Goldcorp gives Red Lake mine a facelift

The Red Lake mine, one of Canada’s longest-running gold mines before labour troubles laid it to rest in 1996, is fast approaching its rebirth.

Since May, Goldcorp (G-T) has spent $11.6 million rebuilding the mine, and it plans to have spent US$56 million by the time production renews in late 2000. This follows four years of exploration efforts below the old 30-Level workings, where a new deposit known as High Grade has been outlined.

Annual production is forecast at 240,000 oz. gold, with cash costs expected to average US$88 per oz. Reserves, totalling 1.4 million tons grading 1.37 oz. per ton, are sufficient for 6.5 years of mine life.

The facelift is certainly warranted, as evidenced by the decrepit state of the old mill. Says Goldcorp’s vice-president of gold operations, Bruce Humphrey: “This was a very old and tired mine that wouldn’t do justice to the new orebody. We wanted to build a new mine with year-2000 technology, not 1950s.”

In 1948, Red Lake (formerly the Dickenson mine) became the 10th of 19 mines to pop up in this renowed camp of northern Ontario, and subsequently poured its three-millionth ounce in 1994. Only the adjacent Campbell mine of Placer Dome (PDG-T) surpasses it, having recently poured its ten-millionth ounce since starting production in 1949.

However, overshadowing the milestone were ballooning costs arising from years of neglect and unsustainable grades (0.38 oz.) of the refractory ore being mined. After taking over management in 1994, Goldcorp quickly scaled back production and let the exploration crews loose, resulting in the discovery of High Grade in the mine’s basement.

“I was left with a choice: sell the mine or keep it going at the high costs,” says Robert McEwen, Goldcorp’s chairman and chief executive officer, noting that the company has spent only US$11 for each of the 2 million ounces discovered since.

Not all were happy with the change, and, consequently, already-tense labour relations deteriorated to the point where a strike was called in June 1996. A settlement is still wanting, which Goldcorp employee and union member Nancy Hutchison chalks up to indifference.

“From 1990, there hasn’t been a true set of negotiations with Goldcorp, where the workers were able to put all our issues on the table,” she told management at the company’s annual meeting in June. “From 1990 to 1994, there were no increases in wages, pensions or in the drug plan.

“So when 1995 came around and you hit the Motherlode [the High Grade zone], we thought maybe Goldcorp was going to give us something back for our patience, for our goodwill, for our reasonableness in extending the collective agreement and for agreeing in 1994 not to discuss monetary issues. It hasn’t happened — it put us on strike and we’re still on strike.”

When asked about the situation, McEwen told The Northern Miner that had the strike not occurred and no new reserves been found, the undercapitalized facilities would have soon forced the mine’s closure anyway. In 1996 alone, it cost the company US$360 for each of the 56,000 oz. produced.

The latest round of talks occurred a day before presstime, but they met with little success. The company says it is unclear whether the bargaining committee will take its offer to the employees but that it nevertheless remains willing to resume discussions.

Meanwhile, contractors are continuing their efforts, recently pouring the foundation for a new warehouse and continuing work on the plant. A new compressor has already been built, and the dry, rehabilitated.

Underground, the ramp has been extended 800 ft. from the 30 level and will be lengthened another 5,300 ft. to the 37 Level. The other main level is 34, with sub-levels to branch off the ramp every 75 ft. A total of 19,000 ft. of new workings is planned in all.

Unlike historical production, the new operation will benefit from the relatively sulphide-free (up to 7% in drill-core) and bonanza-grade ore. As such, 40% of the gold is expected to fall out in a gravity circuit and another 43% will be recovered by conventional carbon-in-pulp methods. The leftover refractory tailings will be floated and the concentrates stockpiled on surface.

Also, in 2002, Goldcorp plans to install a secondary circuit to treat stockpiled ore and the remaining Sulphide reserves, raising the overall recovery rate to 95%. At the end of 1998, that zone held 152,000 tons grading 0.37 oz. below the 30 Level and 1.2 million tons grading 0.36 oz. above it.

Concurrently, daily production will be ramped up to 1,000 from 600 tons, thus increasing yearly output to 475,000 oz. and lowering cash costs to US$70 per oz. A smooth transition should ensue, owing to the automation of the hoist and upgrading of the No. 2 shaft and other facilities: “We have allowed for expansion in almost all of our decision-making without the need for excess capital,” notes Humphrey.

Goldcorp expects the expansion will add another US$35 million to the capital costs but plans to fund it internally. More than two-thirds of the expense is tied to the recovery circuit, though the most suitable method is unresolved.

“We’ve just assumed the most expensive processing plant, being an autoclave,” says McEwen. “But there are options, such as custom-milling or bio-oxidation.”

Preproduction ore development is expected to begin next April and provide 40,000 tons of ore by the end of the summer. By year-end, Goldcorp expects to have produced 64,000 oz., with full production following thereafter.

Mineralization in this section of the Red Lake camp is held in a series of vein structures associated with shear zones formed at the contact of andesites and ultramafics. Broad zones of biotite-carbonate alteration in the ultramafic rocks and high-angle splays off the main shears typically point to richer grades.

The High Grade zone itself consists of several lenses that pinch and swell along strike and dip. Each will be mined by mechanized cut-and-fill methods, at a minimum width of 4 ft. plus 22% external dilution.

Definition drilling on 25-ft. centres is providing a firmer grip on the geometry of the lenses and offering higher confidence in their grade-consistency.

Infill drilling has increased by 172 to 920 the number of intercepts from High Grade since the last reserve audit, at the end of 1998. This in turn has bumped up the average uncut grade to 3.24 oz. from 2.87 oz. and could lead to some surprises in either direction down the road. (In estimating reserves, Goldcorp follows historical cutting practices, reducing higher-grade assays to 10, 5 or 2 oz.)

New mineralization is being intersected as well, with the latest exploration holes hitting the possible western extention to the delineated FW zone (T.N.M., Aug. 23/99).

A new reserve audit will be completed at year-end using a gold price of US$250 per oz., instead of the US$300 figure attached to the original feasibility study.

Goldcorp raised $60 million in an equity financing earlier this year. However, additional capital will be required to finish the job, which will most likely come by way of debt.