Young-Davidson story grows with Northgate exploration

SITE VISIT

Matachewan, Ont. — Below an old open pit — now an artificial lake said to contain at least one Plymouth Fury with Ontario Provincial Police markings — Northgate Minerals (NGX-T, NXG-X) is carefully threading drill rods through the syenitic host rock of a storied old gold mine, the Young-Davidson.

And there are more stories than just police cars being pushed into lakes. Young-Davidson is in the southern part of the Abitibi belt, and like many gold deposits in the belt, has been in and out of production numerous times. But one story attracted Northgate: “twenty years of continuous mining at a profit,” says Christopher Rockingham, the company’s vice-president of exploration.

Those 20 years were actually 22, from 1934 to 1955; and in those US$35-per-oz. days the mine paid out half a million dollars in dividends. “They (Hollinger) ran this rinky-dink little mine down in Matachewan . . . Well, they ran it for a reason,” Rockingham says.

It was, at the time, a big-tonnage operation, starting as a 1,000-ton-per-day open pit in 1934 that took out 1.3 million tons (1.2 million tonnes) of ore by 1941. After that, the operators (Hollinger Mines) went underground and pulled another 5 million tons out, in a bulk underground operation that was unusual for its era. In the end, Young-Davidson produced about 600,000 oz. and its neighbour, Matachewan Consolidated, another 400,000.

After the mine closed in 1955, Hollinger returned the property to Young-Davidson Mines, which did some work on the property. Timmins, Ont.-based producer Pamour Porcupine Mines excavated two pits — which Rockingham describes as “rip-and-run,” in the 1970s, then in the late 1980s Royal Oak Mines, which had taken over Pamour, began a serious exploration program.

A punctuation mark in the history was a 1991 incident where a beaver dam on Otisse Lake, upstream from the mine, broke, sending water through the old Matachewan tailings pond. The consequent spill of tailings into the Montreal River (and the damage to a provincial highway) attracted both national news coverage and the gentle attentions of the Ontario Ministry of the Environment. The cleanup bill was $2 million.

Royal Oak’s effort culminated in a program of definition drilling for an open pit, and dewatering for underground exploration in the mid-1990s. That, however, was a bad time for Royal Oak, weighed down by cash commitments on the Kemess mine. (Today, Northgate owns Kemess too, put there by Royal Oak’s principal lender after the mining company’s bankruptcy.)

Royal Oak defined a resource, but did not start engineering work on a pit, and after its bankruptcy the property was orphaned. In 1999, Thomas Obradovich bought the property from Royal Oak’s receiver, and vended it into Young-Davidson Mines. By 2004 Young-Davidson had assembled a 35-sq.-km land package consisting of its own claims and an option agreement on claims held by prospectors and neighbouring Matachewan Consolidated Mines (MCM.A-V). The option agreement with Matachewan Consolidated includes advance royalty payments, a $1-per-short-ton royalty, and a 5% participation in any increase in the price of gold over US$270.

Young-Davidson’s work, which led up to a resource estimate, attracted Northgate’s attention and Young Davidson found itself on the selling end of a $20-million offer for the company. It was a decent resource, too, if low-grade: measured and indicated resources in an open-pit configuration, 6.8 million tonnes, grading 2.1 grams per tonne, plus about 330,000 tonnes inferred at 1.3 grams.

‘The history’

Below that, there was an inferred underground resource, at widths that would accommodate bulk underground stoping, of another 7.8 million tonnes at 4.1 grams. And it had “the history” — simple metallurgy, good ground in syenite, and a money-making track record.

The mineralization at Young-Davidson is not the typical volcanic-hosted vein system of the Abitibi, but then neither were Hollinger, McIntyre, or Wright Hargreaves. The gold is in a small syenite stock, tagging along with a small amount of disseminated pyrite that surrounds quartz- carbonate and quartz veins in a stockwork and in shallow-dipping “flat” veins.

Roughly on the property boundary, the syenite is in intrusive contact with mafic volcanics, which are the dominant host rocks on the Matachewan Consolidated property. There, then, is the typical Abitibi gold mineralization, in conjugate vein sets, each vein at a shallow angle to a “mate.”

Northgate’s master plan is to take a ramp down to about 450 metres depth, which would be a drive of 2.4 to 3 km at a 15% grade. That will cost about $10 million (about $3,900 per metre, with all services). It really is the only way to explore a gold deposit at 600 metres, but in the meantime, careful directional drilling is providing some hints. The drilling must be careful, too; it has to thread past old mine workings where the hole could be lost, and avoid several large, post-mineralization diabase dykes.

Three zones are being tested, all in the syenite. The Lower Boundary Zone, near the Matachewan Consolidated ground, is centred at about 900 metres depth, recently yielded an intersection of 194 metres that averaged 0.9 gram gold per tonne; it was, though, seven separate zones, anywhere from 4 metres to 77 metres in core length, which returned grades of 1.2 to 3.2 grams per tonne.

In the Lower YD Zone, immediately below the mined-out areas of Young-Davidson, recent deep drilling confirmed that the zone is about 600 metres long along its dip. The recent hole, YD06-17, cut 12 metres grading 2.9 grams per tonne and, farther down, 35 metres grading 2.3 grams.

Both those holes are to be used as parent holes for later drill holes wedged off the parent.

In a third zone, Lucky, a little to the east of the Lower YD, four new holes intersected core lengths of 7 to 50 metres, with grades of 0.8 to 3 grams gold per tonne.

The grades of most intersections are in line with the resource estimate, ranging from a gram to 6 grams per tonne. But like many other intrusion-hosted gold deposits, there are local high-grade pods. (There is certainly no shortage of visible gold in drill core seen by The Northern Miner.)

The deposit is low grade, and with the tight economics of a low-grade gold deposit in mind, the current work is meant to define a bigger resource that would make for better economics. But some basic costing by Northgate put a price tag of US$40 million on bringing the deposit to a feasibility study — a sum that includes the current exploration program and the $10-million (Canadian) cost of the ramp. Building a 5,000-tonne-per-day mine and mill looks like a US$120-million job, plus US$40 million in sustaining capital and another US$40 million for underground expansion in later years.

If all goes on schedule, Young-Davidson could be producing gold in 2010, at about 160,000 oz. annually, ramping to 210,000 oz. after five years assuming the underground resource could be doubled.

“This project has been criticized for grade,” says Rockingham. “It’s not a slam-dunk as a mine (but) we’re getting good results.”