Gold prices remain at high levels, which is great news for mining companies. But mines are fundamentally a depleting resource and as reserves decline at one mine, another must be found to take its place. Andrew Cormier at Northgate Minerals Corporation tells Andrew Pelis how his company has dealt with the forthcoming closure of its flagship operation, the Kemess South Mine in British Columbia, and is building a new cornerstone, the Young-Davidson Mine in northern Ontario.
Gold mining continues to attract favorable returns and remains a burgeoning industry, with Canada remaining a prime location. One of the big challenges for mining companies is to identify new opportunities as reserves as existing mines dwindle.
It’s a scenario that Northgate Minerals Corporation is only too well aware of as it works toward production at its newest mine, Young-Davidson, which is actually a reinvention of two historical mines near the town of Matachewan, Ontario.
Young-Davidson is located three kilometres from Matachewan, some 65 kilometres west of Kirkland Lake in northern Ontario and “is almost as old as Northgate Minerals itself,” explains project manager Andrew Cormier. “More specifically, the mine is located on the historic Abitibi greenstone belt, on a brownfield site where two former mines had previously produced one million ounces of gold between the mid 1930s and 1950s,” said Cormier.
Northgate Minerals was founded in Ontario when it was incorporated as Kirkland–Hudson Bay Gold Mines, Ltd. in January 1919. The company changed its name to Northgate Exploration in 1959 and finally to Northgate Minerals Corporation not long after acquiring the Kemess South Mine in north-central British Columbia. Given Northgate’s roots, the development of the Young-Davidson mine in Ontario represents a homecoming of sorts for the organization.
Northgate Minerals is listed on the Toronto and NYSE-Amex Exchanges with its executive offices located in Toronto. Northgate currently operates three mines, the Kemess South open-pit copper-gold mine in British Columbia and two underground gold mines, Fosterville and Stawell, located in the state of Victoria in Australia.
“Northgate will produce roughly 270,000 ounces of gold in 2010, and once the Young-Davidson mine begins production in 2012, we estimate total production will rise to over 300,000 ounces per year,” Cormier says. “Northgate has always prided itself on its ability to take on challenging, under-performing assets and turn them into efficient and profitable operations. We first demonstrated this in 2000 at Kemess South, where we acquired a distressed operation out of the bankruptcy of Royal Oak and turned it around in the space of two years into an extraordinarily efficient operation that has produced operating cash flow of over $900 million over the past 10 years.”
In November 2005, Northgate acquired the Young-Davidson property for $18 million, which represented Northgate’s first significant diversification beyond the Kemess camp and another example of its ability to identify a “diamond in the rough.” Since acquiring Young-Davidson five years ago, Northgate has delineated over four million ounces of gold resources on the property through diamond drilling, and has completed a feasibility study outlining a 180,000-ounce-per-year gold mine with an initial 15-year life.
On 10 September, 2010, Northgate entered into a dynamic new stage of development for its Young-Davidson gold mine after a groundbreaking ceremony was held onsite to mark the start of construction.
“The groundbreaking marked the achievement of a key milestone in the development of the Young-Davidson mine. Our first gold pour is scheduled for early 2012, and in its first 15 years of production, the Young-Davidson mine will produce over 2.5 million ounces of gold,” said Ken Stowe, president and CEO of Northgate. “Young-Davidson represents a long-life, low-cost operation located in one of the best mining jurisdictions in the world. We are extremely proud to be here today, five years after Northgate first set foot on the property, as we realize our vision of building this mine.”
“The total pre-production capital cost of the Young-Davidson mine is projected to be $340 million,” Cormier states, “and during the height of the construction, in 2011, there will be approximately 600 construction workers on site. We are now fully funded after recently raising $170 million through a convertible debentures issue that closed in early October.”
Development activities over the next 18 to 30 months will include the construction of a 6,000-mt/day mill, raise boring of a 1,500-meter ore-hoisting shaft, deepening of an existing shaft and driving of an access ramp to ferry men and materials to the underground, upgrading of a 47-kilometer transmission line to the property, and construction of a modern tailings impoundment area. Cormier comments, “The existing infrastructure on the site has given us a great head start and has allowed us to develop the mine in a very short period of time at a cost that is significantly less than what we would have had to spend on a greenfield site.”
When the Young-Davidson mine begins producing gold in early 2012, ore will be sourced from a small open pit on the property for the first two years while the underground mine that will supply ore to the mill for the remaining 13 years of the mine life is being completed.
Cormier says that when the Young-Davidson mine reaches full production, it will employ approximately 300 people and he anticipates that most of the mine’s employees will come from the local area. “Young-Davidson is located in a very prominent district for mining in Canada, and we have forged close links with the local communities and the nearby Matachewan First Nation, which will be beneficial as we staff up our mine,” he said.
An excellent example of the close, collaborative relationship that Northgate enjoys with the local community is an innovative First Nations training program, Matachewan Aboriginal Access to Mining Jobs Training Strategy (MAATS). The program allows members of various First Nations to receive access to education, upgrading and training in the field of mining. As part of this provincially funded program, Northgate provides students with the opportunity for hands-on training at Young-Davidson with the hope that those who graduate from the program will become full-time employees at the mine. Thus far, the program has been a tremendous success as the first five graduates were all hired to work as underground miners at Young-Davidson, bringing total First Nations employment at the mine to approximately 15 percent.
Northgate’s strong relationship with local communities was vital to the project and became an important factor as the company initiated the permit application process for Young-Davidson. The tremendous support provided by the towns of Matachewan, Kirkland Lake, Elk Lake and Timiskaming Shores along with the support of the Matachewan First Nation, with whom Northgate has signed an Impacts and Benefits Agreement, facilitated the timely granting of the various permits necessary to start building the Young-Davidson mine.
The current mineral reserve on the Young-Davidson property provides Northgate with 15 years of mine life, however, many of the surrounding exploration claims continue to hold a high prospective for additional reserves that could extend the mine life well past this mark. “We have explored between the two original mines at a one-kilometer width and 1,500-meter depth,” comments Cormier “and we know that the mineralization is still open beyond that depth. Additional targets to the east and west have given us confidence that there are more reserves to be found on the property.”
Once the initial construction is completed over the next 18 months, Young-Davidson will take its place as the new cornerstone of Northgate Minerals, replacing the venerable Kemess South mine, which has held this position for the past decade. The development of new mines and the closure of old ones is a fundamental part of the mining industry, and, in this instance, that natural life cycle is bringing Northgate back to its roots in Ontario where the future looks very bright. www.northgateminerals.com
