Skelleftea, Sweden — Having grown weary of a Central American climate that has become increasingly hostile to exploration and mining,
After conducting several months of due diligence review on the Bjorkdal gold mine, Gold-Ore amended its original purchase arrangement and agreed to an exclusive 2-year option to purchase the mine and all of its assets from AIM-listed
The exclusive option agreement gives Gold-Ore the right but not the obligation to purchase 100% of the mine before the end of 2007. To exercise that option, Gold-Ore is required to pay Minmet the equivalent of US$4 million in a combination of cash and shares. Minmet will retain a sliding-scale net smelter return royalty of between 0.5-1.75%, which can be purchased outright by Gold-Ore for US$1 million at any time.
Gold-Ore’s management believes this to be an excellent opportunity to acquire an advanced-stage project that is fully permitted, with an efficient, modern operating mill and significant resources totalling some 815,000 oz. Detailed exploration plans and budgets are being wrapped up.
“We were having problems in Honduras and Guatemala with concession granting, and the Swedish opportunity appeared through one of our contacts,” Robert Wasylyshyn, Gold-Ore’s president says, explaining why the company made the jump to Sweden. “We will maintain our presence in Central America, but we recognize the mining laws need to be sorted out in some countries to guarantee mining rights to the concession holders. Right now that is an uncertainty in large parts of Latin America.”
Gold-Ore has engaged Blackmont Capital to form a syndicate with Paradigm Capital and Haywood Securities to raise up to $4 million in proceeds. The financing will include an offering of up to 10 million shares priced at 20 each, in conjunction with a “side car” brokered private placement of up to 20 million units at 20. There are currently 23.5 million shares issued in Gold-Ore, or 26.3 million on a fully diluted basis.
Minmet operates the Bjorkdal gold mine through Bjorkdalsgruvan AB, a wholly owned Swedish subsidiary. Bjorkdalsgruvan acquired the mine and restarted production in September 2001; up to the end of September 2005 the mine had produced about 132,500 oz. gold. The mine is 35 km along paved highway northwest of the city of Skelleftea in the Vasterbotten district of northern Sweden, 750 km north of Stockholm. The area has a long history of mining and strong economic ties to the industry, which is supported by low-cost hydroelectric power and a skilled labour force. The climate of north Sweden is moderated by the Gulf Stream and is very similar to the Timmins area of northern Ontario.
Facilities at the mine include a rock-crushing plant and an ore processing mill, with a capacity of 1.3 million tonnes per year. Crushed ore is treated using gravity and flotation separation methods to produce gold concentrates that are sold to third-party refineries. The operation has produced a total of 850,000 oz. gold since it was first put into production in 1988. There are currently 45 people working on-site.
Minmet, out of Dublin, Ireland, acquired 50% of Bjorkdalsgruvan in March 2003 and purchased the remaining 50% later that same year. Gold production during 2003, 2004 and 2005 has been from processing a mixture of lower-grade stockpiled material, supplemented by ore in the pit. In 2004, the mine produced 30,601 oz. gold from the treatment of 1.2 million tonnes averaging 0.94 gram per tonne, at a recovery of 84.8%. This compares to 43,287 oz. gold produced in 2003 from 1.2 million tonnes of mill feed grading 1.3 grams, for a recovery of 86.4%.
During the first quarter of 2005, mining concentrated on extracting ore from the southeast extension of the pit. The plan was to mine marginal-grade material in order to access higher-grade ore at depth. Faced with significant losses in the first quarter, Minmet suspended mining operations at the end of March 2005. Lower than expected grades and high stripping ratios weren’t providing enough gold to cover costs.
In the meantime, the mill has continued to run at full capacity, processing low-grade material that has been stockpiled by previous operators. With the rising price of gold, the operations at Bjorkdal have reverted to a break-even level. “We are taking over a healthy operation,” Wasylyshyn says.
During the 3-month period ended Sept 30, 2005, the mine produced 5,081 oz. by processing 297,604 tonnes of stockpiles averaging 0.64 gram, for a recovery of 83.2%. Production for the first nine months totals 16,064 oz. from the treatment of 881,000 tonnes grading 0.67 gram, giving an 84.2% recovery. It’s estimated that there is enough stockpiled material alone to keep the mill going for another 4 to 5 years.
The processing plant operates 24 hours, seven days a week year-round, apart from short shutdown periods for planned maintenance breaks. The production facilities incorporate a coarse crusher, a rod-and-ball mill, a gravity concentration circuit that uses centrifugal spirals and shaking tables, and a flotation circuit for gold-bearing pyrite.
The flotation concentrates are trucked to the nearby Boliden smelter on the coast for further refining. In a February 2003 report, SRK Consulting judged the plant to be capable of treating ore without significant capital injection.
The tailings contain no deleterious elements and have been classified by Swedish authorities as non-toxic.
In addition, the mine is making some incremental revenue off the sale of crushed rock, which is sold as high-quality aggregate to locals. In fact, Bjorkdal had sold some 46,000 tonnes of crushed aggregate rock at the end of September 2005.
Gold-Ore hired Wardell-Armstrong International (WAI) to conduct an on-site technical review of the operation, including the open pit, mill and tailings disposal facilities. The company says that WAI did not identify any fatal flaws or impediments to the acquisition. A newly completed resource estimate for the mine, prepared by WAI, shows a measured and indicated resource of 177,000 oz. gold contained in 2.2 million tonnes grading 2.53 grams gold per tonne, based on a 1-gram cutoff. A further 638,000 oz., or 7.8 million tonnes averaging 2.53 grams, is inferred.
Data from a total of 1,105 drill holes was used in the resource estimate, including 335 percussion holes, 101 diamond drill holes and 669 reverse-circulation (RC) holes. The pit currently measures 1,500 metres long, up to 500 metres wide and as deep as 200 metres. Past drilling also outlined the Storheden and Nylund prospects that are respectively 1,000 metres north and 500 metres east of the pit.
“We have played with the three-dimensional modelling using the 43-101 resource and the three-dimension software called Datamine, and you can very clearly see the extension of the orebody going north, under about 40 metres of hangingwall,” Wasylyshyn says. “The ounces are there. There is not much doubt because there is enough drilling. And then the drilling ends and it remains open so it could even get larger.”
He adds: “The big risk factor now, is not are there ounces but what are the economics of those ounces? We will have to do a feasibility because we don’t understand the economics of extracting them.”
The pit needs to be pushed back to get to those ounces, Wasylyshyn says.
In September, Bjorkdal management undertook an underground trial mining initia
tive by driving a 50-metre-long adit at the base of the pit to access some 5,000-10,000 tonnes of higher-grade ore averaging 2.8 grams gold from the north wall. The venture more than paid for itself, Wasylyshyn says.
“They made money at it and demonstrated what the cost was to go underground.”
Gold-Ore is proposing to drill off the north-end extension from underground by driving a 1-km-long tunnel through a drilled portion of the deposit that shows good grades.
“The tunnelling essentially pays for itself because the plant is there, running, and it’s hungry,” Wasylyshyn explains. “We’ll haul the material out to the plant and process it, which will offset our exploration costs. Essentially we’re getting free underground access that affords us drilling.”
By going underground, Gold-Ore will be able to see and sample the geology, and get a better handle on the gold distribution in the veins. “It needs careful geology and careful exploration to develop the ore reserves,” Wasylyshyn explains.
The Bjorkdal mine is in the eastern part of the Proterozoic-age Skelleftea district. This 1.9-billion-year-old volcanic arc hosts upwards of 100 polymetallic volcanogenic massive sulphide (VMS) and lode gold deposits, of which 28 have been mined historically. The best-known mine in this area is the famous Boliden deposit, just 12 km from Bjorkdal. The Boliden mine was worked from 1926 to 1967, producing 8.3 million tonnes averaging 15.5 grams gold, 1.4% copper and 0.9% zinc, or more than 3 million oz. gold. The complex composition of the Boliden ore, in particular its high arsenic content, led to the construction of the Ronnskar smelter on the Baltic coast in 1930.
Initially interpreted as a VMS deposit, it wasn’t until quite recently that the Boliden deposit was reinterpreted as a high-sulphidation epithermal system.
The mine had a strong economic impact on the district and resulted in the formation of the Boliden mining and smelting company in 1931. Today, the new
In terms of regional geology, a lower volcanic sequence (Skelleftea Group) is overlain by a younger sedimentary sequence (Vargfors Group). The 3-km-thick Skelleftea Group is comprised of mainly felsic volcanics, with the upper part of the sequence host to most of the area’s massive sulphide deposits. The supracrustal rocks were later cut by a variety of intrusions.
Bjorkdal is an intrusion-related deposit. The gold is associated with centimetres-to-metres wide subvertical quartz veins in a biotite-altered granodiorite. The mineralization is localized near the contact between the intrusion and the overlying volcanics and sediments. The veins generally trend northeast and north-northeast, and terminate at the limestone-intrusive contact. The gold occurs as free milling and in association with pyrite.
Bjorkdal
The Bjorkdal deposit was discovered through grassroots exploration by Terra Mining. A geochemical till-sampling program in 1983 defined an anomalous gold target, which was successfully drilled in 1985. Following the completion of a positive feasibility study in May 1986, Terra Mining went ahead with the construction, at a capital cost of SEK 93 million, and the first concentrate was shipped in September 1988. Two further upgrades to increase plant capacity in 1990 and 1993 involved reported spending of SEK 35 million.
In late 1996, Stan Bharti’s William Resources paid $147 million to acquire Terra Mining and its assets. At the time, Bjorkdal was reported to contain proven and probable reserves of 13.9 million tonnes grading 2.2 grams, equivalent to 983,000 oz. The overall resource was estimated to be 33.1 million tonnes averaging 2.78 grams, or 2.9 million oz. gold.
It’s all in the timing, though. William took Bjorkdal on at a very high price in a falling gold market.
“It didn’t have a fair shake,” Wasylyshyn says.
Faced with a steady decline in the price of gold and high cash operating costs, William struggled under an increasing debt load before ceding control of Terra Mining in 1999 in lieu of US$31 million in associated debt. The Bjorkdal mine was subsequently placed into receivership in June 1999. The mine site lay dormant until 2001 when private concerns purchased the Terra Mining assets from the banks and resumed operations.
Exploration
Gold-Ore considers the exploration potential in the Skelleftea district excellent. At least 11 gold targets are defined by highly anomalous till samples within a 5-km radius of the mine. Many of these gold anomalies are associated with pathfinder elements typical of intrusion-related systems. In addition, there are highly anomalous base metal values in the region.
“We think that there is very good precedent for finding VMS, and we think the gold potential hasn’t been properly addressed, so we will focus on those two targets,” Wasylyshyn says. “We are looking forward to jumping in with both feet.”
Included in the Bjorkdal assets is an extensive regional and local geochemical database containing the results of some 140,000 till samples taken by Terra Mining from right across Sweden and parts of Finland, Norway and Ireland. The till sampling focused primarily on gold. There are also results available for another 35,000 samples taken by the Swedish government.
The entire Swedish countryside was sampled every 36 sq. km during a first-pass reconnaissance, with greater target definition on progressively tighter grids during follow-up of anomalous results. Of greater interest is the existence of the reject and duplicate samples that are stored at Bjorkdal and still available for further analysis for base metals or diamonds.
“We will use the Terra database to evaluate the potential outside of the classic mining districts,” Wasylyshyn says. “We think the intervening belts haven’t been looked at in too much detail.”
This database could prove more valuable than the mine itself. Till sampling was not only responsible for the Bjorkdal find, but it also led to the discovery of the past-producing Pahtavaara gold mine in northern Finland and the Barsele gold project, 200 km west of Bjorkdal.
Minmet farmed out a 60% interest in the Barsele project to
The Barsele project covers 95 sq. km at the western end of the Skelleftea district. It falls along the so-called Gold Line, an emerging northwest-southeast-oriented trend of gold prospects and deposits that includes Australia-listed
Two distinct styles of gold mineralization are recognized at Barsele. A mesothermal, granodiorite-hosted system of quartz stockwork and veins is defined by drilling on the western shore of Lake Skirtrasket, where three zones — Avan, Central and Skirasen — extend over a strike length of 2.6 km. Further north, the Norra prospect is comprised of Skelleftea-style, epithermal, gold-rich, volcanic-hosted semi-massive sulphides. From 1985 to 1995, Terra Mining targeted the Barsele mineralized zones with just over 30,000 metres of drilling in 319 core and RC holes.
An independent resource calculation was done in February 2005, which incorporated the results of an additional 37 holes drilled by Northland and Minmet. The intrusive-hosted deposits of Barsele contain indicated resources of 5 million tonnes grading 1.7 grams gold per tonne, equal to 273,000 oz., with an inferred 6.6 million tonnes gradin
g 1.63 grams, for an additional 343,000 oz.
The Norra massive sulphide zone is nowhere near as significant, containing only 18,000 oz. of indicated resources grading 2.9 grams, and 5,450 oz. of inferred resources at 2.8 grams.
Northland believes that the previous use of small-diameter core during the 1986 and 1987 programs may have under-sampled the gold and led to an underestimation of the grade at Barsele. This year’s drilling of an additional 13 holes, including six large-diameter RC holes in select areas, was designed to test the potential for an upgrade in the resource, while also testing the extension of projected higher-grade shoots. Eight new holes were also completed on the Norra prospect.
Land of ABBA and Ikea
ABBA, Ikea, Volvo and Ericsson are all synonymous with Sweden. Despite its small population (9 million) and large area (450,000 sq. km), Sweden is a technically advanced country with good infrastructure.
Sweden is situated in a stable portion of the great Eurasian landmass. The southernmost part of the country (Skane or Scania) is a continuation of the fertile plains of Denmark and northern Germany, which gives way to a varied landscape of fields, hills and lakes that is typical of the broad zone between the cities of Stockholm and Goteborg (Gothenburg). North of this belt is a borderline area that separates the more northerly Norrland region from the south, with its rolling landscape of hills and mountains, forests and large river valleys. Along this borderline are deposits of iron and other ores, which gave rise to Sweden’s oldest industrial region, Bergslagen. Farther north are the copper, lead and zinc ores of the Vasterbotten region and the large iron ore deposits of Kiruna and Gallivare-Malmberget.
The landscape in Skelleftea and Vasterbotten area, with its forests and hay fields, is remarkably similar to parts of eastern Canada, as is the climate.
Sweden’s rich natural resources — its forests, ore deposits and hydroelectric power — constitute the historical basis of its industrial economy, but the engineering industry and high-technology sectors have grown in significance. Today, the mining industry accounts for 1% of the market value of Sweden’s total industrial production and employs 0.5% of the industrial labour force.
Sweden has an established mining code and guaranteed mineral tenure based on a mineral policy introduced in 1992. This ended a government monopoly on the funding of exploration and a free 50% share of the mineral properties. The private sector is further encouraged by a favourable tax regime of 28% and no royalties on mineral extraction.
“It affords a very mining friendly environment, with a favourable mining code, and a history of mining and discovery,” Wasylyshyn says. “It is a modern, progressive country that embraces mining as a foundation or an underpinning of its economy. High labour costs are offset by a very productive workforce.”
He adds: “A big offset is the lack of political risk — you can get concessions granted quickly in Sweden.”
When the euro was introduced more than five years ago, Sweden chose not to adopt the European currency and kept its krona in place. One U.S. dollar is currently worth about SEK 7.70.
To see more pictures of Rob Robertson’s trip to Skelleftea, Sweden, please visit
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