B.C. firm gets bargain on Bissett mine

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This article was published 18/12/2015 (1339 days ago), so information in it may no longer be current.

The shuttered Rice Lake gold mine in Bissett has a new lease on life with the announced purchase of the entire property by Vancouver-based Klondex Mines.

Klondex will pay US$32 million, a bargain-basement price considering $375 million of capital improvement has been invested in the property since 2007.

The purchase includes a mill that would cost about $90 million to replace and close to $20 million worth of mobile equipment.

Klondex has two other operating gold mines in Nevada employing about 300 people.

'We are intent to get the underground mine and mill going. We're very excited about it' — Klondex CEO Paul Huet

Company CEO Paul Huet was enthusiastic about the prospects of operating at Rice Lake, which has been producing gold intermittently since 1931.

"We think it is going to be a great asset in our portfolio," Huet said. "We are intent to get the underground mine and mill going. We're very excited about it."

Huet said they intend to produce a new mining plan and will be patient with how it goes about restarting production.

Huet said the plan is to be back up and running by the fourth quarter of 2016 at the latest.

San Gold filed for creditor protection at the end of last year, and in June of this year it was effectively acquired by a numbered company on behalf of Beechwood Re, a reinsurance operation based out of the Cayman Islands which held secured debt totalling $23.75 million.

Tim Friesen, executive vice-president of the Mining Association of Manitoba, said the Klondex deal is great news for the Manitoba mining sector.

"This means the potential for a restart of the Rice Lake mine moves it from the 'if' to the 'when' category," Friesen said.

Huet spoke about mining strategies he believes will be effective at Rice Lake saying its operational experience in Nevada makes it well-suited for the Rice Lake operations.

Huet virtually guaranteed the asset would bring returns to Klondex shareholders and said he would have bought the asset himself if he had $32 million.

Friesen said Klondex is the right sized company to operate the modest-sized mine.

"As opposed to Goldcorp or Barrick Gold, which have large stables of properties all around the world that would be more difficult for Rice Lake to get noticed, it will be high on the radar of senior management at Klondex," said Friesen.

Huet made it clear that, although the company was committed to not losing focus on its Nevada operations, it has every intention of making Rice Lake work.

He said he anticipates it should be able to produce 60,000 to 100,000 ounces of gold per year, roughly the same range that San Gold had produced.

The Bissett mine is currently on care and maintenance with a skeleton staff. About 300 people were laid off over the course of the last year as the former owner's financial difficulties became increasingly difficult to manage.

Under the proposed acquisition, Klondex will pay US$20 million in cash and provide an interest-bearing note for the other US$12 million, to be paid down in three equal annual instalments.

In addition to the Rice Lake complex, Klondex gets a 50 per cent interest in the Tully gold project near Timmins, Ont., and a 32 per cent stake in SGX Resources.

martin.cash@freepress.mb.ca