Placer miners profitable despite unique problems

Like most of the other company executives who are currently earning a profit from one of the world’s most famous gold regions, the 59-year-old president of Gold City Resources (ASE) travels by airplane. But the pioneer image placer mining has earned since the Klondike gold rush of the late 1880s, makes White feel like something of a comic opera character when he comes to do business in the big city.

According to White, few people outside the Yukon realize that placer gold mining has experienced a resurgence in the past couple of years and that by using up to date mining methods, companies like Gold City, Teck Corp. (TSE) and Queenstake Resources (TSE) are turning a profit.

In the Yukon last year where production was at its highest level since 1917, large bulldozers and custom- made sluice boxes were used in some of the 234 operations to extract 16,000 crude oz gold.

(A crude or raw oz of gold consists of approximately 75% gold, 20% silver and 5% impurities.)

Most of those were private “mom and pop” style outfits which operate on claims handed down by previous generations.

But companies like Teck Corp., which reported an operating profit of $490,000 from its Granville joint venture operation at Goldrun Creek, consider their operations lucrative enough to remain in the region. As long as gold prices remain at current levels, most are expecting to be back in 1989 with refurbished equipment and a renewed appetite for the rugged uncertainty that comes with placer mining. Due to the frigid arctic temperatures which sometimes drop to below –50 degrees celsius, Yukon placer gold miners can only extract ore from the ground during a 100-day season which lasts from late June to early October. During that critical period, miners who live in transient camps are working round the clock to reach their production targets.

But after a winter vacation in the south, most operators are already on site and preparing for the season by late March when stripping and drilling operations begin. “We were planning to do an exploration program in February but you can’t do anything when the temperature is –50 degrees,” said Wayne Lenton president of Canada Tungsten Mining Corp. (TSE). He was referring to a recent cold snap in the region which caused truck tires to burst. At a cost of about $205(US) the Vancouver-based Amax Inc. subsidiary produced 4,400 oz gold last year at its Swamp Creek project near the Alaskan border.

Now in his fifth year in the area, Lenton admitted that even in much more temperate regions like Nevada, placer mining can be risky. Toronto-based Cliff Resources (TSE), for example, is currently reassessing its Olinghouse gold project west of Reno, Nev., after production fell well below the anticipated 20,000 oz.

Variable grades and a problem with the conveyor system has been blamed for a shut down at Olinghouse where Cliff has spent $6.5 million to date.

“Because the location of placer gold deposits depends on the velocity of river flow, you tend to get high grade and low grade spots,” said Cliff’s Deputy Chairman Gary Last. “As a result it takes a lot of detailed drilling to define reserves adequately,” he said.

But with the right amount of experience and determination, experts say placer mining methods can be successful. “The trick is to be working on a reasonably shallow deposit with enough room to run a business-like operation,” said White, who believes that rapid development is at the root of many failures.

Because placer gold miners must make every hour of the brief sluicing season count, efficient equipment is also vitally important, according to White.

Having lived in the Klondike for 25 years, he observed the 15,000- acre Indian River project for a long time before getting involved as operator in a joint venture with the Hughes Lang Group and Dawson Eldorado Mines (VSE).

By focusing on four mining units on the Indian River basin, Gold City is planning to increase its production to 10,000 oz in 1989 from 5,500 oz last year. White believes that careful preparation at the McKinnon, Quartz and Ruby Creek units will give his company a leg up on the competition this year.

After purchasing two new 2 D9 ripper bulldozers and scrapers at a cost of about $2 million, Teck Corp.’s general manager of Yukon operations John Anderson is hoping to equal the 5,000 oz which Teck produced last year in the Granville joint venture with Balner Enterprises. Teck will be the sole participant in the project this year.

But even if their projects live up to expectations, few Yukon operators expect investors elsewhere to sit up and take notice. “We feel we trade at a discount because of placer mining’s bad name,” said Lenton. Indeed, Gold City has turned to debt as opposed to equity financing for the Indian River project rather than compete with the number of paper companies on the market.

“There have been some horror shows, but we always having to defend ourselves against other people’s history,” said White. “Instead of knocking the placer mining industry, people should be knocking their own bad judgment,” he said.

Nevertheless, White believes that companies which have stuck it out through the bad times are now benefiting from the mistakes made by others. Even if his company doesn’t make a profit, the continued presence of placer miners in the Yukon territory should give an added dimension to the local tourist industry.

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