Total Erickson/Agip suspend Mt. Skukum project

When the Mount Skukum mine officially opened in the summer of 1986, it was hailed with great fanfare as the Yukon’s first significant hard rock gold mine. Two years later, the internationally-backed companies involved in the operation, Total Erickson Resources (TSE) and AGIP Resources, say they have made a decision to temporarily suspend production because reserves are “presently uneconomic.”

The companies say the decision was made pending an evaluation of the results of a $2.2 million underground and surface exploration program continuing on several targets on the property. The epithermal vein-type mine is located in the Wheaton River Valley, about 55 miles southwest of Whitehorse. During 1987, the 300-ton-per-day operation produced 44,320 oz gold and 34,333 oz silver.

Total Erickson, which is owned 52% by Total Compagnie Francaise des Petroles of France, is operator with a 37% interest while AGIP Resources, controlled by Italian interests, holds a 63% interest in the mine project.

The decision to shut down — temporarily or otherwise — was not totally unexpected. In May of this year, Total Erickson had advised its shareholders that drill-indicated reserve estimates in the lake zone at the Mount Skukum mine were not confirmed by the initial mine development work then in progress. The reserves might have to be reassessed downward, the company said at the time, which could result in a shortage of near term mineable reserves. After carrying out additional underground development the company said it became apparent the reserves are, for now at least, uneconomic.

Visco Jutronich, Total Erickson’s vice-president mining, told The Northern Miner that although present reserves are near depletion (only about 40,000 tons remain), he believes the potential for discovery of new zones in other areas of the 45-sq-mi property is good. And he said discussions are underway between the partners to allocate additional funds to further explore a “very promising new showing.”

Total Erickson also operates its wholly-owned Erickson gold mine near Cassiar, B.C. The mine began production in late 1978 and during 1987 it produced a record 36,847 oz gold and 18,137 oz silver. Now operating at close to its targeted 300- ton-per-day capacity, the mine is reported to have sufficient developed mineable reserves for most of 1988. The company said earlier this year the results of an exploration program budgeted at $3 million on a number of target areas will determine the short-term future of the mine. If a suspension of milling operations is required by year-end or early 1989, the company said it will “take advantage of the situation to allow exploration and development to move further ahead of milling requirements.”

Jutronich said many small tonnage, high grade mines such as Mount Skukum and Erickson operate in what he calls a “feast or famine” cycle, because the mines begin production with the expectation that new reserves will be found while mining operations are being carried out. A temporary or permanent closure is always a risk in these situations.

Total Erickson is now doing an economic study on a high grade ore zone called the Michelle extension as part of its current effort to find new reserves. Jutronich said the company also has potential mining problems with water to deal with at the Erickson mine, which the company is now assessing.

Given the present situation at Mount Skukum and the possibility of a production suspension at the Erickson mine, it is not inconceivable that Total Erickson’s mining division could find itself facing 1989 without any operating mines.

The company does have an interest in the Dome Mountain gold project in B.C., but the ownership is disputed and the ongoing legal proceedings will likely affect the start of production anticipated for early 1989. Total Ericks on also has two affiliates, Ranchmen’s Resources, and Trans-Canada Resources, involved in exploration, development and production in the oil and gas sector.

Within the next several months, Total Erickson expects that it will have become Totalcorp; the result of a corporate restructuring that will see it merge with a wholly-owned subsidiary of Getty Resources (TSE). At the end of 1987 Total Erickson, through its parent company, initiated a successful bid for Getty Resources; part of an effort to broaden and strengthen its long term gold reserve base and diversify its mineral exploration portfolio. Shareholders of both companies are expected to vote on the proposed merger in mid-September.

Getty Resources holds a number of exploration projects in Canada and the United States, but its major asset is its 49% interest in the Tundra gold venture in the Northwest Territories. That company, and its joint venture partner, Noranda Exploration, have announced undiluted possible reserves at the Tundra deposit of 26.4 million tons grading 0.18 oz gold per ton, or 9.3 million tons grading 0.26 oz gold (at respective cut-offs of 0.1 and 0.2 oz gold). The deposit is open along strike and to depth. The joint venture partners in early 1988 began a 2-year $33 million underground exploration program designed to confirm the continuity, mineability, and economic viability of the deposit.