EDITORIAL PAGE — Mrs. Witte goes to town

To Royal Oak Mines President and Chief Executive Margaret Witte, the recent signing of a deal-in-principle to acquire the mothballed Colomac mine in the Northwest Territories must represent more than just another potential mine. Colomac, after all, was Witte’s brainchild when she first ventured into mine-finding as president of Neptune Resources in the late 1980s.

But she lost Colomac. Northgate Exploration, at the time an acquisitive, relatively deep-pocketed senior, shouldered Witte aside when it had to keep reaching again and again into its pockets for money to keep the mine development afloat.

Ultimately, Colomac failed. Predicated on a gold price of $US450 per oz., the mine attained production status with gold struggling at about $350. A $90-million bank loan, plus Northgate’s financial commitment, also weighed heavily on the project. Those burdens and early operating problems finally contributed to its demise in 1991.

But if, as is so often voiced, mines are made and not found, Colomac was and remains a bold invention. Remote, low-grade Colomac needs “everything to go right.” Those were the words of Northgate Chairman John Kearney, who spoke candidly — and bravely, for a public utterance — about the Colomac debacle at a minerals symposium of the Canadian Institute of Mines, Metallurgy and Petroleum (CIM) early last year.

“There were four vital elements — the grade, the throughput, the operating costs and the gold price,” Kearney told the CIM gathering. “Any one (factor) wrong would be serious and any two would kill the project. In the event, we got all four partly wrong.”

Post-Colomac, Witte set off on a new tack. Rather than acquiring grassroots projects for potential development, she formed Royal Oak Mines and bought at bargain prices Giant Yellowknife mine, the Pamour complex near Timmins, Ont., and the failed Hope Brook mine in southwestern Newfoundland. (At presstime, Royal Oak announced it was also seeking to acquire an interest in Geddes Resources, owner of the Windy Craggy copper/gold project in northwestern British Columbia.)

Even after the acquisition binge, Royal Oak emerged debt-free, profitable and a producer of more than 300,000 oz. gold annually. Quite an achievement. Now, if she can bring Colomac back, Witte will come close to having her cake and eating it. She gets a virtually operational Colomac — a complete mill, trucks, shovels — for about $10 million, a fraction of the $200-million development cost. Another $15 million should bring it on-stream. However, this is not an occasion for gloating. Investors lost heavily on the failed Colomac. But at least a resurrected Colomac will reward others and put yet another feather in Witte’s (and her management team’s) already heavily plumed cap.

We humbly offer Mrs. Witte a single piece of perhaps sage (perhaps unnecessary) advice. Yes, tall oaks from little acorns grow. Keep an eye that the roots can support the structure.