Under the guidance of a new executive chairman with extensive mining experience, Tamerlane Ventures is raising the $120 million it will need to return the Pine Point mine to full production. Keith Regan learns how leveraging novel technologies and other operational improvements have altered the economics of the project.
For almost a quarter century, Pine Point Mine was the largest and most profitable zinc-lead mine in Canadian history. Between 1964 and 1987, the mine produced more than 64 million tons of ore that yielded 7 percent zinc and 3 percent lead. The mine served as an economic engine that created hundreds of jobs and an entire community in a remote part of the Northwest Territories.
By the time metals markets swooned in the mid-1980s, the economics of the project began to change. Mining activity moved further away from the mill site, boosting trucking costs at a time when demand for the metals being produced was waning. The cost of maintaining Pine Point as a viable community was a factor in the project being shut down in 1987 by then-owner TeckCominco.
“In the 1960s, when this mine first went into production, they didn’t have the fly-in, fly-out approaches that are used today,” says Margaret “Peggy” Kent, executive chairman of Tamerlane Ventures, which has owned Pine Point and adjacent lands since 2004. “When companies went into the wild west frontier to establish remote mining sites, they basically had to build a town and keep that town going to make it work.”
In the fall of 2010, Kent, who has helped found two publicly traded mining concerns and arranged for $1 billion in public and private equity financing for companies in the US and Canada over her career, began looking to line up backers for the revival of Pine Point.
The mine had been shuttered by Cominco in the late 1980s, with at least 70 million tons of ore grade material still in the ground. Tamerlane bought that property as well as a piece of land across the Buffalo River, known as the Westmin claims, and over the course of four years, completed a feasibility study and has been awarded all the necessary permits to bring the legendary mine back online.
By bringing technologies borrowed from other types of mining to bear on the project, and having access to workers and supplies from the area communities of Hay River and Fort Resolution, Tamerlane hopes to make the mine even more profitable, Kent notes.
Tamerlane may also benefit from the fact that infrastructure in the area makes it unnecessary to build a large-scale mining encampment. “There is a hydro power line, a rail-head and a paved road leading straight to the mine site, but there are no houses that we have to support,” Kent says. Instead, workers will be drawn from and commute from Hay River, which is 40 kilometers away by roads that the provincial government keeps cleared and passable 365 days a year. “It’s a fairly thriving community,” Kent says, with an airport and scheduled flights to and from Yellowknife/Edmonton several times a day, as well as a Canadian National railhead and a regional hospital.
The operation of the mine will also bring technology from the potash industry and help produce strong cash flow and enhanced profitability. For instance, because some of the underground deposits left behind in the original mining areas are in an aquifer, they are subjected to groundwater intrusion. Tamerlane plans to use a freeze-ring technique to address this problem. The environmentally friendly freezing process uses brine as a refrigerant to freeze the ground adjacent to drill holes which are arranged in a circle around the deposit. This frozen ground prevents water from entering the mine.
Elsewhere, Tamerlane plans to deploy vertical conveyor systems to help bring ore up to the surface, borrowing from technology used to build subways in New York City and salt mines in Louisiana. The company also plans to use dense media separation, or DMS, on the property, an approach brought into the zinc-lead industry about 15 years ago, after Pine Point was taken offline.
In early November, Tamerlane announced it had obtained $10 million in financing, an amount meant to bridge the venture to a larger closing. “We just started the process of lining up the funding in the last month and a half and we already expect that by the end of the first quarter of 2011, we’ll have a plan in place,” says Kent.
Assuming a closing later in the year, the mine could be up and running 18 to 24 months later, or in early 2013. That timing could be another competitive advantage for the mine project, Kent argues. “What’s interesting about 2013 and onward is during the time that Pine Point is being built and brought online about 20 percent of the world’s production will be depleted. There are many mines that are looking at reserves that are running out and some are quite large.”
Mining companies are moving to address that production decline, but much planned new capacity will not be coming online until 2015 to 2020. “That leaves a window where we believe, and there are reports on the street that show, that zinc prices could approach the $2 level, and lead $1.30-$1.40. That sets our project up to be spinning off cash and enabling us to pay down our debt rapidly.”
Already, the timing is right to move the project forward. “We completed our feasibility study in 2008 right as the base metals markets began to fall apart at the seams,” she says—a blow then followed by the credit crisis. “We knew that was not the time to be seeking to finance the project. The market started to come back at the end of 2009 and is gaining momentum.”
The project’s revival will mean a win not just for Tamerlane, but the entire region near Great Slave Lake as well. “The communities in the area are very excited with our project’s 220 high paying jobs being created,” Kent says. “It’s a situation where we could make a positive economic impact over the long term. We’ve got nine years of reserves ahead of us now and we are continually adding reserves and resources and we are looking to get up to 15 to 20 years of mine life. I came to Tamerlane for one reason, and that’s because I think it’s an extremely exciting project,” she concludes.
