Lalor mine stealing thunder of other site

There's no doubt the big story in mining in Manitoba these days is HudBay's Lalor project near Snow Lake.

Weighing in at about $700 million, the zinc/copper/gold mine is shaking up the economic landscape in the region.

But just down the road and almost below the radar, HudBay is also in the process of building another new mine in northern Manitoba at Reed Lake in the Grass River Provincial Park, about 110 kilometres east of Flin Flon at Reed Lake, about 100 metres off Highway 39.

It's the first time in the modern history of mining in Manitoba dating back to the 1930s when two new mines are under construction at the same time in Manitoba.

And were it not for the scale and size of Lalor, the Reed Lake copper mine -- which is going to cost about $70 million -- would be much bigger news.

A joint venture with the exploration company VMS Ventures (HudBay owns 70 per cent and VMS has 30 per cent), the mine came to fruition at almost lightning speed compared to the typical timelines for such an enterprise.

The location of the deposit -- so close to the highway and so close to HudBay processing plants in Flin Flon -- means there is virtually no surface infrastructure required at Reed Lake.

Blasting and trenching began this summer and bulk extraction is expected by the third quarter of next year.

John Roozendaal, VMS's Brandon-based president, can't say enough about how good it's been working with HudBay since the joint venture was formed in 2010.

"A deposit like ours by itself may not go ahead it if was just us because it's really not big enough to justify a new mill, not to mention that we don't have the expertise on the mining side," Roozendaal said. "We're so impressed with the calibre of HudBay's people and they are taking it very seriously even though it is a small deposit."

Last week, HudBay celebrated its 85th year in operation in northern Manitoba. They clearly know how to make money mining in the region.

As "small" as the Reed Lake deposit may be, one industry official said when it's in production, it could mean as much as $100 million per year on HudBay's bottom line.

"This is our bread and butter; it's what we do well in Manitoba," said HudBay CEO David Garofalo. "This is a project with relatively low capital intensity, quick lead time to production and a high rate of return."

Although it's officially only pegged for a five-year lifetime, HudBay knows how to maximize its deposits.

"Like many deposits in northern Manitoba, once we get underground and get drills set up for exploration we do tend to lengthen mine lives," Garofalo said. "Five years is a launching point. Hopefully we'll find more as we get underground."

The timing of Reed Lake's development slots nicely into HudBay's northern Manitoba mining complex. HudBay's Chisel North mine in Snow Lake has reached the end of its productivity and is closing and its Trout Lake mine in Flin Flon closed at the end of June.

The Chisel North group will transition to Lalor and the Trout Lake crews will have work soon at Reed Lake.

"With the shutdown at Trout and eventually Chisel North in the next month, there has been zero layoffs," said Garofalo.

By the time Lalor gets up to full production, HudBay's northern Manitoba workforce will be about 200 people larger than it is today.

For an exploration company such as VMS, it couldn't be a better opportunity. Reed Lake could provide $85 million in cash flow. And it has other projects it's eager to spend money developing.

VMS has a 30 per cent stake in exploration firm North American Nickel. That firm recently received the Greenland government's largest mineral exploration licence ever, covering a huge geological structure on the southwest corner of the island.

It's the most ancient crater known to man and twice the size of the Sudbury crater, and we all know how valuable the nickel deposits are under that crater.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition August 23, 2012 B5