Goldcorp cuts ribbon at reborn Red Lake mine

It began life in 1948 as Dickenson Mines’ Arthur White gold mine and went on to produce more than 3.1 million oz. without interruption until a strike forced a shutdown in 1996. Recently, under the ownership of Goldcorp (G-T), the mine was reborn as one of the highest-grade underground gold producers in the world.

The re-christened Red Lake operation, situated in the Kenora district of northern Ontario, started up in August, since which time more than 35,000 oz. gold have been poured. In October, the mine was officially re-opened in a ribbon-cutting ceremony attended by The Northern Miner and various other guests.

Goldcorp acquired the mine when it amalgamated with Dickenson Mines in 1994. In April 1998, Bruce Humphrey, Goldcorp’s vice-president of operations, visited the site for the first time. “I had been warned that the property was a little run-down and needed some work,” he says. “That was an understatement: this truly was a 50-year-old facility that had been undercapitalized for many years. But it’s not the same mine anymore. It not only looks different; in may ways, it really is different.”

The new mine is wired for fibre-optic communications and video, and all areas, including the head office in Toronto, are linked via computer networks.

These and other modifications are key to Goldcorp’s full-production target of 240,000 oz. per year, which was to have been achieved by presstime. Cash costs are estimated at US$88 per oz., with the total after-tax cost pegged at US$213 per oz.

Reserves in the High Grade zone are believed to total 1.4 million tons grading 1.37 oz. gold per ton, sufficient for 6.5 years of production. The estimate was calculated by Watts Griffis & McOuat and is based on a gold price of US$300 per oz., 22% external dilution and the cutting of higher grades to 10, 5 or 2 oz. (a historical practice in this section of the Red Lake mining camp).

In addition, Red Lake contains 1.4 million tons of refractory sulphide material grading 0.36 oz. Such material kept the mine running continuously for 48 years, prior to the 1996 strike, which was resolved only recently (T.N.M., Aug. 14-20/00).

Goldcorp intends to increase exploration spending at the mine and, over the next two years, boost daily production to 800 from 600 tonnes. A further increase to about 1,000 tonnes of high-grade material is anticipated, provided sufficient reserves are outlined.

Robert McEwen, chairman and chief executive officer, says that at 1,000 tonnes per day and 1.37 oz. per ton (as outlined in the feasibility study), “you’d be looking at 475,00 oz. per year.” He then adds: “But we’ve been finding grades higher than that — sometimes approaching 1.8 oz. per ton.”

At that rate and grade, Goldcorp believes the mine is capable of spitting out more than 600,000 oz. per year at an operating cost of US$50 per oz. Operating cash flow is projected to be $160 million.

At the boardroom level, management has proposed a reorganization of the company, under which controlling shareholder CSA Management (CSA-T) would be folded into Goldcorp and the existing A- and B-series Goldcorp shares traded back for a single class of common shares.

Under the proposal, Goldcorp A shares would be exchanged 1-for-1, and four B-series multiple-voting shares would be worth five new common shares. Each CSA Class A share would be traded for 2.1 new Goldcorp shares, and each CSA Class B, for six Goldcorp shares.