Two years ago, McEwen Mining (TSX: MUX; NYSE: MUX) purchased the Black Fox mine complex in northeastern Ontario for US$35 million.
The complex — 70 km from Timmins and 9 km from Matheson — included the Black Fox underground gold mine, a 2,400-tonne-per-day mill, a tailings facility, the past-producing Stock gold mine and two development projects — Grey Fox and Froome.
The acquisition from Primero Mining also came with US$150 million in tax pools the company could use to shelter future income. (Those tax pools are now worth US$197 million.)
The Toronto-based mining company thinks the deal was a steal.
Primero had bought the property from Brigus Gold in 2014 for more than $300 million, and assumed liabilities of $140 million. It then spent another $120 million on capex and exploration, McEwen Mining says.
Last year, the Black Fox mine contributed 48,848 equivalent oz. gold to the company’s coffers, and in the first half of 2019, churned out another 18,373 oz. gold. Black Fox has a remaining mine life of two years based on proven and probable reserves of 89,000 equivalent oz. gold.
But it’s the exploration upside at the complex, which is situated along a 15 km section of the Destor–Porcupine fault, that most excites Sylvain Guerard, the company’s senior vice-president of exploration. “It’s a great geological setting,” he said in an interview. “The Destor–Porcupine fault has the right rocks … the gold is present, and we have all the infrastructure.
“I have been in the business for quite some time, and being along the break in the Abitibi is obviously a good place to be, but we believe Black Fox and Stock are located over special segments of the Destor–Porcupine break,” he said. “There are splay structures intersecting the break at both Stock and Black Fox. We are at the right place, and we have significant gold endowment at both properties.”
In July, the company updated the resource estimate for Grey Fox, 5 km southeast of the Black Fox mine. Indicated resources for Grey Fox’s three zones expanded 22% to 2.49 million tonnes grading 7.10 grams gold per tonne for 567,000 oz. gold, while inferred resources increased 35% to 678,000 tonnes averaging 6.19 grams gold for 135,000 contained oz. gold.
The resource estimate was based on 70 more drill holes completed since the previous estimate in October 2017, and included 147NE, a zone the company’s geologists discovered last year that extends from surface to 250 metres, and over a strike length of more than 250 metres.
Exploration on the Stock property near the mill, where ore from Black Fox is processed, and in and around the Stock underground mine, which produced 137,000 oz. gold at a head grade of 5.4 grams gold per tonne between 1989 and 2005, has also been successful. The Stock assets are 30 km from the Black Fox mine.
Less than a year after acquiring the complex, the company completed an initial resource estimate on the Stock East deposit (700 metres east of the Stock mine), where drilling had outlined a thick sequence of gold-bearing, altered mafic volcanic rocks believed to represent the eastern strike extension of the Stock mine.
The Stock East deposit has underground and open-pittable resources defined to 450 metres’ depth totalling 1.5 million indicated tonnes grading 1.25 grams gold per tonne for 60,000 contained oz. gold, and 2 million inferred tonnes grading 1.39 grams gold per tonne for 90,000 contained oz. gold.
“What is interesting about the Stock area — particularly Stock East — is that when we acquired it from Primero, it had been essentially dormant for over 20 years,” says Christina McCarthy, a geologist in charge of corporate communications and investor relations for the company. “It was low-hanging fruit, because it’s exactly where the mine and mill are.”
This year the company will continue to drill west and east of the Stock mine and in the down-plunge extension of the mine, because the base of the historic mine was shallow, at just 330 metres below surface.
“We have a very good understanding of the geology, and our current focus is along 3 km of strike that hosts the old mine,” Guerard said. “We’re trying to extend and better define mineralization within the fault there, and so far we have been adding significant results all along the strike length, with some good intersections at depth.
“Of course we need more work and more drilling, but it’s quite encouraging knowing that in the Abitibi, it’s not uncommon to see mineralization pinching and reopening at depth and forming a significant deposit deeper, and Archean deposits can extend to a depth of 1 km, and even more.”
The company released more assay results from Stock in the first week of September. Hole 19-95, which was drilled 650 metres below the deepest workings in the mine, returned a 9-metre intercept grading 18 grams gold per tonne, including 120 grams gold over 1 metre, starting from a downhole depth of 972 metres.
The assay reinforced Guerard’s conviction that the gold system could extend mineralization below the old mine workings.
East of the mine, drill hole 19-15 returned 5 metres of 10.94 grams gold starting from 169 metres downhole, while 19-14 cut 1 metres of 9.94 grams gold starting from 56 metres downhole.
About 1.1 km along strike to the west of the Stock mine, drill hole 19-90 returned 4 metres (core length) of 4.2 grams gold, including 5.7 grams gold over 2 metres, from 350 metres’ depth.
Last year, drill hole 18-31 intersected multiple intervals of mineralization up to 750 metres’ depth below surface under the mine workings, including 1 metre of 14.8 grams gold within a broader interval of 3 metres of 5.58 grams gold, starting from 720 metres downhole.
Meanwhile, exploration at Grey Fox shows potential for more mineralization. Last year the company discovered a zone called Gibson, just west of Grey Fox. “It was near surface and mostly vein-type mineralization, but when we drilled deeper into it we entered into highly altered and brecciated mineralization, and we got intersections of tens of metres, with some high-grade portions of it, so we are also following up there,” Guerard said.
Assays from drilling at Grey Fox’s 147 zone, released in May, included 48.80 grams gold over 1 metre starting from 146 metres in drill hole 19-1114; 8.24 grams gold over 2 metres starting 163 metres downhole in 19-1113; and 10.33 grams gold over 4 metres at 130 metres downhole in 19-1109.
The company plans to spend US$15 million on exploration in 2019 — 70% of it at Black Fox, and the other 30% at Stock.
Guerard notes that while Grey Fox has seen a lot of drilling in the past, most of it was in just one orientation. McEwen Mining developed its own geological model and came up with a different orientation, which targeted more specifically the cross-structures — an important part of the mineralized system. “That has proven to be quite successful,” he says.
“We’re intersecting high grade and good widths, and defining the zone and extending the mineralization,” Guerard said, “so this is very encouraging to see that our existing resource — since the acquisition — has kept growing, and will likely keep growing with additional work.”