Puffy Lake mine faces uncertain future

Robert Willis, president, said the 100%-owned gold mine “has yet to reach commercial production levels and continues to run at an operating loss.” With a rated capacity of 1,000 tons per day, the mine began start-up in December, 1987 with probable and possible reserves reported at 3.9 million tons grading 0.23 oz gold per ton.

Grappling with problems at the mine since start-up, Pioneer said operations during the fourth quarter of 1988 through to February, 1989 “indicated that a number of technical improvements were showing a trend to profitability.” The company had altered the mining method from jack-leg/slusher open stope mining to fully mechanized drift and slash to better handle dilution and more cost-effectively and safely mine the flat-lying deposit.

“We saw a trend of reasonable improvement but that trend line is not improving as quickly as we would like,” said Willis. “Because of our size we simply cannot afford to continue following that trend line to profitability in a loss situation.”

The company cited a lack of sufficient underground development ahead of active stopes as the main reason for the lower than expected mill feed grade. The company had been co-mingling 500 tons per day of stope ore and 300 tons per day of development ore in order to provide enough feed to run the mill.

Operating costs (mining, milling and administration) were as predicted, but without sufficient stope ore the company said the mine has continued to operate at a loss.

Pioneer is now carrying out a thorough update of underground geological mapping, and subsequently of required development work to identify an optimum operating plan. The work is expected to take 12-14 weeks to complete and will be carried out by on-site personnel.

“It’s a matter of putting all the parameters in place that will ensure profitability on a consistent basis,” said Willis. “At Puffy Lake we have all coarse, free gold and it is very difficult to mine by assay grade sampling alone because the numbers are so erratic. We have to use the geology of that deposit a lot more than standard vein-type gold structures.”

Because of the difficulty in predicting grades of any given stope, Willis said the key to Puffy Lake is to have a plan in place that will allow the company to get ahead of development work so a minimum of 1,000 tons of stope ore can be run through the mill each day.

“Unless we can consistently do that to get a reasonable average grade, we are not going to make money,” he said.

After a plan is worked out, the company will decide the fate of the mine, taking into account factors such as gold prices and the capital cost requirements for further mine development.

In the meantime, by eliminating the operating loss to the Puffy Lake Mine, Pioneer said it will ensure that its Premier, Stibnite and Bonito gold projects remained fully funded.

The 40%-owned Premier Gold mine project near Stewart, B.C. is expected to begin operations in late April and reach commercial production levels by September. The $88-million open pit mine is operated by 50.1%-owner Westmin Resources (TSE) and is targeted to produce 77,000 oz gold and 900,000 oz silver per year.

The partners plan a $3.2-million exploration program for 1989, a good portion of which is for underground development work to access higher grade areas below the open pit.

“We think there is substantial potential for underground reserves and grades similar to what was mined in the early 1900s,” said Willis.

Pioneer is 50%-owner and operator (since 1986) of the Stibnite gold mine in Idaho, a seasonal heap leach mine expected to resume production in May. The operation is targeted to produce 32,000 oz gold from 800,000 tons of oxide ore, for at least another four years in proven ore.

The Stibnite project has geological reserves of 11,215,000 tons at 0.037 oz gold, of which 7,485,00 tons at 0.030 oz are cyanide recoverable. Mineable reserves (based on $400/US gold and a 0.017 oz cutoff grade) are reported as 2,557,000 tons at 0.037 oz.

Pioneer is also expecting that its Bonito project in New Mexico will be at the feasibility stage by August of this year. The 1988 exploration program identified seven breccia zones, two of which have been explored to date.

The potentially open pittable Bluefront zone is reported to have drill indicated reserves of 1.7 million tons of 0.06 oz gold and 0.50 oz silver, with the zone open to depth and on strike to the east. Selected intervals from the 1988 program include: 100 ft of 0.170 oz gold; 85 ft of 0.302 oz; and 145 ft of 0.125 oz per ton. A 40,000-ft drilling program is now under way.

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