Three Kenora gold projects hinge on financing plans

The reduced appeal of gold shares since the 1987 stock market crash, and a poor perception of profitability with gold at around $385(US) per oz, make the projects less appealing to investors than they might have been in early 1987.

At Nuinsco’s Cameron Lake deposit, 50 miles southeast of Kenora, a complex orebody and relatively lean grade averaging 0.16 oz gold per ton, present significant challenges to the company. An earlier partner, Echo Bay Mines (TSE), pulled out of the venture last year selling its 53.8% control block in Nuinsco to Deak International. Echo Bay at that time recommended the project be closed down pending a rise in gold prices.

But Nuinsco’s management remain confident in the project and say they could turn the deposit into a mine as early as next January.

A positive production decision could be made next month when the company completes a new reserve calculation based on recent diamond drilling. Although the grade picture is not expected to change much, Nuinsco thinks a significant increase in tonnage is possible based on some deep drill holes that show the orebody continuing 2,500-ft depth.

Costs to bring the deposit into production are estimated at $21.84 million and the company plans to raise the money through a combination of equity and debt. The debt portion is expected to consist of a gold loan.

Douglas Hume, Nuinsco’s president, says once a revised final ore reserve calculation is complete, his company will begin looking for production financing.

An 8-month pre-production program has already begun that could result in the Cameron Lake deposit producing at a rate of 800 tons per day. Production from satellite properties could contribute an additional 200 tons for a total mill throughput of 1,000 tons per day. The mine could produce about 58,000 oz of gold per year at an average cost of $250-$275(US), the company said.

Total reserves in all categories, estimated prior to the current work, stood at 1,310,155 tons grading 0.164 oz. This figure used a 0.08 oz per ton cut-off grade and dilution at 20%. About 82% of the reserves occur between the 300-ft and 800-ft levels.

At Shoal Lake, sixty miles to the west, another junior company, Consolidated Professor Mines (TSE), is contemplating the future of its Duport mine project where considerable underground work has also been conducted.

President of Consolidated Professor, G. R. Cunningham-Dunlop, says his company has had to contend with several problems that have hindered project development.

“The original Duport deposit,” he quipped, “was first discovered back in 1897, and could set a record for the longest pre-production period in Canadian mining history.”

The Lake-of-the-Woods area, better known as a tourist destination, has never had a major gold producer and that has hampered promotional efforts by his company, said Cunningham-Dunlop.

Since Shoal Lake provides drinking water to Winnipeg, environmental concerns have also been a touchy issue. Cottagers in the area are concerned about possible mine development as well.

Most of the gold reserves in the Duport deposit lie under the waters of Shoal Lake with access via a shaft on Cameron Island and a decline ramp from the mainland.

Arsenical refractory ore at Duport will require treatment by pressure oxidation, an environmentally safe, but costly process.

“A major hold up factor at Shoal Lake has been the metallurgy,” he said, “and environmental concerns are related to the metallurgical issue.”

The company has ruled out roasting the ore because that would produce undesirable sulphur emissions. Recognizing the environmental sensitivity of the area, the company decided to consider pressure oxidation. In this process, arsenic will come out as an insoluble precipitate that can be disposed safely.

According to Consolidated Professor pilot plant tests have shown recoveries as high as 91% can be achieved at Duport with this process.

During the past nine years, the company has had three separate joint venture partners on the Duport project: TRV Minerals, Selco Inc., and Union Carbide Corp.

“We’re beginning to feel like a bride who’s been left at the church doorstep three times,” said Cunningham-Dunlop.

To date, an impressive amount of definition drilling and drifting to prove ore reserves have been completed. A total of 665 holes have been drilled into the deposit and 12,300 ft of lateral development has been undertaken on four levels. Drifting on ore has been done for some 3,000 ft, the company said.

Cunningham-Dunlop said his company is currently proceeding with environmental studies for site permitting, and the next major hurdle to be faced will be raising pre- production financing. Capital costs are estimated at $55 million and a gold price of $400(US) per oz would be needed to make the project feasible, he said. Debt financing is being sought and the company has received tentative proposals from at least two banks for part of the required capital costs.

Total reserves for the main and east zones stand at 1.93 million tons grading 0.36 oz gold per ton, including 937,000 tons at 0.39 oz gold in the proven and probable categories, before allowance for dilution.

Consolidated Professor has more than $1 million in cash and says it is prepared to “stick it out” until favorable financing can be arranged.

Also at Shoal Lake, Bond Gold Canada, a subsidiary of Bond International Gold (TSE), is poised to make an underground decision on its Cedar Island project with 50%- partner Kenora Prospectors and Miners (COATS). Reserves there stand at 1.4 million tons grading 0.25 oz gold.

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