Ressources Appalaches establishes Nova Scotia gold mine

Ressources Appalaches’ (TSXV: APP) president and CEO Alain Hupé is only too happy to follow a hunch.

It was, after all, a hunch that started him down a path that has led to the imminent first gold pour at the company’s Dufferin gold mine in Nova Scotia — which marks the province’s first new gold mine in 13 years. 

The roots of the story trace back to Ressources Appalaches going public in 1997, and shortly after expanding its area of exploration interest beyond its own backyard of Rimouski, Que., and into the Maritimes. On one such exploratory trip to the Maritimes Hupé, a geologist and a mining engineer, noticed something out of the corner of his eye.

“I was on my way back from a visit with a prospector in Nova Scotia and I saw a sign that said ‘Dufferin mine,’” he recalls. “I had never heard of it before because as it turned out, it was run by private company . . . so I just pulled over. There were guys there working the mill, so I started talking to them and got around to asking if they needed financing. They said yes, and that’s what got me interested.”

That was 2006, and Hupé’s newfound interest led him to discover that the mine had been built in 2001 only to go out of business eight months later, as the gold price dipped below the US$300 per oz. mark.

That meant the contractor was left unpaid,which was remedied by raising more money from the remaining shareholders to mine the tailings and generate enough cash flow to pay off the outstanding debt.

The plan worked, the debt was cleared and by 2009 Ressources Appalache had secured a deal to buy the mine for just $4 million in cash.

For the money, it not only inherited all the necessary permits and infrastructure built up around the deposit, but also some highly prospective ground.

The past operator outlined a non-National Instrument 43-101 compliant deposit across a 750-metre strike length. Ressources Appalaches put the drill to work and found that the mineralization continued along strike and at depth. So far it has tested down to 400 metres and has expanded the strike length to 1.4 km.

That outlined zone hosts an unusual structure, with the only other one occurring across the globe — known as a “saddle reef vein.”

The other saddle reef vein deposit is Australia’s Bendigo mine, which was mined most recently by Unity Mining (ASX: UML; US-OTC: BGOMF), which stands as Australia’s second-largest gold mine in terms of historical production with 22 million oz. gold produced.

At Dufferin mine the saddle reef vein deposits are formed at the nose of an anticline fold and a series of gold quartz veins run parallel beneath the nose of the fold. So far 13 veins have been discovered, each one spaced 20 to 40 metres beneath the next.

While it has yet to complete a compliant resource calculation — it expects to have a maiden one out in the fourth quarter — the company has outlined 75,000 non-compliant oz. gold within the area that the past operator focused on. With its latest infill drilling program underway, it is looking to add another 75,000 oz. along strike east of the current deposit and beneath it.

The ounces are being fed into a mill with a flotation and gravity circuit that can handle 300 tonnes per day. Seventy-five percent of production is expected to come from the gravity circuit due to the large amount of coarse gold in the veins. The other 20% will be trucked out as a concentrate 600 km to a smelter, for a total recovery rate of 95%.

The company estimates that the head grade will be between 6 and 7 grams gold with the mining crews using ramps that built by the past operator.

Ressources Appalaches also has its eye on expansion as the current bottleneck is the ball mill — where the 300-tonne-per-day constraint lies. The rest of the plant is equipped to handle three times that amount.

That means for a relatively modest amount of capital the company can take milling up to 600 tonnes per day, which it plans to do in 2015. For the time being it expects to produce 10,000 oz. gold for the rest of this year, then 20,000 to 25,000 oz. next year, with expansion taking that number up to 50,000 oz. gold by 2016.

Ressources Appalaches has already proven that it can get capital when it needs to. It funded the refurbishment of some of the processing facility as well as the new mining fleet via a US$10-million loan from Lascaux Resource Capital. 

The loan has a two-year maturity with an 8% coupon and another 10,125 oz. in gold repayment over those two years. 

At press time Ressources Appalaches shares traded for 8¢ apiece, within a 52-week trading range of 7¢ to 12¢. 

With 202.1 million shares the firm’s market capitalization sits at $16 million.