Musselwhite not economic, Placer shelves project

Following the recent completion of a feasibility study, the joint venture partners have cancelled construction of a proposed $100-million mine at the Opapimiskan Lake gold property.

High power costs and lack of infrastructure in the remote area were cited as the main reasons behind the decision.

Situated 100 km north of Pickle Lake, Ont., the Musselwhite project is owned 43% by Placer Dome, 32% by Inco and 25% by Corona.

Last year, operator Placer Dome said it was contemplating the construction of a 2,200-ton-per-day mine costing $100 million at Opapimiskan Lake.

“Commencement of construction is possible in the fourth quarter of 1989,” said Placer Dome’s 1988 annual report.

An absence of road access, infrastructure and convenient power source at the remote location, however, seems to have forced the companies to cancel plans for developing what would likely be a 90,000-oz-per-year gold mine.

Opting for a conservative approach, the joint venture will wait until a number of factors, including the price of gold, are more attractive.

The partners said that based on 1989’s average gold price, the current economies of the Musselwhite project do not justify development of a mine.

“We’re putting the project on hold for this winter,” said Placer Dome engineer Michael Winship. He managed an underground program completed last winter at Musselwhite. “We’ll re-examine the situation next year,” he said.

The partners will continue working on environmental permitting and negotiations with local Native groups regarding the proposed mine, he added.

“One of the biggest cost factors for the project is power,” said a Corona spokesman. “Lack of infrastructure in such a remote area also adds significantly to the cost.

A spokesman for Inco said the partners decided not to go ahead with the Musselwhite project because “the economics didn’t look good enough.”

To make a mine out of the deposit, which hosts geological reserves estimated recently at 7.4 million tons grading 0.20 oz gold per ton, could require a $35- million powerline from Ear Falls, Ont. If the companies used diesel as a power source instead, fuel costs could run as high as $47 for each ounce of gold produced at the proposed mine.

In the second quarter of this year, Placer Dome increased its interest in the Musselwhite project to 43% from 35% at a cost of $6.5 million. A $17-million underground exploration program was completed last March.

Geologically, the Musselwhite orebodies consist of sulphide-rich gold zones hosted by folded iron formation and volcanic rocks. At least 10 separate zones of gold mineralization have been outlined, with the bulk of the reserves in the East Bay zones, south of Opapimiskan Lake.

Considered as a teaser for many years, the project has undergone considerable exploration since 1973 when the original Musselwhite grubstake was formed. The first major gold discovery in the area was made by prospectors Harold and Al Musselwhite in 1962.

Elsewhere in the area, Placer Dome’s wholly owned Dona Lake mine was officially opened last summer, 15 km south of Pickle Lake. That $43-million mine is expected to produce 40,000 oz of gold per year at a cost of about $244(US) per oz.

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