Brigus Gold (BRD-T) says gold production will increase, as it ramps up the Black Fox mine and its exploration efforts in Timmins, Ont.
“We are making very good progress at Black Fox,” says Wade Dawe, the company’s chairman, CEO and president. He notes it’s on track for month-over-month growth in production.
Yield increased nearly 80% in the second quarter over the previous quarter, but fell 5% below the company’s estimate after slower-than-expected underground development, as Brigus looked to secure underground mining staff.
“The labour market is tight in the Timmins area, and in Canada, for that matter – particularly for skilled underground miners,” Dawe says.
The company has recruited 80% of staff, but needs to fill the superintendent and chief geologist positions, among other roles.
Brigus’ prized mine processed 181,488 tonnes grading 2.86 grams gold per tonne for 15,688 oz. from April to June, with recovery averaging 94.1%. The company anticipated second quarter output between 16,500 and 18,000 oz., but it came well above the first quarter’s 8,772 oz.
For the second quarter, more than half of the tonnes were mined from the open-pit, while the rest came from the underground mine and development ore.
Throughput at the Black Fox mill averaged 1,994 tonnes per day, and hit 2,115 tonnes per day in June.
Brigus says ore production for the Phase 2 open-pit and underground mine started in late March. The open-pit kicked off commercial production in April, and the underground mine is expected to reach commercial status before October.
When it does, Brigus expects an uptick in output, reaching 800 tonnes per day in the third quarter, and 1,000 tonnes daily by year-end. By that time, the mine plan should include 10 mining stopes, Dawe says. Underground production currently comes from a mix of four stopes and low-grade development ore.
“We think Black Fox is getting to the point where there is enough room underground to start delivering decent underground ore tonnes,” Haywood Securities’ analyst Kerry Smith writes in a note.
An initial mill expansion to boost capacity from 2,000 to 2,200 tonnes daily is planned for the third quarter. The company will decide whether to further expand capacity to 3,500 tonnes per day in the latter half of the year.
Smith notes that while 1,000 to 1,500 tonnes were mined daily from the open-pit during the quarter, the number should decline by year-end as the company ramps up underground higher-grade ore production. The grade should increase as a result.
Although Black Fox previously operated as an underground mine from 1997 to 2001, it was launched as an open-pit mine in May 2009. Both the mine and the mill are part of Brigus’ wholly owned Black Fox Complex, which spans 18 sq. km and extends 6.5 km along strike of the Destor-Porcupine fault zone.
The complex includes the new Contact and 147 gold zone discoveries and the adjoining Grey Fox and Pike River properties, all in the township of Black River-Matheson, Ont. The company scooped up the mine, Grey Fox and Pike River when Linear Gold, formerly led by Dawe, merged with Apollo Gold last June.
Brigus completed induced polarization and magnetic geophysical surveys within the complex in late 2010.
With the surveys, the company identified a “multitude of high priority drill targets,” which led to the Contact and 147 discoveries. Brigus plans to test the other previously highlighted targets over the next 12 to 24 months.
“We hope to find one or two more zones of gold mineralization on the property,” Dawe says.
Brigus is working through an $11-million exploration program for the year, with a focus on expanding Black Fox along strike and downdip, drilling the Contact and 147 zones and testing potential gold-bearing targets.
It has three drills turning at 147, and two on the Contact zone 400 metres north of 147.
The junior has been pulling intriguing results from the 147 zone since uncovering it in April, 4 km south of the Black Fox mine.
“We drilled 50 holes in the discovery to date, and we are getting some very good drill results,” Dawe says.
Highlights include: 20.11 grams gold per tonne over 16 metres, and 34.06 grams gold over 5 metres; 3.94 grams gold over 24 metres, and 6.86 grams gold over 12 metres; and 3.84 grams gold over 26 metres, with 14.38 grams gold over 5 metres.
“What’s interesting is the grades are high, and the ore zone is thick, and it remains open at depth,” Dawe enthuses.
Brigus, which has extended 147 to a vertical depth of 240 metres, describes gold mineralization as occurring mainly within several quartz and carbonate-healed brecciated zones, within bleached units of mafic volcanics.
It plans to add another rig to the property in August, and release an initial resource on the Contact and 147 zones before 2012.
Brigus expects to produce 73,000 to 80,000 oz. for 2011, at a total cash cost ranging between US$575 and US$625 per oz.
The company also has the Goldfields project in Uranium City, Sask. Goldfields has little more than 1 million oz. gold in reserves from the Box and Athona deposits, with 14.9 million tonnes grading 1.4 grams gold, and 10.4 million tonnes at 1 gram, respectively.
Dawe says Brigus is completing “desktop-type of work” at the project, such as engineering, plus some drilling. The company anticipates production to start in 2013.
He emphasizes that Black Fox is the company’s priority. “We want to optimize the production situation at Black Fox. We want to reach nameplate capacity with respect to production, and maximize our cash flow. And after that time, we would be able to contemplate our next steps with Goldfields.”
Black Fox has an estimated mine life of 8.5 years, based on reserves of 6.3 million tonnes grading 4.4 grams gold for 895,800 oz. It has another 5.9 million tonnes at 5.5 grams for 1 million gold-equivalent oz.
Smith of Haywood Securities rates Brigus Gold as “sector outperform,” and has a 12-month target of $2.50 per share. The company notes that Smith owns Brigus shares and has visited the property, and that Haywood has taken part in financings over the past year.
The company’s shares closed at $1.61, within a 52-week trading range of $1.11-$2.15.