Colomac going out on a high note

The Colomac mine of NorthWest Gold(Amex) in the Northwest Territories is scheduled for suspension with the last ore to be delivered to the mill July 3. Milling started in May, 1990, and 2.5 million tons had been processed by May 31.

“There’s little latitude for misjudgments or teething problems for the high volume, low-grade gold operation particularly at startup,” Greg Bowes, vice-president of NorthWest Gold, told The Northern Miner on site.

The company was unable to raise additional working capital and consequently could not replenish the mine’s vital supplies for the coming year. The most important commodity is diesel fuel for the power plant and present stocks will soon run out. All bulk supplies are delivered by an ice road that is open for only 8-10 weeks each year and ending late March or early April.

If bulk supplies do not come in by the ice road, they do not come in at all. Air freight is too expensive. The plant burns half a million gallons of fuel per month including fuel required by the open pit’s trucks and drills.

The mine is owned 52% by Northgate Exploration (TSE). Mill construction at Colomac started in early 1988 and was completed two years later.

The 1988 decision to go into production was based on a gold price of US$450 per oz. with the spot price then hovering near US$460. The price dropped to US$368 by the time milling started and remains in the same area to the present day. Incorporating the dollar exchange rate, the decline is even more pronounced eroding the Canadian gold price to $421 from $572, a 26% change.

Thus, a miscalled gold price has administered the coup de grace for a promising producer.

To compound the decline in gold prices, the company has had to handle its inevitable startup problems. In Colomac’s case, the culprit is a hard, tough and abrasive ore. “It’s the most difficult ore to handle that I have come across,” says mill superintendent Bill Wakabayashi. “The only ore that comes close is that from Princeton Mining’s (TSE) Similco property; we’ve gone through three mantles on our primary crusher in not much more than a year and the wear problem is severe in all our crushing and grinding equipment.”

The upshot is that instead of being able to process a scheduled 10,000 tons per day the mill has only been able to handle 6,000-7,000 tons. This, of course, has had a critical effect upon daily gold output.

Despite startup problems, Colomac’s 1991 gold production is expected to total 75,000 oz. The production of 14,500 oz. in May is equivalent to an annualized rate of 174,000 oz. and compares with an original projected production of 200,000 oz. per year.

Gold recoveries have improved from 82% at the start of milling to 91% three months later and they recently reached an all-time high of 96%. Average recovery for 1991 is expected to be 94% and is on target.

Ore reserve grades established by the 1988 feasibility study were judged by Colomac to be approximately 10% high, but more recent analysis is indicating that the 10% figure is itself too high. An authoritative factor will be determined on completion of milling.

According to Wayne Valliant, superintendent of technical services, the secretion of particulate gold in the early months of the mill’s operation led to low apparent gold recoveries with the subsequent assumption that the ore reserve grade was too high. Later performance figures have shown that the correspondence between actual ore grades and feasibility grades is much more favorable.

(The secretion of gold particles in a new mill is a phenomenon known to many entrepreneurs in the salvage business. It can be very profitable to strip old grinding mills for the recovery of the gold lodged in crevices and packed behind the mill’s liners.)

Proven and probable reserves as of Jan. 1, including 15% dilution, total 26.7 million tons at a grade of 0.055 oz. per ton. John Kearney, president and chief executive officer of both NorthWest Gold and Northgate Exploration, acknowledged that the operation had generated an operating profit over the last half year but was not prepared to release figures nor the cash cost of gold production.

Kearney senses that a gold price in the US$425 range will be needed to make the operation profitable but an authoritative figure will be determined when a comprehensive review of the project is completed later this year. He also asserted that none of the Northgate Group of companies will be forced into bankruptcy because of the failure of the Colomac mine.

Approximately $200 million was required to bring the mine into production with the sum including provision for the first instalment of working capital. The expense was provided by contributions from members of the Northgate Group, equity and a $90-million non-recourse bank loan to Neptune Resources, a wholly owned subsidiary of NorthWest Gold.