Mine feasibility study offers glimmer of hope

Opinion

Hey there, time traveller!
This article was published 13/09/2016 (3308 days ago), so information in it may no longer be current.

Considering all the bad news coming out of northern Manitoba for the past several weeks, the recent announcement Alamos Gold Inc. will proceed with a feasibility study on its two potential open pit gold mine sites in Lynn Lake is cause for a little excitement.

In the mining world, when a company says it is doing a feasibility study on a potential mine development, it means it’s serious about the project.

John McCluskey, CEO of Alamos, said he is dead serious.

Alamos has already spent close to $4 million this year in Lynn Lake in on-going exploratory drilling and it intends to keep drilling. A feasibility study — which Alamos is expecting will cost about $8 million to $10 million on its own — is generally considered bankable, which means it’s definitive enough to be able to go out and get financing on.

“It is an exercise in risk reduction is really what it comes down to,” McCluskey said.

But for northern Manitoba it is something else as well: a glimmer of hope.

Even if everything happens in the most expeditious way — with the feasibility study finished by the third quarter of 2017, two years worth of permitting and then another two years of construction — it would be close to five years before a mine is constructed.

If Alamos does proceed with the construction of a mine, it will invest more than $200 million with the intention of producing annual revenues of greater than $250 million.

It will also mean the renewal of a town that has gone from a population of 3,500 people a few decades ago when there was an operating mine, to less than 700. It means potential investment in the transportation infrastructure and a range of other things in the north that wouldn’t have been possible without that industry.

It will also generate renewed interest in a geological zone that some say is worthy of greater attention than it has received in the past.

“In the mining world, success breeds success,” said Tim Friesen, the assistant deputy minister of Manitoba Mineral Resources.

“Part of the really exciting thing for Manitoba is that as they continue to move forward (with the Lynn Lake project) they will start to attract momentum back to that belt.”

And that’s not just wishful thinking from a government official looking to see more activity in a sector that has been noticeably slumping.

“There is very big exploration potential in that part of Manitoba,” McCluskey said in a recent telephone interview. “This is the very beginning. We anticipate there is much more (gold) to be found and it won’t only be us looking. I think there will be others coming into the region and competing directly with us on the exploration side. It is inevitable that will happen.”

Alamos has only been the owner of the Lynn Lake properties since the beginning of this year, when it acquired the remaining stake in the property after having merged with AuRico Gold Inc. in 2015. AuRico had a joint venture agreement with the former owners of the Lynn Lake properties and had committed to funding a feasibility study.

The merger with AuRico was mostly about an Ontario mine AuRico was developing.

McCluskey said, “In a sense we lucked into Lynn Lake. It was not on our radar screen.”

It goes to show mineral exploration projects look more or less attractive to one company over another for various reasons.

Even if it was just luck, it’s a good sign for mineral exploration in Manitoba.

Although exploration has increased a little over the last couple of years, in 2016 it’s still expected to be about half of what will be spent in Nunavut and the Northwest Territories and one-fifth of the spending in Saskatchewan.

And while spending has declined across the country, it slipped a little more than the national average in Manitoba and the provincial reputation as a mining friendly jurisdiction has taken a bit of a hit.

In addition to the momentum that may be picking up steam in the northwest part of the province, exploration work continues in the northeast corner at the second most promising development in the province, Monument Bay near Red Sucker Lake.

A year ago, Yamana Gold Inc. acquired Mega Precious Metals Inc. which had been drilling on that property for several years building up an excellent profile of gold and tungsten deposits.

It is at an earlier stage project than the Lynn Lake one and Yamana has other development projects that are of greater priority,

Still, Yamana recently said it intends to spend $6 million on exploration work on the property this year.

Increased activity on the mineral exploration front could translate into the possibility for increased economic activity across the board in the north.

martin.cash@freepress.mb.ca