Cheni’s isolation, severe winters make transportation a major cost

At Cheni Gold Mines’ (TSE) Lawyers mine in northern British Columbia, transporting crew and goods on to and from the site can translate into hefty dollar costs.

Company president Paul Savoy said working in an isolated location and in severe winter conditions has underscored the necessity for the operation to be self-sufficient.

“We have to fly in and out our people that’s a major consideration,” he said, adding that staff plus other associated travel costs can boost the company’s aircraft charter bill to $1 million annually.

Since there is only road access for part of the year, all camp consumables must be stored on site. Not only is the company seeing its capital drained as it must convert it to inventory before being required for use, but there are further associated costs with such inventory storage.

“There is an incredible amount of material that must be located on site, that affects your area capacity, and you also must protect them against the severe weather,” he said.

Power generation, Savoy said, is the largest consumable cost for milling and mining operations. Diesel fuel must also be stored on site.

“Not only do you have your fuel costs, but, then you have horrific maintenance costs to keep the operations running full time,” he pointed out. Providing a pleasing camp environment for men in an isolated area is another associated cost. A year-round operation, Lawyers accommodates at least 25-35 men at a cost of about $100 per day per man for room and board expenses. That’s at least $2,500 per day to maintain the camp.

All such associated overheads (many exist in mines that are not isolated) are enhanced when a mine is situated in a remote area and dealing with climatic restrictions. And the effects are felt on the mine’s operating life in relation to world metal prices.

For example, Savoy pointed out that if the Lawyers mine was located in Ontario or Quebec near infrastructure and a skilled labor pool, overhead costs would be about $50 per ton, whereas at Lawyers these costs are $85 to $90 per ton.

“Our position is that the grade must support that additional cost,” he said. “When you have such infrastructure you can afford to go after lower grade, when you don’t, you need higher values.”