Kemess project moves closer to production — British Columbia government and Royal Oak reach agreement

A formal agreement between British Columbia and Royal Oak Mines (RYO-T) will pave the way for development of a copper-gold mine in the province’s north-Central region.

The company had been at odds with the provincial government over the details of a compensation package, announced in the summer of 1995, related to the expropriation of the Windy Craggy copper-Cobalt deposit. But compromises were made and the parties recently signed a formal agreement for the $166.2-Million compensation package, which includes a $50-Million royalty investment to help finance mine infrastructure for Royal Oak’s Kemess South copper-gold mine.

The company received two instalments of $14.5 million, paid in 1996 and 1997, in accordance with the 1995 agreement. In further fulfilment of the agreement, the government recently paid an additional $18.8 million and will continue to advance funds to Royal Oak and related entities as required.

Daniel Miller, minister of employment and investment, says the government is pleased to have reached the formal agreement with Royal Oak. “The Kemess South project has been, and will continue to provide, an economic boost for B.C. — particularly the north-Central region — by creating well-paying, family-supporting jobs.”

Kemess South will create about 550 jobs during construction and 350 direct jobs during the mine’s operation.

In other news, Royal Oak obtained an injunction against a roadblock set up by a local native band for the purpose of stopping haulage to the construction site. The order requires the band to cease and desist from blocking the forest road. Even so, Royal Oak plans to meet with band officials to discuss the issue.

Production at Kemess South is expected to start on schedule in the second quarter of 1998. The average annual production rate is targeted at 250,000 oz. gold at an average cash cost of US$189 per oz. and 60 million lb. copper at an estimated average cost of US48 cents per lb.

Reserves at Kemess South stand at 221 million tons grading 0.018 oz. gold per ton and 0.22% copper, with a stripping ratio of 1.26-To-1.

Construction of the $390-Million project is well over half-finished. Mill steelwork is being erected and major services have been installed.

Royal Oak’s Hope Brook gold mine in Newfoundland is scheduled to close in the third quarter, when reserves are expected to be depleted.

The mine and mill equipment will be moved to the Matachewan gold project in Ontario, which is targeted to start production in the second quarter of 1999, six months later than planned.

Royal Oak says the delay at Matachewan will allow it to conserve cash during a period of weak gold prices until the Kemess mine reaches full production capacity.