Acadian Mining Rewarded by Broader Focus

Years of underinvestment in exploration and new zinc mine capacity, coupled with low zinc prices, screamed opportunity for Acadian Gold.

So the Nova Scotia gold mining company snapped up the Gays River zinc-lead mine from HudBay Minerals (HBM-T, HBMFF-O) for $7.5 million in July last year, at a time when zinc was selling at about US70 per lb.

Now Acadian, which officially changed its name to Acadian Mining (ADA-V, ADAIF-O) in June — is laughing its way to the bank as low inventories and surging demand for zinc in Asia have pushed up prices dramatically.

Today, the sought-after metal sells for US$1.44 per lb., up from US35 per lb. five years ago, and the company believes zinc could top US$2 per lb. before the year is out.

“The timing of this was perfect,” says Jim Borland, a Toronto-based director of the company. “We got it before the prices for zinc and lead took off. If you look at the inventories for zinc, the outlook is probably better than for any of the other metals. The inventories continue to decline and they are very limited.”

It’s been a similar story for lead. Stock levels at the LME warehouse have dropped below the 40,000-tonne level, notes Terry Coughlan, Acadian’s vice-president.

“The inventories for lead have dropped to some of the lowest levels I’ve ever seen,” Coughlan says. “A lot of the larger lead mines have had problems with strikes and other things that have increased prices.”

Today, lead sells for US$1.49 per lb., up from just 20 per lb. in January 2003.

Acadian’s zinc-lead mine, 65 km northwest of Halifax, N.S., is forecast to churn out 30,000 tonnes of high-grade zinc concentrate and 10,000 tonnes of high-grade lead concentrate per year.

Initially, the mine will operate for an estimated six or seven years as an open-pit operation, followed by a couple of years of underground mining, Borland notes.

In May, after spending $15 million to refurbish the existing mill and develop the pit, Acadian brought the zinc-lead mine to life after 16 years of it lying idle.

Previous owners had tried to run the mine as an underground operation. But groundwater problems and low commodity prices combined to make the mine an often unprofitable venture.

Assets at the mine include a modern 2,000-tonne-per-day processing plant, maintenance facilities, administration buildings, a tailings pond and associated infrastructure, as well as 470 sq. km of mineral rights.

The company hopes to get the mill running at 2,500 tonnes per day by the end of this year.

Coughlan says it didn’t take long to refurbish the mill, which Esso Minerals built when it owned the property in the 1970s.

“It was a Cadillac operation,” Coughlan says. “If you compare this mill to other mills out there, a lot of the equipment is double pumped and a lot of the tanks and equipment are inside rather than outside.”

Corrosion was minimal, in part because the ore is limestone as opposed to a volcanogenic massive sulphide deposit, with a lot of acid-generating rock, Coughlan explains.

The mine has a proven and probable reserve of 4.6 million tonnes grading 3.6% zinc and 1.7% lead, and an inferred resource of 1.8 million tonnes.

The mine is situated 15 km off the Trans Canada Highway and 1 km east of the community of Gays River. Shipping facilities are available in Sheet Harbour, about 80 km from the mine.

“For a junior company to make the transition from explorer to producer is a difficult leap and something that is rarely done,” Borland says. “We are quite proud of being a metal producer.”

Acadian hopes that high zinc prices will help finance its gold projects.

Acadian’s principal focus traditionally has been on the Nova Scotia gold fields where it is the dominant player, controlling four advanced gold projects: Beaver Dam, Forest Hill, Tangier and Goldenville.

Current resources at its gold properties stand at 626,000 oz. gold in the measured and indicated categories and 909,000 oz. gold inferred.