Emgold aims to restart Idaho-Maryland mine

Grass Valley, Calif. — After half a century, Emgold Mining (EMR-V) intends to reactivate the Idaho-Maryland underground gold mine near this former mining town, 45 miles west of Lake Tahoe in eastern California. If all goes as planned, the mine could be back in business by 2007.

The project is at the feasibility stage; its future depends on Emgold’s ability to secure permitting, which in turn depends on community support.

The former mine is on the outskirts of Grass Valley in the Sierra Nevada foothills between the Idaho-Maryland Road, the Brunswick Road, and State Route 174 in Nevada Cty. The mine contains 72 miles of underground tunnels (now flooded) that produced more than 2.3 million oz. gold from 1862 to 1956, making it the third-largest underground producer in California’s history.

Alongside the gold production, the company is eager to reap the benefits of an innovative method of dealing with mine tailings. Emgold developed an in-house process to produce ceramic tiles that would provide an additional revenue stream for the mine. The so-called Ceramext process which has been patented and is now being tested on all sorts of material, would eliminate the need for storage or transport of the tailings and waste rock thereby lowering the total mining costs (see separate story, page 18).

Late last year, Emgold raised $7.5 million to build the demonstration plant for its ceramics products. Portions will be used for ongoing exploratory drilling and applications for mine-use permits. The permits will include provisions for Emgold to operate a staged mine with a production rate of up to 2,400 tons per day.

President William Witte outlined Emgold’s proposed strategy: “First, we will dewater the mine; then, from our fifty-six-acre [surface] property, we’ll put in a decline and go down to roughly the seven-hundred to seven-hundred-and-fifty level. As we are going down, we will be doing underground exploration — mostly shooting holes into the deformation corridor. Then we can do a 43-101 mine feasibility study, which, if positive, would lead to a production decision.”

Permitting and construction of the decline and surface infrastructure are estimated to cost $10-11 million in total.

Grass Valley is in the lode gold district of California, where, in 1848, placer gold was first discovered on the south fork of the American River at Sutter’s Mill. Although the Grass Valley region was the most productive lode gold mining area in the North American Cordillera, there is little mining activity there now.

The surrounding area has become a popular retirement and tourist destination, owing to its sunny dry weather and mild winters. Many of the old mining towns and mines have been preserved with an eye to tourism; the prospect of a mining revival has taken the area by surprise.

Among the former producers in the area is the Empire mine, near the Idaho-Maryland site. Empire produced 5.6 million oz. gold. Before it closed in 1956, it reached an incline depth of 11,000 ft. with 367 miles of abandoned and flooded mine shafts. In 1975, the state of California purchased the 784-acre property for $1.25 million and turned it into a park.

Newmont Mining (NEM-N) is likely to keep a close watch on developments at Idaho-Maryland, as it still holds the mineral rights to the underground part of the mine (now flooded), which it had purchased along with the North Star mine in 1929.

Idaho-Maryland comprises 2,750 acres of adjoining mineral lands, with 37 acres of surface rights centered around the New Brunswick shaft, and 56 acres of surface rights west of the Idaho shaft. The mine was closed in 1942 as a result of the Second World War, but it reopened in 1945. However, rising costs and a low gold price forced it to close in 1957.

Emgold can buy the property for US$4.3 million at any time during the 5-year term of the lease, which started June 1, 2002. Since 1983, the mineral rights had been held by three individuals known as the BET Group. Emgold agreed to pay the BET Group in cash increments through to 2007. Emgold can buy the property at any time by prepaying the principal and must pay all appropriate taxes. Production from the property will be subject to a 3% net smelter return royalty.

“It took us a year and a half to acquire the project,” says Witte. “The owners are in their eighties, and it was slow-going at first. During this time, Ross Guenther [a director of Emgold] focused on developing the ceramics technology and Mark Payne [a registered geologist in California] has been compiling data to ascertain the situation underground.”

Idaho-Maryland is a structurally controlled mesothermal gold deposit. In 2002, the measured and indicated resource was estimated to be 1.7 million tons averaging 0.28 oz. gold per ton, or 472,000 oz. An additional 2.5 million tons at 0.38 oz. gold, or 934,000 oz., are in the inferred category.

Separate permits are required for the surface-based exploration phase (already under way) and development (permits pending).

MACTEC Engineering & Consulting was brought on board in 2002 to develop a environmental assessment plan in preparation for a mine-use permit. The permit will allow the company to dewater underground workings and construct a decline. Operation of the Ceramext plant is included.

While awaiting this permit, the company is drill-testing the Idaho Structural corridor, on surface, in an attempt to expand the resources. So far, the drilling has turned up visible gold in the drill core, for which results are pending.

Emgold is working hard to dispel the myth that getting a mine into production in California is impossible. The company notes that several gold mines, including underground and surface operations, have been permitted in recent years.

Local support

The locals are supportive of a mine, according to the local press, which is not surprising considering gold prices are relatively high and the regional economy suffered as a result of the recent dot-com bust. Some of the old timers are keen to see things restored and are looking forward to returning underground.

The Idaho-Maryland mine will employ 400 workers when it resumes production, according to company officials. Half the workforce would be employed at the mine, and half at the Ceramext plant.

The land package is within the city of Grass Valley, and a portion occupies unincorporated county lands designated to be annexed by the city. Other project lands, including the New Brunswick shaft, are on Nevada Cty. lands.

Among the environmental laws under which the project will have to operate are the California Environmental Quality Act (CEQA), the Surface Mining and Reclamation Act (SMARA), the Clean Water Act (CWA), and the Clean Air Act (CAA).

The permit for development from the city or the county will be approved only after environmental issues associated with the project are addressed. These issues include the following:

— preparation of an environmental impact report in accordance with CEQA;

— preparation of a reclamation plan in accordance with SMARA;

— application for, and issuance of, a discharge permit for mine dewatering in accordance with the CWA; and

— application for, and issuance of, either a permit to construct or Title V permit in accordance with the CAA.

A typical CEQA process may last up to two years. To comply, the company needs to deal with the following issues:

— land use — general plan and zoning amendments, annexation of county land into city of Grass Valley, and reclamation planning;

— noise — use of explosives and mining equipment;

— traffic and circulation — mining trucks and employee vehicles;

— air quality — dust generation from machinery and vehicles;

— cultural resources — potential prehistoric and historic sites;

— geology — potential for subsidence;

— hydrogeology — effects of dewatering on private wells;

— water quality — use of and potential exposure to hazardous substances and materials;

— biology — river-bank habitat, migratory birds, and streambed alteration, owing to proximity to Wolf Creek;

— visual — construction of mine operations area, development of stockpiles, and office buildings for employees;

— public services — fire, sewage, water and electrical facilities, to support mine operations; and

— public health — use of explosives and potential exposure to hazardous materials.

Eight years ago, Emgold received a conditional-use permit to allow dewatering of the underground workings, in accordance with CEQA. Emgold also received a pollution elimination permit from the regional water quality control board, though it expired in mid-2001.