Brigus upgrades underground ops at Black Fox

VANCOUVER — After turning the corner at its Black Fox gold mine in Timmins Ont. earlier this year, Halifax-based producer Brigus Gold (BRD-T, BRD-X) has followed up with a solid operational second quarter that saw average costs decline and gold production on the rise.

Brigus is set to complete a mill optimization program, and enjoy an improvement in grades from its underground operation as the company taps higher-grade ore. Black Fox produced 18,254 oz. gold during the quarter, an improvement from the 16,922 oz. the company recorded in the first quarter. Brigus saw average cash costs drop by 7% quarter-on-quarter, falling from US$858 per oz. gold to US$799 per oz.

The company is still relying heavily on its open-pit operations to meet its 2,000-tonnes-per-day throughput target as it develops underground infrastructure in a bid to increase average head grades at the mine. The company is on a second phase open-pit operation, where 192,000 ore tonnes were mined at an average grade of 2.16 grams gold per tonne over the past three months.

Underground operations during the quarter totalled 37,000 tonnes of ore at an average grade of 6.31 grams gold, originating from 2,630 metres of development advance.

“We’ve succeeded in more than doubling the ore grades from the underground mine, and we’re continuing to increase the tonnage,” explained president and CEO Wade Dawe during a second quarter conference call.  “We’re developing towards a large long-hole stope on the westside of the mine, and though this mining method requires more up-front development it will result in lower overall mining costs and higher ore recovery grades than traditional cut-and-fill mining.”

Brigus has twin ramps accessing its ore body from the east and west, both ramps utilize traditional cut-and-fill mining techniques, but a new block of ore was discovered in the west zone during the first quarter, which has the company switching over to a transverese long-hole technique. Additional drilling revealed a zone that measured 130 metres in strike length, 25 metres in horizontal width, and 70 metres in vertical height.

“The stope is expected to provide four-to-five hundred tonnes of high-grade ore once it is fully operational,” Dawe continued. “Due to the increase in size and the development schedule we’re currently on it has taken a bit longer than originally planned, and production is scheduled to begin there next quarter.”

Capital development in the underground totalled US$8.1 million during the second quarter, and Brigus increased its development budget for the remainder of the year by US$10 million to account for the long-hole infrastructure.

Despite a quarterly decline in average cash costs, Brigus is continuing to work on operational savings in a bid to drop its production costs to US$700 per oz. gold by year end.

According to management, the mill optimization process that started-up at the beginning of the year is beginning to pay dividends, but the primary cost cutting mechanism will stem from the higher grades in the underground. As grades rise fixed costs are spread over more ounces, forcing average costs per ounce to drop.

“We’re pleased with our success in the [second quarter] considering the operating challenges the company faced, including forest fires in the region and a breakdown of the cone-crusher at the mill,” Dawe commented. “Achieving our targets despite these challenges speaks volumes to the progress that has been made at Black Fox and the quality of our team at site.”

In a bid to improve operational efficiencies, Brigus named Daniel Racine chief operating officer on July 25. Racine brings 25 years of industry experience to the company, with 24 years at Agnico-Eagle Mines (AEM-T, AEM-N) where he served as senior vice-president operations.

Brigus has allocated US$8 million to exploration and delineating drilling in 2012, with a specific focus on converting inferred resources at its 147 and contact zones — now jointly referred to as Grey Fox — to the indicated category. The 147 zone hosts 4.9 million inferred tonnes grading 2.2 grams gold for 351,900 contained oz., while the contact zone holds 565,700 inferred tonnes averaging 5.9 grams gold for 107,500 contained oz.

On August 23, Brigus released assays from an in-fill drill program on the 147 zone that continued to demonstrate solid grade consistency, with highlights including: 10 metres averaging 8.95 grams gold in hole 12-433; 38 metres grading 2.25 grams gold in hole 12-438; 17 metres of 12.74 grams gold in hole 12-520; and 56 metres averaging 7.65 grams gold in hole 12-532.

“At present there are three drill rigs operating on the Black Fox complex, and numerous high-priority targets remain to be tested,” Dawe commented. “Exploration and definition drilling in the underground of the existing Black Fox mine started in June on a new drift located on the deepest portion of the eastside of the mine in order to expand reserves. A second drill rig will be added to the underground drill program next month.”

The Grey Fox zones are located 4 km southeast of Black Fox, and Brigus expects a resouced update in Sept. followed by a preliminary economic assessment on the project expansion by November. Dawe mentioned the company is looking closely at synergies between the two sites, and expects “robust economics” from the study.

Brigus’ shares have remained in the 82¢ to 88¢ range over the second quarter after hitting a quarterly low of 77¢ in mid-July. The company has 217 million shares outstanding and a $191 million presstime market capitalization.