Premier example of new challenges facing B.C. mining

Operating in northern regions presents economic and environmental challenges to British Columbia’s mining industry.

Companies are wrestling with the logistics of transportation and commodity movement, increased operating overhead and restrictive legislation that all combine to test the northern operator’s ability to withstand lacklustre markets, weather conditions and watch-dog environmentalists. One example is Westmin Resources’ (TSE) new Premier Gold operation near Stewart, B.C., where environmental and economic constraints have thrown a few unexpected curves at the company.

Bruce McKnight, vice-president corporate affairs, said one of the conditions of reactivating this old property was dealing with environmental problems left by past mining operators. Water run-off from the portals contained elevated levels of zinc.

“We put in a large collection pond below the adit,” he explained. Then, using lime derivatives to elevate the PH-levels, the zinc was precipitated out. Safe water can then be released.

The zinc-sludge is dredged and safely disposed of.

Economic constraints came in the form of a municipal tax bill for nearly $1 million.

It’s currently under appeal. McKnight said that although the town of Stewart is small, with a population of 2,000, its municipal boundaries are large and touch upon the mine site.

As a result, he pointed out, the operation is taxed at a municipal industrial rate although it receives no municipal benefits such as snow removal and sewer. Since the mine contributes to the provincial assessment authority for services such as snow removal and ambulance services, McKnight said “we are, in fact, paying twice.”

The company has also had to implement some cost-cutting measures in response to lower-than-anticipated grade and tonnage levels coupled with flagging gold prices and high exchange rates and inflationary operating costs. Staff has been cut from 160 to 100, while milling rates have dropped from 2,300 to 1,500-1,600 tons. Also, wage increases to employees have been frozen. To compensate employees, McKnight said the company has actively pursued a 15% profit-sharing plan “which will be divided among employees on a cash basis.” During the past winter, in a bid to increase production, the company operated its open pit throughout the winter and “we had good production during the whole time,” except for the odd day when blizzard conditions closed out the operation.

Faced with tough operating constraints, McKnight said the company is actively pursuing a participatory management style with employees.

Under this process, management encourages employee participation in the daily mine operation, feeling that employees on the front-lines are often better able to realize cost-cutting measures and more efficient operating methods than head office management.

“Some of the best (innovative) ideas come from the lower ranks rather than head office,” McKnight admitted, adding that communications on site and cross-training are an integral part of the operation.

Premier is also actively soliciting custom mill feed,

McKnight said, adding that the operation can handle about 1,000 tons per day as well as its own product. However, if more capacity is required, Premier will displace its own production.