Golden Rose not so golden, Noramco stops production

One question on everybody’s mind at the Noramco Mining (TSE) annual meeting was why the company shut down the Golden Rose mine near Thunder Bay, Ont. The property was explored and developed by Emerald Lake Resources which has since been absorbed into Noramco, a company now controlled by Breakwater Resources (TSE).

Noramco President Brian Pewsey says the closure will “enable the company to concentrate its manpower and efforts to gain access to previously indicated higher grade ore below the fourth level.” Elaborating on the company’s plans, Pewsey later told The Northern Miner that underground development is well behind schedule and there are insufficient working places to supply the mill at its rated capacity of 400 tons per day.

About 100 employees will be laid off while “we pour our efforts into getting the underground development areas up to scratch,” he said. Forty people will be kept on for the decline and exploration work.

Pewsey said the best reserves are located below the old workings but this ore isn’t accessible at the moment. Instead of trying to find working places at higher elevations, Noramco wants to develop the deeper reserves. The decision to drive a decline was made earlier in the year but it “will take time to get to that area,” he stated.

At this point, about 140,000 tons of ore grade material has been indicated at depth which would give a 2-year mine life at a production rate of 70,000 tons per year. “It’s still open to further exploration though,” he emphasized. A number of areas parallel to the main zone extension will be explored in conjunction with the development program.

The mill has never operated at design capacity and head grades have been averaging about 0.08 oz gold, he confirmed. “That was a lot of development ore which was coming up and also material from ancillary areas in the upper sections which weren’t providing the tons or the grade.”

Pewsey said that exploration drilling in the lower levels indicates an average grade of 0.3 oz gold which “would give the mine an opportunity to have a positive cash flow.” At the lower grade (0.08) it was losing money,” he said.

The mill has encountered start- up problems but Pewsey argued that you can’t really test a mill “until you have a consistent feed at a grade it’s designed for.” If things go really well, production could resume later this year, he predicted. But a likely scenario would be early 1989.

Asked why Breakwater (of which Pewsey is also president) paid $6.50 per share to buy 19.9% of Noramco, he said the deal cost Breakwater about $20 million of which $6 million was cash and the rest involved shares. Pewsey felt the expenditure was justified because Breakwater had the opportunity to “look at about $120 million worth of exploration work. We took the gamble to be able to assess what the heck is in there.”