Teck closes Beaverdell silver mine, Keno reopens Yukon operations

The heady days of 1980 when silver prices averaged US$20.66 per oz. are a distant memory for companies that produce the metal either as a byproduct or as a primary commodity. Today, with silver prices in a slump that recently bottomed at US$4.14 per oz., it has become tough to find anyone with a bullish forecast for “poor man’s gold.” Most analysts point out that demand is simply not keeping pace with the recent increase in silver production, most of which is now produced as a byproduct from a growing roster of large gold and base metal mines.

Small wonder then, that United Keno Hill Mines (TSE) has raised a few eyebrows after announcing plans to resume operations at its silver-lead-zinc properties in the Yukon which have been shut down on a care-and-maintenance basis since early 1989.

The company released a progress report detailing preparations to resume mining just days after Teck (TSE) announced it would be suspending operations at its Beaverdell silver mine near Kelowna, B.C., early next year. Rated at 100 tons per day, Beaverdell has 36 employees and produces about 325,000 oz. silver annually.

Teck said Beaverdell, an underground mine, was “marginally profitable” in 1987 when it received $9.35 per oz. of silver produced. Since then, the mine has been operating at a loss because of steadily declining silver prices. The ore reserve grade is now considered too low to continue operations.

Beaverdell produced over 40 million oz. silver since production began in 1898. The mine has operated continuously since 1900, making it one of the oldest operating mines in Canada today.

Teck isn’t closing the book on Beaverdell, however. The mine will be secured and maintained and operations could resume if silver prices improve and if the potential for higher-grade ore is realized.

Despite lower than anticipated silver prices, Minnova (TSE) and Rea Gold (TSE) are still reporting profits from their joint venture Samatosum mine near Kamloops, B.C. Although silver is the most important commodity produced at Samatosum by operator and 70% owner Minnova, the mine also turns out gold, lead, zinc and copper.

Meanwhile, in the Keno-Galena Hills area of the Yukon, United Keno Hill Mines has already started preparing its properties for the resumption of some mining and milling operations.

Initially, efforts will be directed at certain open pit operations, and at the Bellekeno mine which is considered to have the best potential for high-grade reserves. The company is already planning to construct a backfill plant at the Bellekeno mine site, and it is also investigating the feasibility of resuming mining at other mine sites, including Silver King, Husky Southwest and Lucky Queen.

In 1988 (the last full year of operations) some 101,000 tons of ore was milled to produce 1.7 million oz. silver, 6.2 million lb. lead and 828,000 lb. zinc. After the suspension of operations, reserves were reported as 322,000 tons averaging 28.0 oz. silver and 4.6% lead per ton.

Company management began discussions with union officials and environmental authorities shortly after BLM Mines completed its recent purchase of Falconbridge Ltd.’s 45% interest in United Keno Hill Mines. Progress is reported to have gone well on both counts, and the company and union recently signed a new 3-year agreement.

Stephen Powell, president of United Keno, said the company isn’t basing its operating plans on silver’s most recent price slump which is being viewed as a “sympathetic” decline (with oil prices) brought about by the easing of tensions in the Middle East.

“We surely won’t open and operate to any degree at all unless we can do so on a profitable basis,” Powell said. “It is our opinion that these low prices won’t be the norm for our planned operating future.”

The company is aiming to start limited production at a modest rate this winter, although its longer-term objective is to gradually increase this to 400 tons per day to achieve “optimum economic efficiencies.”

Within the next several weeks, the company expects to release definitive estimates of the costs involved in resuming operations. At this stage, it is believed some of the costs will involve the incorporation of new methods and technology to improve productivity and cost effectiveness.

In order to keep costs down, the company plans to operate Elsa as a camp site (rather than a company town) and draw the workforce from area communities.

United Keno is also evaluating its mill site and gold-silver mining properties at Venus on the border between the Yukon and British Columbia. The results of a surface and underground exploration program (1984-1988) are being analyzed and the company expects that its 150-ton-per-day mill could become operational with minimal cost should a production decision be made.