TRUE GRIT: Skiers delay garnet mine startup

If all goes according to plan, Polestar Exploration (VSE) and Hawkeye Developments (VSE) expect to have Canada’s only garnet mining and processing facility in production by the fourth quarter of 1992.

Robert Wolfe, vice-president of Polestar, expects all-in mining, milling and marketing costs to be about $40 per tonne. Transportation to Vancouver will add about $20 per tonne to the cost.

Wolfe said marketing studies have indicated that there is a ready market for the mine’s product. The sandblasting product is expected to sell for $100 per tonne (f.o.b. Vancouver), while the water jet and water filter material will sell for US$150 per tonne (f.o.b. mine site).

The companies have, however, faced regulatory delays which postponed an expected start-date this summer.

The project, dubbed Crystal Peak Garnet, is near Hedley, B.C., adjacent to the Apex alpine ski area.

Wolfe hopes development delays are behind the company. He noted that the company has successfully completed all governmental reviews with only cabinet approval remaining. Before going to cabinet, the ministry of energy, mines, and petroleum resources held an open house and public meeting on Oct. 28 to “allow full public access and input to all aspects of the project.” A group of cabin owners in the Apex village area as well as some skiers are opposed to the development.

This, coupled with the recent election of a majority New Democratic Party government in British Columbia, could throw the whole process into reverse if the new regime were to decide further study is required.

Wolfe notes that the local impact of the Crystal Peak project will be very limited with none of its operations visible from either the village or the ski area.

The original quarry area was in fact moved to ensure this. The plant site was also moved from just north of the pit area to about one kilometre west of the pit and about two kilometres from the village.

Wolfe said the only impact on the area will be the movement of 4-5 40-tonne haul trucks per day passing through the village, an approximate 20% increase from the current traffic which is primarily associated with Corona’s Nickel Plate open pit gold mine to the north. He added that the Nickel Plate mine is expected to have a limited life and its eventual closure will significantly lower traffic volumes.

Hawkeye can earn a 70% interest in the garnet property from Polestar by funding the project to production and paying Polestar a total of $5 million. The first payment of $500,000 is due on completion of permitting and feasibility. Hawkeye currently has the funds in trust. On payment, Hawkeye becomes the operator and must pay an additional $500,000 six months later followed by payments of $1 million per year for four years.

Polestar retains a 3% royalty on gross sales at the plant site while Hawkeye will receive 100% of the profits until it has recouped its capital investment plus the $5 million in cash payments. At that point Polestar will participate with the 30% interest.

Not including the $500,000 in trust, Hawkeye has about $280,000 in working capital. In addition to this, Hawkeye expects to complete a $5-million issue of convertible debentures by the end of October. The debentures carry an interest rate of 9% and are convertible at a share price of $1.10. Hawkeye also has an additional $650,000 in debentures outstanding; $150,000 convertible at 75 per share and $500,000 convertible at $1 per share. Hawkeye is sufficiently confident in the future for garnet markets in North America that it recently completed the purchase of Emerald Creek Garnet in Idaho for US$2.5 million. The operation produces about 28,000 tonnes of garnet per year.

Lindsey Gorell, chief financial officer at Hawkeye, said the company should have enough money to bring the Crystal Peak project into production as well as to cover the cost of the Emerald Creek acquisition.

Prior to the conversion of any of the debentures, Hawkeye has about 5.4-million shares outstanding. Polestar has about 6.7 million shares outstanding.