The Mining Report: Hope Bay Gets Its Shine Back
I bet you didn’t know that they’re mining up at Hope Bay right now.
Sure, TMAC Resources is also trying to amend its water licence and project certificate, and waiting for its $78-million processing plant, slated to arrive from Australia by sealift next fall. But at its gold property on the coast of the Arctic Ocean just south of Cambridge Bay, Nunavut, TMAC is already mining ore. And once its plant is assembled, the mine will have a stockpile of ore ready for processing. TMAC could start pouring gold bricks by early 2017.
On the surface, it would seem the company’s been able to pull off some minor miracles in the last year. It managed to raise $155 million through its initial public offering—when TMAC Resources became a publicly traded company—and secure another $120 million in loans from big private lenders (Sprott Resource Lending in Canada, Morgan Stanley in the U.S.) All this at a time when investors see mining as a losing proposition, and with no major jumps in the gold price.
Today, says CEO Catharine Farrow, TMAC has more than $360 million in the bank, needing only $290 million to complete construction on Hope Bay, continue its exploration plan and cover other ancillary costs. “So we’re there,” she says. “And we have a cushion of some extra money, which is very comforting for investors.”
So just how did TMAC Resources accomplish such impressive feats? Well, it had some help—more than 25 years and $1 billion’s worth of help to be exact. The Hope Bay project has always held promise, but it’s been through four different owners since BHP first started drilling it out back in 1988. BHP spent roughly $100 million on the project before selling it in 1999 to Miramar Mining Corporation, which invested another $150 million into further exploration and moving ahead permitting, before it sold Hope Bay to Newmont in 2007. The American gold-mining giant then went big, sinking more than $800 million into Hope Bay over the next six years. It drilled out the Doris deposit, at the north end of the property nearest to port access, and built much of the project’s necessary infrastructure—a three-kilometre ramp underground, a workers’ camp, a power plant. But the project stalled and Newmont, with other assets around the world, turned its attention elsewhere.
“We strongly believe that we will find more mineral resources and ultimately convert those to reserves, so we will be mining longer at Doris.”
That’s when TMAC came in. With Newmont looking to sell, CEO Farrow, current chairman Terry MacGibbon and president Gord Morrison put their heads together. The three had experience bringing legacy projects—and new discoveries—into production in Ontario with a company called FNX. (FNX would merge with another miner, Quadra, to become Quadra FNX in 2010. And in 2012, Quadra FNX was bought by one of the world’s biggest copper producers, the Polish company, KGHM. That’s sort of how the industry works.) The group sold Newmont on its pedigree and Newmont gave them the reins. It kept a stake in the project it had invested so much money into, though. Newmont owns roughly 29 percent of TMAC Resources, has two members on its board and has a one percent net smelter royalty—or dibs on one percent of all gold produced—at Hope Bay.
Building on the considerable work already done, TMAC started with the Doris deposit—one of three discovered on the 80-by-20-kilometre property. Mining and processing for Doris had previously been permitted, so the plan is to begin mining it and start generating cashflow, which will fund development at the Madrid and Boston deposits, both south of Doris. (And, again, TMAC won’t be starting from scratch. BHP built a three-kilometre ramp underground to Boston. Admits Farrow: “We’ve never been underground at Boston.”) TMAC is permitted to mine and mill 720 and 800 tonnes per day, respectively, from Doris, but is hoping to up that to 1,000 tpd, and eventually 2,000 tpd, once commercial production ramps up.
A pre-feasibility study released last April found proven and probable reserves of 3.5 million ounces at the three deposits, with a total mine life of 20 years. But Farrow says that could be just the tip of the iceberg. As TMAC mines out Doris, it will continue to explore the deposit at greater depths. “We strongly believe that we will find more mineral resources and ultimately convert those to reserves, so we will be mining longer at Doris,” she says.
In its initial stage at 1,000 tonnes per day, Doris will need 160 to 180 on-site workers, so overall employment will be double that, based on the fly-in, fly-out rotational nature of the job. But if more discoveries are made at Doris, the company could be mining from multiple deposits simultaneously. That’s more production and more jobs.
All this will be a boon for the Kitikmeot region. The Kitikmeot Inuit Association signed a 20-year land tenure agreement and an Inuit Impact and Benefits Agreement with TMAC earlier this year. (KIA is a 1.4 percent shareholder in TMAC and has a one percent gold royalty for Hope Bay too.) Farrow has nothing but good things to say about Charlie Evalik, Stanley Anablak and the KIA team that negotiated the deal. And the same goes for Nunavut as a place to develop a mine. “Nunavut has settled land claims. We are on Inuit-owned land. We have land tenure agreements with NTI and the Kitikmeot Inuit Association and we’re in a very solid jurisdiction with a mining act that everybody understands,” she says. “So there’s a lot of comfort in the jurisdiction.”
And just because the mine is located above the Arctic Circle with no road access doesn’t mean it’s inaccessible. “Hope Bay is a tremendous asset on tidewater. We can bring big, bulk items in,” says Farrow. “It really makes a difference in how we move bulk materials around, and it makes it much more cost effective as well, compared to even an ice road.”
The last big pieces to put in place are the modular mill, which will arrive by barge next September. By then, the company hopes to have its water permit and project certificate amendments approved—namely, changes to its tailings management and allowance of releasing some treated effluent into the ocean—so it can hit its intended production goal of 2,000 tonnes per day.
There’s still a lot left to do, but considering how far TMAC has come in so short a time, it’s poised to become the next member of Nunavut’s operating miners club—and further proof that though it can take decades to develop a mine in the North, the payoff is well worth it.