Magnacon makes second mine for growing Muscocho group

The Mishibishu Lake joint venture plans to spend $29 million during the next year to develop and put into production a 600-ton-per- day gold mine and mill operation on the Magnacon property about 32 miles west of Wawa, Ont.

Participants in the joint venture are Flanagan McAdam Resources (50%), Muscocho Explorations (25% and operator) and Windarra Minerals (25%).

While Muscocho’s work on the property has been highly visible during the past three years, the production announcement was somewhat unexpected. Muscocho’s other project in the area, the Magino property about 80 miles northeast of Magnacon which it owns 50-50 with Windarra Minerals, was believed to be closer to production because a mill has already been erected on that property.

Michipicoten Twp. Reeve Douglas Woods, for instance, was surprised to learn from The Northern Miner that a second gold mine within his municipality plans to go into production within the next year. Canamax Resources announced about a year ago that it plans to start producing at its Kremzar mine in the third quarter of 1988 at a rate of 500 tons per day. “We thought Magino was going to be the next one,” said Woods. “We’ve been expecting to hear from Magino for the past six months.”

By this time next year there will likely be two and, if Magino gets the green light, possibly three gold mines operating near Wawa, a community that until now has survived on a marginal underground iron ore operation owned by Algoma Steel and a dwindling forestry industry.

Reeve Woods said the new mining development is “definitely good news for our community.” He credited flow-through financing for making the mine developments possible and for “turning around” the town.

As the forestry industry cut back operations in the area over the past few years, employment fell. In the past two years, however, things have changed markedly, says Woods. “In July ’86 there were 100 houses for sale in Wawa and no buyers. Today you can’t get a house,” said Woods.

The only reservations the community has about mining development “is that there’s not 10 more” he added.

For J. T. Flanagan and John McAdam, principals in Flanagan McAdam Resources and Muscocho and joint recipients of the Prospectors and Developers Association of Canada’s 1988 award for mine developers, Magnacon will mark their second operating mine. Muscocho also owns and operates the Montauban gold mine near Quebec City.

The project was developed extremely quickly. The first hole drilled by Muscocho on what was essentially a grass-roots project at the time, was put down in June of 1985. Production is expected as early as January, 1989, a remarkably short lead time for an underground mine.

It could be difficult for the Muscocho group to raise the capital needed to get both projects up and running so soon, but Muscocho has made somewhat of a name for itself in overcoming such difficulties. It has good connections with institutional investors, particularly in the U.S., partly because it has operated the Montauban mine at a profit for several years.

A project gold loan could raise as much as half of the money needed for Magnacon. Muscocho has the money in hand to meet it’s commitment and the other two partners could do equity financing to raise their share.

Previous work on the project, including surface and underground exploration, cost $16.2 million. Based on that work, estimated ore reserves stand at 1,440,580 tons averaging 0.24 oz gold per ton. Included in that estimate is a 319,040-ton block of proven reserves averaging 0.40 oz.

A 10×16-ft ramp currently provides access to five levels at 100-ft vertical intervals. Extensive lateral work has been carried out on four levels.

Mordaunt describes the deposit as two parallel structures: “A really typical quartz-vein host deposit.” He says it is very easy to follow underground with excellent continuity. When The Northern Miner visited the site in late 1987, a visual inspection on the second level showed the main quartz vein to be persistent over several hundred feet of drift, with widths ranging up to 15-ft. and rarely pinching to less than three feet.

A 30-mile hydroelectric line will have to be built to the property.

Flanagan McAdam and Muscocho recently agreed to buy Westfield Minerals’ 50% interest in the adjoining property to the east (N.M., March 14 /88). Mordaunt says they feel it holds the greatest potential in the immediate area and is known to host the extension of the Magnacon shear zone.