Osisko aims to make Atikokan a mining town again by 2015

by Editor on October 26, 2010

200 at work here now, planned spending in 2011: $60-80 million

Jessica Smith

How can Atikokan position itself to be a mining town, and how soon should it plan to accommodate hundreds of mine workers, contractors and suppliers? Also, what can the community do to support the mine’s development?

These were some of the questions put to Osisko Mining executives here Monday, during a meeting with Town staff, Council, the Atikokan Economic Development Corp. and Chamber of Commerce.

The company needs about two years to prove that it has a viable gold resource before it can be certain it will build a mine at Hammond Reef, executive vice-president Robert Wares said. In the meantime however, the project is going full speed ahead, and with what the company already knows about the deposit and encouraging new drilling results, all signs look very positive.

Town CAO Andre Morin acknowledged that while the municipality is attempting to put plans in place to allow for commercial, residential and industrial development, it needs confidence and hard numbers to really make solid plans to accommodate up to 450 mine employees and their families and associated suppliers and contractors. Once a mine gets the go-ahead, “how much time will the municipality have to get ready?” asked Morin.

“To answer your question, you’ll have 18 months to two years to contact [the developers] on your end,” said Wares, adding that in the meantime, the Town may want to take a preliminary look at expanding the industrial park area west of town to accommodate suppliers and businesses associated with a mine.

Current drilling will expand and define a resource estimated at 6.7 million ounces (in 2009) to determine the economic feasibility of a mine. Wares said the fact Osisko will have the cash in hand (from its Canadian Malartic mine, which goes into production next summer) to build the Hammond Reef mine, will reduce lead time by about six months.

“We should be able to avoid banks altogether,” said Wares, adding that while hundreds of construction workers would be in town during mine-building, it should still be manageable for the community because temporary housing could be set up. “It could be trailers on site,” he added.

Council and the AEDC suggested setting up a liaison committee with Osisko because “we’re trying to identify services your company may need and [look at development of] commercial and industrial lots,” said Mayor Dennis Brown.

Councillors also expressed a sense of urgency to get ready for growth, with Councillor Marlene Davidson commenting “I’m thinking there will be 700 new students and no way to accommodate them.”

Wares said the project will likely enter the feasibility stage at the end of 2011. That would be an ideal time to discuss with more confidence the redevelopment of Atikokan as mining town. In the meantime, he added, the Town should consider meeting with the town manager of Malartic, Quebec, where Osisko’s first mine is opening.

Councillor Sherwin Durand asked what the “bad news number” for the project would be, in terms of gold prices and Wares responded that anything below $500 per ounce would leave the project not viable.

However, with prices flirting with the $1,400 mark – a trend Wares predicts will continue – it looks positive for Atikokan’s revival as a mining town to begin in about two years.

Permitting

“We have an awful lot of work to do in preparation, in terms of AEDC and the Town,” said AEDC board chair Dave Elder, adding that forming even a small informal liaison committee “would certainly help us get going. We have to deal with governments and we have to get going both in this office and the Town to help in any way we can, and to know the potential impediments.”

After the feasibility study and environmental assessment may come the time for some extra lobbying, noted Wares. The company will outline a detailed description of the mine and its environmental impacts, and because the project involves draining Mitta Lake (a small lake on the Hammond Reef peninsula), is adjacent to the Marmion Lake reservoir, and will involve using the Steep Rock mine site for tailings (ore would be transported as a slurry down a pipeline from the mine), water management will be the most important environmental concern. Permitting will involve both federal and provincial governments, and supporting the company’s permitting process may be the most crucial way the Town and AEDC can help over the next two years, said Wares.

For the Malartic project, permitting went through only one government (Quebec). That helped it set “a record in Canada”: five years from planning a mine to production start (despite the need to relocate some 250 homes). Hammond Reef may involve a few more permitting delays, because both Ontario and the federal government will be involved.

“We’ll have to push [governments] together; that’s where local solidarity is very important, so we don’t have to wait ten years.”

Wares added that the province seemed keen to work with them to allow the use of the Steep Rock site and said they are working on treatment plans for the pit’s toxic water.

He added that Hammond Reef’s deposit has a 93% recovery rate – slightly higher than Malartic’s 85% – and a clean, non-toxic metallurgy makes it “environmentally benign – there are no heavy metals or nasty chemicals such as arsenic [involved in extraction].”

Long-range potential

Also needing consideration from the community’s viewpoint is “what happens when you disappear in fifteen years [the mine’s projected life time]?” asked Elder.

In addition to budgeting and planning for the mine reclamation, (a process which begins as soon as the mine is operation), the company will also establish a sustainable economic development fund to allow for diverse economic opportunities upon its closure “to try to guide the town toward economic diversification,” said Wares.

In Malartic, the company has pledged a minimum of $3 million to the fund, and “we’re hoping that by the time the mine closes there will be sufficient money to develop new economies.”

He added that with new high-grade gold recently detected south of the deposit, and the ability to economically process even very low grade and waste rock, the projected Hammond Reef mine life of 14 years may be conservative. “Once you’ve spent a half a billion dollars building a mill, the last thing you want to do is shut it down,” said Wares.

Jobs

Like Malartic, Hammond Reef’s shallow deposit (mostly located within 300 metres of the surface) makes for “a very large earth moving operation,” said Wares. Heavy equipment such as the type now being used in Malartic, include 200 tonne trucks and excavators which move 60 tonnes of rock in one bucket. Although the deposit averages at a very low grade (around a gram per tonne of rock) “the reason it works is economy of scale,” noted Wares. “You’re moving very large amounts of rock.”

Queried on the types of job skills a mine would require, Wares said “a huge, huge range of skills.” Anything from engineers, technicians, maintenance workers, truck drivers, security, mechanics, plumbers, and many others are needed to run a mine, he said.

“Any [one] from the forest industry used to dealing with heavy equipment could easily use those skills here.” As well, there will be training available in the community over time, and the company reiterated that its focus is to hire locally if at all possible, a practice it is already employing. (69% of its current staff are from Atikokan; 25% geologists who are flown in on a rotating basis and 6% are from the region.)

All told, about 85 Atikokanites are at work now on the project, plus 40 other specialists with Osisko (including geologists, technicians and management) and 75 drillers (they work on contract). Those numbers will remain the same until the end of next year, at least.

2011 spending

He noted that with recent drilling, Hammond Reef’s gold deposit has a good chance of reaching 8 million ounces. Senior project manager Anne Charland provided an update on progress since Osisko took over from Brett Resources last August. (The property and project are now a wholly owned subsidiary of Osisko, named Osisko Hammond Reef Gold Ltd.

Underway now are a 300,000 metre drilling program, geological mapping and the baseline environmental study. Sixteen drills are turning on the Marmion Lake property, at a rate of 25,000 metres per month. The company has spent $16 million on the project since August (that includes $2 million in Atikokan and $11 million in the region) and, over the past year, has spent $28 million.

That money has gone to drilling to define the outer limits of the resource, outlining the deposit and exploration of new areas; mining camp improvements (expanding to house 150 employees, new sewer and wastewater system, helicopter pad); expanding core logging facilities in Atikokan; upgrading the 22 km camp road (the entire road project has so far cost $4.2 million); and renovating the Main St. public relations office, which is opening soon.

Health and safety policies are being implemented for the camp and in-town facility, including emergency Medivac heli pads, and a new communications radio system for contact between the camp and town. As well staff is receiving H&S training.

The company is budgeting $60-80 million for next year as the company continues work to bring the gold resource to a ‘measured’ and ‘indicated’ reserves and the baseline environmental study to “better understand the area, the fish, flora and fauna,” said Charland.

The company also met Monday with reps from eight area First Nations as work on an impact benefits agreement to share employment, resources, and training continues. (The company has named Bud Dickson as senior advisor, governmental and Aboriginal relations.)

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jessica@atikokanprogress.ca'

– who has written 931 posts on Atikokan Progress and Printing.

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