Mobrun mine, a triumph for Audrey president

In a region where Falconbridge and Noranda are the established producers, a relative unknown named Audrey Resources is about to make its presence felt with announcements on two key properties.

During a brief stopover in this thriving camp, The Northern Miner learned that underground production will begin this week at Audrey’s Mobrun polymetallic mine where exploration has produced some surprisingly good results. The company has also announced what it calls a “major discovery” at a grass roots exploration project near the old Quebec Belleterre mine.

While exploration at Belleterre is still very much in its infancy, (see story Page 2) the Mobrun mine is starting to look like a substantial revenue earner.

That was underlined on Aug 6 when 906 tonnes of stockpiled ore from Mobrun’s underground reserves yielded average net smelter return values of $80.39 per tonne with a gold recovery rate of 62.73% grading 0.128 oz gold per ton.

The company says economic reserves of more than 1.5 million tonnes are sufficient for a 5-year mine life and the potential for additional reserves are high.

A base metal play with a 3- million-ton low grade orebody, the Mobrun mine is located 30 km north of Rouyn-Noranda. Very much the new kid in town, it is only the second mine to begin production there since 1982. Production started at Aiguebelle Resources’ Dest-Or gold mine in July, 1982.

First discovered in 1956, the Mobrun deposit is a massive sulphide lense steeply dipping north, near surface and cut by a 1-m-thick dike parallel to its east-west strike. It has a 240-m average strike length, a 200-m depth and an average thickness of 15 m.

When Falconbridge Copper (now Minnova Inc.) offered him a chance to bid on the Mobrun property in October 1985, Audrey President Guy Hebert had only $575,000 in contributions from an 11-man investment syndicate.

For that reason, Belleterre and Mobrun represent the possibility of a personal triumph for Mr Hebert who quit his job as president of Rouyn-Noranda-based Aiguebelle in 1985.

Still only 37, Mr Hebert went out on his own after management problems and a sudden drop in the gold prices foreshadowed Aiguebelle’s acquisition by Cambior Inc.

“We studied just about every project in this area,” said Mr Hebert who found that Mobrun fitted his company’s near-term and close-to- infrastructure acquisition philosophy.

Although the initial agreement with Minnova was a 50-50 joint venture deal, Audrey recently increased its interest in the property to 70% while remaining as operator. Minnova retains a 30% interest. As The Northern Miner’s recent v isit coincided with underground production startup, a journey to the depths of this open pit project gave visitors a good insight into how the company will proceed over the course of its life cycle.

During the first 2 1/2/ years in operation, activity will centre on the property’s west zone where reserves currently stand at around 700,000 tons. From now until Sept 10, ore mined from the west zone which is accessed by a 223-m shaft and two exploration drifts will be mixed with some 40,000 tons of open pit reserves.

Due in part to the high cost ($100,000 per month) of keeping the Norbec plant on standby, production from the open pit began on July 1. The average value of the net smelter return for this low-grade ore was about $40 per tonne, with production costs close to $26 per tonne.

However, Mr Hebert says underground production costs of $35 per tonne will be offset by $60 per tonne in net smelter royalties.

The Sept 1 production decision follows a 2-phase $11-million exploration program which included testing of a 104,116-tonne bulk sample at Minnova’s Norbec mill and the installation of permanent working facilities. (Until Audrey builds its own milling facility, Mobrun ore is being milled at Norbec for cost of $1 plus direct costs per ton.)

While initial recoveries were much lower than anticipated (65.82% copper, 66.85% zinc, 40.97% gold and 21.31% silver), bulk sample revenues of $4.5 million were sufficient to cover the cost of a 300- ton-per-hour crusher, 5 scoop trams and additional mining equipment.

A more recent test on 10,797 tonnes of low grade ore from underground exploration work yielded recoveries of 50.7% gold, 32.32% silver, 83.9% copper and 81.9% zinc. The net smelter return was $53.47 per ton.

“Sampling work done by drilling, raising and cross-cutting indicates that the gold grades in the deposit will be higher than we anticipated,” said Mr Hebert. Those hopes were boosted when two drill holes conducted below the ramp in the east zone intersected 30 m of high-grade ore in a zone that had previously been interpreted as waste. According to vice-president explorations Michel Bouchard, the new discovery means that the level two ramp will have to be redesigned.

If continued exploration including a 10,000-ft diamond drill program on the east zone reveals another lens, Audrey could also afford to build a $10-million on-site milling facility. But since reserves in the west are sufficient to last until 1989, the company will take its time before making any new decisions.

As Audrey attempts to beef up its portfolio with additional acquisitions, Mr Hebert has vowed not to allow his new company to repeat some of the mistakes which he says were made at Aiguebelle.

For example, if a mill is built at Mobrun, costs won’t be covered by cash flow. “Since investors will pay more for a company with no debt, it’s worth diluting your company a little to stay out of debt,” he says.

Backed by a promise of $100 million in acquisition financing from Richardson Greenshields, he is actively looking for the projects to make his company a 100,000-oz (from all projects) gold producer within five years.

After narrowly missing out on some valuable properties, he says he is prepared to pay a high price for the right project. But like Mobrun, they must be near-term producers and close to infrastructure.

Audrey is currently exploring some Casa Berardi area properties held in joint venture with Noranda Exploration. After spending $382,000 on drilling and geophysical work, the best results have come from the company’s Galinee property.