Capstone’s Minto keeps on growing

MINTO LANDING, YUKON — When the Minto mine started up in 2007 it was an open-pit copper-gold-silver operation with a projected four-year mine life and a 1,600-tonne-per-day throughput. But Sherwood Copper knew the potential at Minto was much greater than that.

Capstone Mining (TSX: CS; US-OTC: CSFFF) felt the same way, and in 2008, the then-small copper producer inked a deal to merge with Sherwood. After the merger, Capstone continued what Sherwood had started at Minto, emphasizing exploration and expansion opportunities. 

The work paid off. Today the mine churns through 3,850 tonnes per day and has a mine life stretching to 2019, with milling to 2022. Minto is partway through its sixth expansion, and this time the mine is expanding downwards, adding an underground component to its operation. To house the accompanying surge in workers, a new camp is under construction.

Amidst it all, exploration continues. Hypogene copper-sulphide mineralization at Minto occurs in lenses. Some are stacked vertically and others have been laterally displaced by faulting. The result is a property that still offers good exploration potential, eight years after mining got underway and almost 40 years after the site’s first feasibility study. 

Minto lies 240 km north of Whitehorse, near the centre of the Yukon. It’s a conventional mine in most senses: ore is mined, crushed, ground and floated to produce a copper concentrate bearing gold and silver credits. 

The concentrate is thickened and dewatered before being loaded onto trucks and transported to the Port of Skagway in Alaska. From there it is shipped to smelters across the Pacific. The copper goes to various buyers while Silver Wheaton buys Minto’s precious metals, pursuant to a streaming deal signed before the mine started operating.

Minto does have one unusual characteristic. To get to the mine one drives the Klondike Highway as far as Minto Landing, which is on the east side of the Yukon River. The mine is on the west side. How — or whether — one gets across the river depends on the time of year.

During the summer months a barge ferries vehicles across the river. In the winter, vehicles drive across an ice bridge. And for six weeks each fall and spring, during freeze-up and thaw, there is no way across the river. 

During that time Capstone stockpiles concentrate at the mine site until the ice either solidifies or disappears, and the Yukon River is again crossable.

Geologically, Minto is part of the north- to northwest-trending Carmacks copper belt, which hosts several intrusion-related copper-gold mineralized hydrothermal systems. At Minto, a granodiorite pluton hosts hypogene copper-sulphide mineralization, primarily in stacked, shallowly dipping lenses. 

Mineralization at Minto is dominated by chalcopyrite, with lesser bornite and chalcocite, and minor pyrite. These sulphide minerals occur as disseminations and stringers along foliation planes within the deformed granodiorite. Coarse gold sometimes occurs where chloritic- or epidote-lined fractures cut through a sulphide lens.

The Minto property has seen more than 1,100 drill holes over 16 sq. km. That body of work identified almost a dozen mineralized zones. Area 2, Area 118, Copper Keel and Wildfire are all reasonably close together, and as such are collectively known as Minto South. As the name implies, this resource lies south of the Minto Main deposit, which is mined out. 

Several other deposits are a bit more distanced. Ridgetop is located 300 metres south of Minto South, Minto North sits 700 metres north of Minto Main and Minto East lies 200 metres east of the south end of Minto Main. Two more recent discoveries, dubbed Fireweed A and B, sit just east of Minto East and are likely related. 

At the end of 2012, the deposits hosted 51.6 million measured and indicated tonnes grading 1.11% copper, 0.41 gram gold per tonne and 3.88 grams silver per tonne, plus 16.2 million inferred tonnes averaging 0.92% copper, 0.34 gram gold and 3.17 grams silver.

Minto’s resources translate into just over 13 million proven and probable reserve tonnes. Of those tonnes, 9.2 million are proven and probable open-pit reserves carrying an average grade of 1.39% copper, 0.52 gram gold and 4.48 grams silver. The other 4.4 million tonnes comprise the underground reserve, which bears an average grade of 1.86% copper, 0.76 gram gold and 6.77 grams silver.

Those underground reserves were defined in the Minto mine phase-six feasibility study, which was completed in early 2012. Near year-end 2012, the company was ready to start underground development. The underground work is contractor operated, though Capstone plans to move to owner-operated underground operations soon. 

Since the reserves at Minto are spread out amongst several zones, it took some doing to prepare an efficient mine plan. The plan Capstone came up with for Minto involves three portals, developed sequentially, to access five different zones. 

Underground operations are starting in the 118 zone. While that area is mined, the ramp will be lengthened to reach the Minto East area. These two zones will keep the first ramp active until late 2014.

While Minto East and 118 are in production, the ramp crew will start on another portal and drive towards Copper Keel. Once that decline is complete the crew will drive another decline into the Wildfire deposit. The underground operation as outlined in the phase-six plan will produce 4.36 million tonnes over a seven-year mine life. 

Developing three short adits instead of one long, winding decline would cut out 600 metres of underground development. The staggered timeline is also efficient, in that the portal- and decline-development crew and equipment will finish one job, and move onto the next. 

When The Northern Miner visited in August, Capstone had completed 900 metres of underground development. A month later, in early September, the decline reached the ore zone. Steady mining has to wait until workers have completed the ventilation raise — a 600 ft. shaft from the decline to surface that doubles as an emergency exit. In the meantime, initial ore-development work is confirming grades and geometry.

That is what is going on underground at Minto, but the mine’s phase-six expansion plan also outlines how and when Capstone plans to mine the various open-pittable resources remaining at Minto. 

The Area 2 pit is being mined and will stay active until year-end. Next Capstone will develop an open pit at the nearby Area 118 deposit, followed by a pit at Minto North. The exact order after that will depend on permitting, but the plan is to return to Area 2 and complete a push back, after which operators will tackle the resources at Ridgetop.

The open-pit aspects of the phase-six expansion require only limited capital expenditures. The underground expansion is pricier. Underground mining equipment is expected to cost $33.4 million while underground development work to access the ore zones will cost another $34.8 million. Ongoing upgrades to the process plant will cost $10.3 million, and  infrastructure upgrades demand another $18.7 million. 

However, those costs should be worthwhile. Not only will the mine operate for longer, it will produce 40 million lb. copper annually, which is a couple million pounds more than before the expansion. And the feasibility study for the phase-six expansion forecasts the expansion will generate a 31% after-tax internal rate of return. 

The underground mine is expected to produce 2,000 tonnes of ore each day. These tonnes will be mixed wit
h feed from the open pits to create 3,850 tonnes of homogeneous mill feed daily. The mixing requires constant assaying, as the nature of Minto’s mineralization — stacked lenses — means that mining moves between high-grade lenses and lower-grade zones. 

When both the underground and open-pit operations are tapping into good ore zones, the mine will produce more ore than the mill can manage and the excess will be stockpiled. Once active mining is complete in 2019, the mill will continue operating for another three years, fed by just over 4 million tonnes of stockpiled ore.

That is the end of the mine plan to date. However, Minto is now in the midst of its sixth expansion and the current mine plan only involves those 13 million tonnes of reserves, whereas Minto’s total resource  tips the scales at more than 60 million tonnes. No one would be surprised if Capstone reveals plans for a Minto phase seven.

Changing and growing

Mines adapt as circumstances change, and Minto is no exception. For example, late last year Capstone encountered stability issues with the west wall of the Area 2 pit. They stabilized the problem area, but the process prompted changes to the mine’s drilling and blasting protocol. Capstone now monitors the active face with a radar that detects sub-millimetre movements. But movement is not a concern — in an area of active drilling, blasting, digging and hauling, the rocks are always going to move. Instead radar operators look for movement accelerations, as quickened movement could indicate mounting instability.

The tailings system at Minto has also changed. Sherwood Copper built a dry-stack tailings facility at Minto, and until a year ago tailings were pressed to remove water, trucked to a cleared area near the plant and stacked. Dry-stack tailings are easier to manage from an environmental standpoint, because they’re solid and they stay put. However, the dry-stack process at Minto required employees, electricity and trucks — in other words, it cost money.

As such, once mining was complete in the Minto Main pit, Capstone applied for permission to shut down the dry-stack facility and instead pipe slurry tailings into the pit. Late last year the Yukon government granted the needed water-licence amendment, so tailings are now being deposited in the pit. 

Other changes are afoot. Adding an underground operation at Minto boosted the number of employees on-site, to the point that  camp accommodations filled up mid-year, and Capstone had to use travel trailers to temporarily provide more space. Now the company is working on a new camp at Minto that will be able to house 300 people. The old camp accommodated 240. 

The evolution of the Minto mine is like a microcosm of the growth of its owner, Capstone Mining. When Capstone merged with Sherwood to acquire Minto, the company was producing 26 million lb. copper annually from one operation, the Cozamin mine in Mexico.

In 2014 Capstone expects to produce 250 million lb. copper. Minto added some of those pounds, as did an expansion at Cozamin. But most came from Capstone’s latest acquisition: the Pinto Valley copper mine, which it bought from BHP Billiton (NYSE: BHP) for US$650 million. The deal, announced in April, closed in October, adding a third mine to Capstone’s roster — and a big one at that.

In recent years BHP spent almost $200 million restarting Pinto Valley, a historic operation that ran for two decades before low copper prices forced it into care and maintenance in the 1990s. 

In late 2012 BHP investment brought the mine back online, but the major’s drive to streamline its assets meant Pinto Valley was up for sale. 

Located in Arizona’s famous Globe–Miami copper district, Pinto Valley churns through 50,800 tonnes of ore daily to produce 130 to 150 million lb. copper annually. That represents a 160% increase in production for Capstone. 

Before completing the Pinto Valley acquisition, Capstone forecast 2013 production of 85 million lb. copper in concentrates. It expects to produce those pounds at an average cash cost of US$1.65 to US$1.75, net of by-product credits and selling costs. The company’s other producing operation, the Cozamin mine in Mexico, produces 50% more copper than Minto and each pound costs half as much to produce. 

Capstone’s share price has certainly bucked the general market trend of late, gaining 75% in four months to hit a 52-week high of $2.94 in mid-October. The Vancouver-based company has 379 million shares outstanding, or 400 million fully diluted.