difficult circumstances,” but said the company could not justify consuming cash by keeping Macassa open. Macassa, which first produced gold in 1933, had yielded about 3.5 million oz. to the end of 1998. Kinross has left the door open to resume production at Macassa once gold prices improve, and will be maintaining the mill and surface workings.

In 1998, Macassa produced 78,034 oz. at an average cash cost of US$257 per oz. and looked as if it was on the road to recovery. Similarly, cash costs in the first quarter of 1999 were down to US$228 — despite a recovering Canadian dollar — and the mine was on track to produce between 75,000 and 80,000 oz. Macassa’s total production costs were US$257 per oz., lower than any other Kinross mine except the Blanket gold mine in Zimbabwe.

Balanced against the mine’s good performance were net operating losses of US$739,000 in 1998 and US$600,000 in the first quarter of 1999. Still, Macassa’s 1998 loss was dwarfed by the US$52.5-million loss posted in 1998 by Kinross’s Refugio mine in Chile. A US$155.7-million loss incurred in the same year at the company’s Fort Knox mine in Alaska reflected early payback costs, not chronic unprofitability.

The shutdown of Macassa marks the first time since 1913, when the Toburn mine opened, that gold has not been produced on the Ontario side of the Kirkland Lake Break. There is currently little hope for early production from other advanced operations in the area; Sudbury Contact Mines (SUD-T) has placed on hold its Victoria Creek project in Gauthier and Lebel twps., awaiting improvements in the price of gold; NFX Gold (NFXG-C) is actively exploring underground at its Cheminis project in Virginiatown; and Armistice Resources (ACI-M) is doing the same across the road at the Sheldon-Larder deposit.