Rubicon wraps up 2017 exploration program at Phoenix

Rubicon Minerals (TSX: RMX; US-OTC: RBYCF) drilled 28,500 metres at its Phoenix gold project in Red Lake in 2017. Highlights from the most recent batch of assay results include a 2.5-metre intercept grading 18.41 grams gold per tonne; a 1.9-metre intercept of 12.81 grams; and a 2.8-metre interval cutting 8.39 grams gold. The company has advanced 41.5 metres in exploratory underground development on the 122- and 244-metre levels into the mineralized envelope and plans to continue underground development work through the first half of 2018. Once that is completed, it will move into a test mining phase. The company expects to deliver an updated resource estimate and technical report in the second half of 2018. The Northern Miner spoke with Rubicon president and CEO George Ogilvie about the company’s progress in 2017 and plans for 2018.

The Northern Miner: In mid-December, Rubicon announced that it had completed its planned 23,500 metre drill program for the year, and then elected to drill an additional 5,000 metres before the start of 2018.

George Ogilvie: The 23,500 metres was finished in early October. While we knew that we wanted to do more diamond drilling in 2018 as part of our continuing work programs, unfortunately the 2018 budget process was not completed in October nor approved, so in order to keep the drills active we felt we’d give the diamond drill contractor another 5,000 metres. Considering that we were ahead of schedule and under budget, it made sense.

TNM: Is it fair to say that your 2017 exploration program has demonstrated higher grades and widths than were predicted by the 2016 resource estimate, as well as higher grades at depth than in the shallower zones?

GO: In general, yes, but we still have work to do. Obviously the history of the company is chequered, given the dramatically changing resource statements. In 2013, there was a 3.3 million oz. global resource in all categories and by 2016 that number had dramatically shrunk to only 400,000 oz. of global resource, which is just too small to justify an economically viable mine.

When I did my own due diligence over a year ago now, I took four months before signing on the dotted line.  I always thought 3.3 million ounces was probably overly optimistic but at the same time, 400,000 ounces was probably conservative. The problem was thought to arise from various East-West structures, known as D2 structures, that cross cut the main F2 zone hosting the bulk of the mineralization. These structures were not well understood. Where they cross cut the F2 mineralization we saw grade blow-outs, as we moved away from these structures, the grade diminishes until there are areas where the grade is sub-economic. The D2 structures and structural geology were never well understood, and understanding these is one of the key objectives prior to publishing an updated NI-43-101 in 2018.

“Orientated drilling is not commonly employed in North America, but if you’re in Red Lake and particularly if you know some of the difficulties that other operations have seen with respect to structural geology, it can be a very valuable tool.”
George Ogilvie
President and CEO, Rubicon Minerals

TNM: Can you describe what you’ve seen this year?

GO: On the 244-metre level, where we’ve developed through the mineralized zone, we see good consistent mineralization, all better than 4 grams gold per tonne, yet when you go to the current resource model we don’t see near the same strike length nor consistency. In short, the current resource model doesn’t marry up with what we can physically touch and see in the mine. We are now seeing similar discrepancies within our new diamond drill core when compared to the existing resource model.

Upon the recommendation of our geological consultants, Golder Associates, we completed structural mapping of all the pre-existing developed openings in the mine and compared these results to what was in the then geological model. There were few similarities. Any new geological model will encapsulate the actual information taken from the physical mine. As far as the resource is concerned, we’re starting from a low base and there’s a good opportunity the next 43-101 will see an uplift in the resource. The key is really the magnitude of how much the resource is going to grow and whether it will be material enough for us to justify putting the mine into commercial production.

TNM: But you’re pleased with the drill results so far?

GO: The drilling this year is encouraging. And what hasn’t come out in the last two press releases — but we’ve mentioned it in prior press releases — is that all the drilling is orientated drilling. When we drill the core and we cross cut these quartz breccia structures and D2 structures or any structure, we actually know how the core barrel is orientated in 3D space, so when we bring the core to surface and the geologists start doing structural mapping and record the azimuth and dip of the structure (because the geologist knows where that barrel sits in 3D space), he or she is able to project where that structure could be at other levels of the mine, and if we have other core or development from that area and we see the same structures, it allows us to connect the dots. While there was 500,000 metres of historic drilling, none of it was orientated, so there was no mechanism to see how these structures are potentially interconnected.

TNM: That’s a huge breakthrough.

GO: It’s massive. And it’s not at a massive additional cost to do the directional diamond drilling. It’s a little bit more time on behalf of the driller, but he has time within the 10 hours he’s down there underground. Orientated drilling is not commonly employed in North America, but if you’re in Red Lake and particularly if you know some of the difficulties that other operations have seen with respect to structural geology, it can be a very valuable tool.

The other exciting development is that we’ve now seen the first geological model for the upper levels of the mine — from surface down to the 305-metre level — which has allowed us to plan and start development into the mineralized envelope. At the same time, we are in the process of developing test trial mining and stoping plans for 2018, based on the stoping blocks we are generating from the upper level resource model.

As we develop into the mineralized area we’ll be taking chip and muck samples as well as doing structural mapping of any newly exposed wall rock to see how it compares to our upper geological model, allowing us to validate the model and improve upon it when we can. In addition, our development and stoping plans are looking to take advantage as much as possible of current sunk costs, such as pre-existing development or semi-excavated stopes to minimize our own costs.

Our key objective is to show that any eventual recovered head grade can be reconciled back to the stoping block and any future geological resource grade. Provided the test trial mining grades marry up well with any future NI 43-101 resource grades, we feel that the market will be able to place confidence in that new resource model and statement. We don’t know what the new NI 43-101 global resource grade is going to be, as the new geological model will extend down to 1,500 metres below surface and, at the moment, we are only working on the upper 305 metres.

A 2015 photo of surface facilities at Rubicon Minerals’ past-producing Phoenix gold project in Ontario. Credit: Rubicon Minerals.

TNM: What test mining scenarios are you looking at for 2018?

GO: We have three that will be presented to the board. We have four stopes at the upper end and a couple of stopes at the lower end, so that will generate a certain number of tonnes and recovered ounces depending on what scenario is chosen. This, coupled with the 28,500 metres of diamond drilling in 2017, with additional metres planned for 2018, puts us in a strong position to release our next NI 43-101.

We’ve made a lot of progress. When I started in the company we only had eight employees on the payroll, and this year we’ve seen that number creep up to 40 on average, and next year with the bulk of development and test trial mining our peak number of employees will get up to 80. That’s 72 jobs we would have added over an 18-24 month period, which is good for the economy of Red Lake, too. So slowly but surely we’re picking this company up by its bootstraps and moving it forward through the execution of work programs.

That was one of the big attractions in joining Rubicon. I’d had success with my team at Rambler ten years ago, and four years ago we were able to turn Kirkland Lake around, and when I looked at Rubicon where there was a lot of scepticism and negativity, I saw a lot of fundamental errors that had been made at Rubicon that I’ve seen over the course of my career at other companies, and I was confident that my team and I could fix it. The story was broken but I don’t think it was a broken company.

The mill at Rubicon Minerals’ past-producing Phoenix gold mine in Red Lake, Ontario. Credit: Rubicon Minerals.

TNM: Currently, Rubicon has about C$24 million in the bank. Will that cover your costs in 2018?

GO: We are fully funded until the end of 2018 and into early 2019, including the finalization and publication of a feasibility study. And depending on which mine plan scenario we go for, the company will be generating some revenue in 2018 based on saleable gold. This project is a bit different. The mine is 99% built. We’ve spoken to one of the consultants who does the feasibility studies, and we believe when we pull the trigger on the feasibility study it should be completed in three to six months. Once the feasibility study is completed, we’ll then be looking to complete the remaining capital development to connect the ramps and levels to open up enough stope blocks required to move into commercial production.

We know there’s skepticism around the Rubicon name but for the moment I’m asking investors and the street to just watch this space. If you look at our eventual production peer groups there’s no reason to believe that the company couldn’t have a market cap around C$500 million to C$600 million dollars, and we’re at sub-C$100 million at the moment, so there’s substantial upside over the next couple of years if we can continue to execute on the plan.

TNM: Rubicon controls over 280 sq. km of prime exploration ground in Red Lake and at the end of November, the company increased its ownership in the McCuaig property, about 6 km southwest of the Phoenix project. Rubicon acquired the remaining 40% stake in the property that it did not previously own, in an all-share deal with Golden Tag Resources.

GO: One of the exercises we completed this year was going through our entire regional land package. We drafted a criteria ranking system and asked ourselves, if we did have money available for regional exploration, where would we put our dollars? After that exercise McCuaig ranked quite high. From the second half of 2018, once we have put more information out into the market and showed the market and investors on the street that Phoenix can be an economically viable mine again — once that’s heading in the right direction — it’s my intention to turn some of our resources to the regional land package. We have 28,000 hectares of prime real estate in Red Lake, where our claims butt up against a lot of Goldcorp property, so it makes a lot of sense to move our regional land package forward.

After the first two resource estimates on Phoenix, which were both in excess of 2 million ounces at over 15 grams gold per tonne, everyone thought, ‘Oh, that’s definitely a mine, we’re not particularly deep but as we go deeper it will become higher grade,’ and they forgot about the regional land package and put all of their eggs in one basket.

But as one analyst recently said, we’re trading below the break-up value of the company, which is a great point. We’re getting no value for our regional land package, which I think is the jewel in the crown.