`89 building start possible Musselwhite could cost $100m

A combined underground and surface exploration program was recently completed on the property and Placer Dome is now busy evaluating the mass of information it obtained.

The remote gold project is situated in the North Caribou Lake greenstone belt 100 km north of Pickle Lake, Ont.

A feasibility study is in progress and is expected to be complete by September. The company says a 2,200-ton-per-day underground mine costing $100 million is contemplated with construction beginning as early as the fourth quarter of this year.

Two prospectors, Harold and Allan Musselwhite, are credited with making the original gold discovery at Opapimiskan Lake in 1962. They later organized a grubstake to explore the area in the 1970s. A grubstake consists of a simple partnership between a prospector and his backers.

The original Musselwhite grubstake consisted of 10 companies, but over the years a joint venture was developed. It was recently reduced to three companies following the sale of a 24% interest held by Esso Minerals for $19.5 million to the remaining partners.

Placer Dome (operator) currently owns a 43% interest with Inco Ltd. (TSE) and Corona Corp. (TSE) holding 32% and 25% respectively. The fact that all three companies exercised their right of first refusal to purchase Esso’s share indicates they believe the project remains attractive.

Harold Musselwhite, now in his eighties, had spent more than 40 years prospecting before retiring in the late 1970s. When he and his brother were named prospectors of the year in 1982 by the Prospector and Developers Association, Musselwhite recalled: “It used to be so frustrating. This property was always in the back of our minds * * * there it was ready and waiting to be developed and no one was interested.”

The two brothers retain a 3.75% net profits interest in the project and Placer Dome has been paying advance royalties to Harold and his brother Allan’s widow as a gesture of good will. Allan died last year.

In a recent interview with The Norther Miner, Placer Dome engineer Michael Winship outlined some of the modern-day challenges facing the Musselwhite project.

Since the company is still evaluating the results of its recent underground program, he couldn’t be specific regarding any revised ore reserve estimates, but The Northern Miner gathers the results were quite encouraging.

“We obtained relatively encouraging results,” he said. “Our general structural and geological models for the deposit were confirmed, but until the whole package is put together, final reserve figures won’t be available.”

The original geological inventory estimate from 1987 surface drilling, indicated reserves in excess of six million tons grading 0.20 oz gold per ton. This does not include the results of recent work.

A recently completed surface drill program consisting of 25,000 ft also could have an impact on the earlier mineral inventory estimate.

Although the project’s remote location presents a number of major challenges, the recent underground program was completed successfully.

“Extremely cold weather last winter was a big challenge,” said Winship. “We also had a very tight time frame in which to complete all the work.”

The shaft collar was established in 52 ft of wet sandy till, and the company had to get equipment in and out before its winter road melted. A 45 km winter trail links the site with an all-weather gravel road from Pickle Lake.

“A good deal of credit for successful completion of the underground work goes to contractor J. S. Redpath,” he said.

To date, about $35 million has been spent on the project.

According to Winship, Placer Dome completed some 37,000 ft of diamond drilling and 26,000 ft of underground development on three levels with the shaft reaching a final depth of 787 ft.

The company encountered several underground water-bearing joints and some grouting was necessary during shaft sinking and level development.

A crusher at the site produced an 8,000-ton bulk sample, the results from which will be used for metallurgical tests to optimize mill design and correlate drill-indicated grades with crushed rock grades.

“Geologically, the extensive Musselwhite property is somewhat of a mining camp by itself,” Winship explained.

There are several distinct mineralized zones on the property and the company has focused on proving enough ore reserves in one area to justify a mine. A complex folded iron formation hosts the East Bay deposit which contains the S, West Arm, and T-main zones. Most of the current reserves are located in the T-main zone where gold and pyrrhotite are closely correlated. Each percent of iron sulphide indicates a grade of around 0.03 oz gold, he said.

In 1983 an underground program was carried out on the West Anticline zone but it was unsuccessful in establishing an ore reserve. The T-main zone was discovered later in 1986.

One of the major hurdles still to be faced in making the project viable is power. “There are quite a few variables in the power situation,” Winship said.

The company is looking at the possibility of obtaining power from Pickle Lake or Ear Falls, 320 km to the south. With power line construction costs of more than $60,000 per km, this variable is critical in the economic equation.

“The federal and provincial governments are working with us to reach a solution to the power alternatives,” he said.

The existing powerline to Pickle Lake already serves two mines in the area as well as the townsite, however, some upgrading would be required.

A power line into the site could also have economic spinoffs for the native reserves in the area as well as enhance overall development of this remote region of northwestern Ontario.

If developed as a mine, Musselwhite would be similar to Placer Dome’s Detour Lake operation in two respects. Detour Lake has roughly the same tonnage per day capacity and operates on a fly-in basis.

“We’re looking at a fly-in situation (at Musselwhite),” said Winslow, noting that it has become prohibitively expensive to maintain towns at remote sites. “There’s also the impact and aftermath of mine closure to consider,” he added.

Low key negotiations are also being held with local native groups in the region. Last November, both the federal and provincial governments and the companies agreed to put up grants of $60,000 each for the Shibogama and Windigo tribal councils to assist them with the cost of negotiations regarding the proposed mine.

“We’re in the middle of negotiations with the native groups now.” As a potential workforce for the new mine, native northerners could continue to live in their communities and carry on traditional pursuits, he noted.

Placer Dome’s other Pickle Lake area gold mine, Dona Lake, poured its first gold bullion in February. An official opening is scheduled sometime next month for the Dona Lake mine.

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