NWT miners clear 2020 hurdles
Despite pandemic Canada works to boost exploration activity Mining Explorers 2020 - Published January 19, 2021
Last updated 1/28/2021 at 3:46pm
For many mining companies eyeing prospects in Canada's far north, 2020 presented insurmountable challenges. But for the few explorers and producers focused on Northwest Territories, the year proved to be quite productive, even as a global coronavirus pandemic added expensive restrictions to already costly campaigns.
Rigorous restrictions imposed by local and federal officials to quell potential outbreaks of the disease at mining camps and prevent its spread to local indigenous communities hampered the efforts of many companies to carry out exploration programs during the field season.
A shutdown of world markets also curtailed diamond production at the territory's three large diamond mines.
Mines and mining camps also took recommended staffing precautions, but some still had difficulty keeping their workplaces free of COVID-19.
"The mines are operating with reduced work forces, which they must fly in by charter from as far away as eastern Canada," said Ken Armstrong, president of the NWT and Nunavut Chamber of Mines, told reporters in April.
To protect vulnerable northern communities from the virus, the mines sent home their local employees with pay, and they are maintaining costly and unplanned virus protection measures, he said.
Still, an aggressive federal and local public health response combined with local incentives, federal rent relief and/or continued investor interest spurred some mining explorers, particularly those with established operations, to pursue work programs for 2020 despite the obstacles.
Less than 50 people in the territory had tested positive for the coronavirus by Sept. 25 and only five individuals had developed symptoms of the disease. All five had recovered, but another four cases emerged in October, according to government figures.
The specter of the pandemic and its attendant threats of illness and death prompted some juniors to stay home and postpone their exploration plans until 2021.
Focus on mining investment
The slowdown, ironically, came on the heels of a major initiative, launched by a new territorial government elected in October 2019, to attract mining investment to the territory. In February, the government released and published its mandate for 2019 to 2023, which outlines steps and timelines to achieve some 22 priorities, including increasing resource exploration and development, investing in strategic infrastructure and settling and implementing treaty, land, resource and self-government agreements with Indigenous populations.
GNWT leaders say they are committed to building up the territory's mining and resource sector. Increasing resource exploration and development is a major component of their mandate.
Canada is the world's third-largest diamond producer, most of which comes from the Northwest Territories and make up a significant part of the territory's GDP. Most of the diamond mines are set to ramp down production and close in the next decade, but the territorial government hopes to expand exploration and save revenue and jobs.
The government's mandate also calls for an independent review, due in 2022, that will examine all aspects of the territory's competitiveness to develop recommendations to maximize benefits using royalties, taxes and economic returns.
Another review of the Northwest Territories' tax and royalty system, completed in October, concluded that the NWT is receiving a fair return in line with other Canadian jurisdictions.
"The re-imagining of our government's fiscal framework around royalties is one that deserves a comprehensive, collaborative, and multi-phased approach – and that's what we will give it. This document is an initial step. The upcoming review of the NWT's mining regime will be founded on a variety of inputs, including an extended and extensive period of consultation with indigenous governments, communities, industry and members of the public," said Caroline Wawzonek, minister of Industry, Tourism and Investment.
The recent review, in the works for years, compares how the NWT treats mines – and how much mines cost to operate – with 21 other Canadian and international jurisdictions, ranging from Alberta and Alaska to Mexico and Sweden.
Overall, the territory's tax and royalty regime are one of the more permissive. In scenarios studied by PricewaterhouseCoopers, the territory is consistently among the eight or so areas with a lower tax demand on companies – or, at worst, the NWT is slightly friendlier-than-average to business.
The report concludes the territory is, if anything, one of the friendlier places for mining companies to do business. However, operating costs are so high that many mines will be built only if the deposits are high-grade or prices high.
PricewaterhouseCoopers, which reviewed the territory's tax and royalty regime, observed: "To increase its mine development potential, the Northwest Territories will need to focus on the underlying drivers of its high costs, rather than tax and royalty policy."
The problem for businesses, and for the territory in attracting new mines, is that running a mine in the Northwest Territories is simply more expensive than anywhere else, regardless of the tax situation, observers say.
Diamond mining is still particularly attractive because it brings in enough money to outweigh high operating costs, the review concluded, even if diamond mines elsewhere might be more profitable.
Mining for other materials, though, means lower prices.
"These mines would not be built unless deposits are of high quality and/or prices are expected to be relatively high," according to the review.
"Our results do not mean that no mines will be built in the Northwest Territories under any circumstances. Rather, they highlight the fact that cost competitiveness is a major challenge in Northwest Territories," added PWC. "Therefore, only relatively high-grade deposits are likely to be developed under the status quo."
The review, the first of its kind in more than a decade, at a cost of C$300,000, further concluded that "lowering taxes is unlikely to be effective for the Northwest Territories."
Instead, the territory "should consider developing energy and transportation infrastructure that would lower costs for mining companies, as well as encouraging the development and use of technologies that can overcome the challenges of operating in northern Canada," PWC opined.
Focus on infrastructure
Infrastructure is a major component of the current GNWT mandate, which promises to "connect communities, expand the economy [and] reduce the cost of living" with several new projects.
The Mackenzie Valley Highway, the Slave Geological Corridor and the Taltson Hydro Project, the three major infrastructure projects named in the mandate, have been planned to improve the quality of life and cost of living in the territory, as well as to help expand and diversify its economy.
The Mackenzie Valley Highway project runs through a region with oil, gas and mineral deposits that are currently accessible only by winter and ice roads. Building a permanent road would not only connect communities but allow for expanding power grids, which in turn make exploration and economic development easier.
Noting that many mining companies have sustainability goals, GNWT officials see expanding hydropower options and transmission lines into mineral-rich areas as opportunities to offer green energy sources for new mines.
Together, the road and power projects would cost at least C$2 billion, observers say.
Another objective cited in the mandate is to promote and improve indigenous participation in the territory's resource sector. A major component of this effort will be concluding treaties with indigenous governments in the territory on land, resources and self-government.
Not having settled land claims in some areas is hurting investor certainty in the North, GNWT officials said, adding that getting those land claims sorted out and finalized so the territory can move forward with the support of the indigenous communities is an important goal.
These objectives seek to establish governments and communities in the territory as partners in resource development and exploration. The NWT is already home to some indigenous-owned and operated businesses that mining companies hire and rely on for building their operations. Further developing and settling treaties would promote even more indigenous involvement in the sector, officials say.
Ups, downs for diamond miners
For Dominion Diamond Mines ULC, owner of one of the three big diamond mines in the territory and part-owner of a second mine, the pandemic has presented substantial financial as well as operational challenges. The 100% owner of the Ekati Mine and 40% owner of the Diavik Mine, reported that its planned sale of the Ekati mine and its assets fell through.
The Ekati mine suspended operations in March, and Dominion Diamond Mines received insolvency protection from creditors in April. Opened in 1998, Ekati has provided nearly 33,000 person-years of employment, and C$9.3 billion in business spending, with more than half the benefits (51% of jobs and 69% of spending) going to northern residents and businesses. Billions of dollars in various taxes and royalties have also been paid to public and indigenous governments by the mine, according to the NWT & Nunavut Chamber of Mines.
The proposed buyers, Canadian Diamond Holdings, L.P. and CA Canadian Diamond Mines ULC, affiliates of The Washington Companies, made a successful stalking horse bid of $120 million for the diamond mine but failed to reach an agreement with the issuers of some C$280 million in surety bonds currently posted with the Government of the Northwest Territories. The surety bonds provide continued security for reclamation obligations of Dominion related to the Ekati mine. The stalking horse bid, an offer by two affiliated companies, is subject to a condition that the surety bond issuers and the purchaser reach an agreement regarding the treatment of the existing surety bonds.
No other qualified bids were submitted for the purchase of Ekati, and Dominion remained under bankruptcy court protection from creditors at least until Nov. 7.
At the Diavik mine where Dominion owns a 40% interest, 60% owner Rio Tinto PLC sought court approval in late October to sell its partner's share of diamond output in hopes of recovering nearly C$120 million, plus legal fees and other costs, that the major says its partner owes.
Diavik produced 6.7 million carats in 2019 in operations that employed 555 northerners in a total work force of 1,124. But this year, output may have been hampered by pandemic-related restrictions required to prevent the spread of infection at the mine. In September, Diavik reported a second worker to test positive for the coronavirus upon returning from southern Canada. Both workers were isolated until the risk of virus spread had passed.
The mine is scheduled to close in 2025.
At the Gahcho Kué Mine, owned by De Beers Canada Inc. (51%) and Mountain Province Diamonds Inc. (49%), Mountain Province reported preliminary results of the mine's latest diamond sale in September. Gahcho Kué is Canada's newest diamond mine, having begun commercial operation in March 2017.
Designed to produce about 5 million carats annually over an initial 12-year mine life, the mine won an award in October for being one of Canada's safest employers. Within days a mine employee tested positive for Covid-19, marking the ninth case of coronavirus reported in the territory since the pandemic began.
The mine reported processing 821,049 metric tons of ore averaging 2.19 carats of diamonds per metric ton during the third quarter. That compared with 890,325 metric tons at 1.72 c/t diamonds during the same period of 2019. Gahcho Kué produced 1.79 million carats of diamonds in the third quarter, up 17% from 1.53 million carats in third-quarter 2019 output.
A diamond sale held in September for Gahcho Kué output, which did not include high value fancy and special stones, generated US$8.9 million (C$11.7 million) from 210,661 carats at an average realized value of US$42 per carat, indicating a 1% discount to values achieved for similar diamonds at a previous sale in February. It was the company's first traditional commercial sale since February and the start of the COVID-19 pandemic.
The Gahcho Kué Joint Venture covers 5,216 hectares of mining leases that includes the Gahcho Kué Mine where exploration is focusing on near-mine and brownfields discoveries that can extend the life of the mine.
De Beers Canada is the operator of the exploration program at Gahcho Kué, with Mountain Province collaborating to prioritize new targets for drilling. In 2019, the joint venture found the Wilson kimberlite; the first new kimberlite discovery on the Gahcho Kué leases in 20 years.
De Beers is also actively exploring Kennady North, a project that covers 106,202 hectares (262,425 acres) adjacent to Gahcho Kué. Mountain Province is the operator of the Kennady North exploration programs.
Five kimberlites have been discovered at Kennady North, and three have NI 43-101 resource estimates. These resources are within 10 kilometers of the Gahcho Kué Mine.
North Arrow Minerals Inc., the only junior exploring for diamonds in Northwest Territories, launched a ground gravity survey program in September at its Loki project in the Lac de Gras region. The project is located about 40 kilometers (25 miles) west, and 35 kilometers (18 miles) southwest of the Diavik and Ekati diamond mines, respectively, and immediately adjacent to the west of North Arrow's LDG Joint Venture Diamond Project with Dominion Diamond Mines. The exploration program, supported by a GNWT mining incentive grant of C$130,000, is focusing on priority magnetic and topographic targets located in the north Loki target area.
Incentives spur exploration
The GNWT Mining Incentive Program proved to be a key factor in mineral exploration across the territory. Following a revision of the program to enhance support and emphasis on public safety, the government awarded C$1 million in total grants for 2020-21 to 20 projects (seven being explored by juniors and 13 by individual prospectors) in August to receive funding.
The successful projects were chosen from 28 applications, a number that officials said indicates continuing interest in NWT mineral exploration, despite the significant challenges faced in 2020.
The incentives program, now in its seventh year, has invested more than C$3 million in mineral projects across the territory. In 2020, the maximum funding available for corporate projects was increased from 50% to 60% of eligible expenses and several COVID-related costs were made eligible. GNWT officials said grant criteria included project compliance with public health orders as well as proposed NWT spending during the review and scoring of the applications.
Besides North Arrow's Loki diamond project, the 2020-2021 mining incentive grant recipients include Gold Terra Resources Corp.'s Yellowknife City gold project (C$86,100); BNT Gold Resources' Fox Lake gold project (C$37,123); Fortune Minerals Ltd.'s cobalt-bismuth-gold project (C$144,000); StrategX Elements Corp.'s 939 cobalt project (C$120,000); and Cheetah Resources' rare earth elements project (C$180,000), which are all located in the territory's North Slave region. Osisko Metals Ltd. also won an incentive grant of C$47,082 for work on its Pine Point zinc-lead project in the South Slave region.
Explorers chase gold
Nighthawk Gold Corp. resumed exploration in July at its advanced stage Indin Lake gold property after a three-month suspension of activities due to coronavirus precautions. The junior controls more than 90% of the Indin Lake gold camp, which encompasses 899 square kilometers (222,203 acres), some 200 kilometers (125 miles) north of Yellowknife, Northwest Territories.
The company concluded its field season in October after drilling more than 22,990 meters on the Colomac, Treasure Island and Leta Arm gold projects in 2020. Assay results from the exploration show numerous long intervals and intersections of gold, including some areas of high-grade mineralization.
A fifth drill arrived in camp in September in preparation for increased exploration planned in 2021 at Colomac and regional targets on its Indin Lake gold property. This work is expected to include up to 75,000 meters of drilling.
Nighthawk also reported positive metallurgical test work in 2020 on samples collected in 2019 from the Colomac gold project.
The company has advanced Colomac, its flagship asset among at least seven discrete gold properties, to outline current indicated resources of 25.89 million metric tons gold grading 2.01 grams per metric ton (1.67 million oz) gold and inferred resources of 5.71 million metric tons with an average grade of 2.03 g/t (370,000 oz) gold, with the majority of ounces contained within an underground resource.
At the Yellowknife City Gold Project, Gold Terra Resource Corp. completed exploration of at least two deposits in 2020, identifying significant zones of gold mineralization as the company continued its campaign to re-establish Yellowknife as one of Canada's premier gold mining districts.
BNT Gold's Fox Lake gold project is currently being explored by Aurora Geosciences Ltd. on behalf of the privately held junior. Discovered by a prospector in 1948, the Fox Lake property is located about 280 kilometers (173.6 miles) to the northeast of Yellowknife and consists of nine mineral claims covering 104.6 square kilometers (40.38 square miles). The property hosts Fox Lake and Zena gold showings to the north of Fox Lake and one extremely high gold anomaly of till sampling to the south of the water body. Historical drilling at the Fox Lake showing revealed that gold mineralization is related to a northeast-trending aplite dyke. The distribution of gold mineralization is an extensive low-grade zone with high-grade pods.
Critical, base metals draw interest
Fortune Minerals Ltd.'s advanced Nico cobalt-bismuth-gold project is located 160 kilometers (99 miles) northwest of Yellowknife. The deposit hosts 33.1 million metric tons of proven and probable mineral reserves averaging 1.03 grams per metric ton (1.1 million ounces) gold, 0.11% cobalt (82.3 million pounds), 0.14% (102.1 million lb) bismuth and 0.04% (27.2 million lb) copper.
In its 2020 exploration program, Fortune is searching for an eastern extension of Nico that may have been offset by faults. The explorer aims to better delineate anomalies previously discovered on the Nico property that may indicate the presence of a larger underlying IOCG-style deposit.
Using geophysical surveys, Fortune hopes to identify concentrations of conductive sulfides within the broader magnetic anomaly beneath this overburden that may represent the east strike extension of the Nico deposit.
Cheetah Resources is aggressively pursuing plans to build a rare earth elements extraction plant in southern Canada to process output from its Nechalacho REE project located southeast of Yellowknife.
The subsidiary of Australia -based Vital Metals Ltd. Oct. 1 said it raised C$7.5 million to advance its efforts to build a rare earth extraction facility adjacent to what will be Canada's first rare earth separation plant in Saskatchewan.
"I think we all know that it has been very challenging for smaller companies to raise monies for projects both in general and in the NWT in particular," David Connelly, Cheetah's vice-president, strategy and corporate affairs, told a reporter recently.
"The fact that there has been a strong response to this funding of investors over-subscribed or heavily subscribed, indicates that this project is gaining investor confidence internationally," he added.
Osisko Metals Ltd. updated its mineral resource estimate and completed a positive preliminary economic assessment for its Pine Point zinc-lead project in 2020. The explorer is working to bring the brownfields project near Hay River in Northwest Territories into production in 2023.
A former mine at Pine Point yielded more than 64 million metric tons of zinc-lead concentrates between 1964 and 1988. Osisko Metals believes the property is still rich in mineralization, especially since only about one-third of the favorable stratigraphy thickness in the 46,552-hectare (115,030 acres) package of mining claims and leases at Pine Point has been tested.
The updated mineral resource estimate for Pine Point includes indicated resources of 12.9 million metric tons grading 4.56% zinc and 1.73% lead (6.28% zinc-equivalent) with a cut-off grade of 1.85-2.05% (pit-constrained) and 5% (underground), and inferred resources of 37.6 million metric tons grading 4.89% zinc and 1.91% lead (6.8% zinc-equivalent).
Osisko Metals focused its 2020 exploration on mineral resource expansion for future open-pit and underground mining and returned high-grade zinc and lead intersections in early drilling results.
In early October, NorZinc Ltd., another junior seeking to breathe new life into a brownfields project in Northwest Territories, reported the start of a surface exploration drill program and resource update at the historic Prairie Creek zinc-lead-silver mine, located about 200 kilometers (125 miles) west of Fort Simpson in traditional Dene First Nation Territory.
Part of its ongoing mine enhancement program, NorZinc said the exploration is focusing on expanding reserves immediately to the north of the deposit's current reserve envelope, adjacent to the last hole drilled at Prairie Creek in 2015.
Hole PCU15-72 returned several intercepts, including a vein intercept of 7.5 meters true width of 247 g/t silver, 33.7% zinc and 17.8% lead; and a stockwork intercept of 3.7 meters true width of 257 g/t silver, 29.3% zinc and 18.7% lead.
Originally developed in the 1980s as the Cadillac Silver Mine by the Hunt Brothers, the mine's owners since have focused on zinc and lead values due to extremely high grades of the base metals in the deposit. Recent increases in silver prices, however, prompted NorZinc to refocus on the high silver grade zones on the property. Prairie Creek currently hosts 38.1 million oz of silver in measured and indicated resources and 37.6 million oz silver in inferred resource. Current reserves, included in the resource estimates, contain 32.2 million oz silver.
Base reserves included in a 2017 feasibility study, Prairie Creek would have a 15-year mine life, producing average annual metal concentrates of 105 million pounds lead, 95 million lb zinc and 2.1 million oz silver for the first 10 years.
The explorer plans 1,300-3,250 meters of surface drilling between mid-October and December, hoping to expand reserves. Final assay results are expected in January 2021.
In late September, NorZinc reported receiving proceeds of a US$2.25 million unsecured bridge loan.