Exploration incentive bonus spurs Troilus discovery team

To the dismay of major mining companies, talented geologists with vision and an entrepreneurial bent are often lured to the junior mining sector. This is because the potential for rewards, through direct ownership or stock options, is much higher when discoveries are made.

“It is a common problem for larger companies,” says Frank Balint, vice-president of exploration for Inmet Mining (TSE). He believes, however, that majors can attract and retain skilled geologists on staff by offering exploration incentives. “This is something I believe in strongly.” As an example, he cites Inmet’s exploration discovery bonus plan, which provides payment based on a calculation determined by a project feasibility study.

During a ceremony in Toronto, Inmet demonstrated its commitment to the plan by making payments totalling $1.35 million to eight individuals who were involved in the discovery of the Troilus gold-copper deposit. Now under construction in the Frotet-Evans greenstone belt of northern Quebec, Troilus will be Inmet’s first wholly owned gold mine.

Stefan Garber, Inmet’s vice-president of corporate development, says the company was happy to make the payment, adding that “we’d be happy to do it again.”

Balint says the incentive plan was actually put into place by Minnova, which became involved in the project in October, 1988, when it formed a joint venture with Kerr Addison. Minnova amalgamated with Metall Mining (now Inmet) in May, 1993, and Metall subsequently bought the remainder of Kerr Addison’s interest in the deposit.

The discovery dates back to 1985, when Kerr Addison began work in the Troilus area following a favorable geology report by the Quebec government. The ground was staked in the winter of 1987, following a drill program carried out in 1986 about 6 km south of the present mine site.

That first program yielded low-grade, copper-gold mineralization. However, field work on some new claims during the summer of 1987 led to the identification of a train of mineralized glacial float containing highly anomalous copper and gold values.

A hole drilled to locate the source of the boulder train hit low-grade mineralization in what later turned out to be the footwall edge of the 87 zone.

Drilling in the winter and spring of 1988 outlined a large area of copper and gold mineralization, but further drilling of the 87 zone was terminated by Kerr Addison because the low grade of mineralization was deemed uneconomic.

After Minnova and Kerr Addison formed their joint venture in late 1988, the project came back to life. A conceptual model for open-pit mining indicated real potential, and in the spring of 1989, metallurgical test work was carried out to determine the possibility of recovering gold in a copper concentrate.

This test not only confirmed acceptable recoveries, but also showed that the gold content of the samples could be higher than that obtained in the original assaying.

As a result, all the previously rejected Kerr Addison drill core was re-analyzed using 1-assay-ton fire assays. This resulted in a 30% overall increase in the gold grade relative to original assays.

The new numbers also had a positive impact on the economic model, and led to delineation drilling of the 87 zone at 100-metre centres in the spring of 1990.

At the end of 1990, potential reserves of 18 million tonnes were calculated, and it was decided to complete definition drilling at the 87 zone and take a bulk sample for pilot-plant metallurgical testing.

This work was carried out in early 1991. In the same year, the J4 zone was discovered about 1 km away from the 87 zone, while following up on results of a former Kerr Addison drill program.

At the end of the program, combined resources on the two deposits were estimated at 36 million tonnes grading 1.6 grams gold per tonne.

Troilus always had its share of skeptics, and their pessimism was no doubt reinforced after a prefeasibility study in 1991 showed only marginal rates of return for the project.

But Minnova’s engineering team rose to the challenge by reconsidering the project on the basis of taking a lower cutoff grade, mining a larger tonnage at a larger daily production rate, recovering some of the gold by gravity, and designing a starter pit.

These improvements showed a potentially acceptable rate of return, and it was decided to carry out definition drilling of the J4 zone and more drilling on the 87 zone in the winter of 1993.

A full-scale feasibility study was commissioned in early 1993 and completed in the fall of that year. In May, 1994, a production decision was announced, and construction began five months later.

Minable reserves are now estimated at 42.9 million tonnes grading 1.4 grams gold and 1.37 grams silver per tonne, plus 0.12% copper. The deposit is still open at depth.

The capital cost of building an open-pit mine, mill and related facilities is projected at $157 million, of which $64 million will be spent this year. The Canadian and Quebec governments will contribute $9.4 million for infrastructure.

The project is accessible by a 44-km, all-weather road that connects to the “Route de Nord,” which, in turn, links up to the provincial road system at Chibougamau. A 137-km power line will connect the minesite to a substation near Chibougamau.

Present reserves will support a mining rate of 10,000 tonnes per day, for annual mill throughput of 3.7 million tonnes, for a mine life of at least 12 years. Mining will begin in the higher-grade portion of the 87 zone to maximize revenue in the first four years. The J4 zone will come on-stream in the seventh year and operate concurrently with the 87 pit.

The mine is projected to produce 163,000 oz. gold during the first full year of operation. Average annual output over the first five years is expected to be 151,000 oz. at an average cash operating cost of US$190 per oz. Production will then average 132,000 oz. per year for the remainder of the mine life.

The mill will use gravity, flotation and cyanide leach methods to extract gold and copper. Gold recoveries are projected at 87% over the mine life, with 58% produced as dore bullion and the remainder in copper concentrate.

Commissioning is expected to begin in the fourth quarter of 1996, and commercial production in the first quarter of 1997.

Once in operation, the mine will employ 225 people. As part of an agreement to develop the mine, Inmet will provide employment and contracting opportunities to the Mistissini Cree.