TORONTO (miningweekly.com) – The spot price for gold came under notable pressure during the past week, sinking below the psychological barrier of $1 100/oz and reaching five-year lows. On Friday, the London afternoon fix stood at $1 080.80/oz of gold,  compared with $1 132.80/oz the week beforehand.

The slide was unwelcome for those developing gold projects and had come on top of downcycle conditions that, for some in the junior space, had remained almost Darwinian in their ferocity; only the most careful companies with the strongest projects had survived, waiting for the next upswing.

LUCKY LYNN
One company that made headway had been Carlisle Goldfields, holding the Lynn Lake gold camp, in Manitoba – a suite of projects near Lynn Lake municipality. The camp’s two flagships had been the MacLellan mine and the Farley mine, which had a combined measured and indicated resource of 23.3-million tonnes at 2.16 g/t of gold, for a contained gold equivalent of almost 1.5-million ounces.

“Overall, there are five deposits in the Lynn Lake area and they total about five-million ounces of geological resource, which is largely pit or underground constrained,” Carlisle Goldfields president and CEO Abraham Drost told Mining Weekly Online.

Under an optimised preliminary economic assessment and with a base case for gold at $1 100/oz, Lynn Lake would have an internal rate of return of 34% and a post-tax net present value of $257-million. Operations would reach 7 500 t/d at 2.2 g/t of gold for 12 years, while initial capital expenditure would reach $185-million, with all-in sustaining costs of C$644/oz. 

Further, key infrastructure was already in place at Lynn Lake, while the company had teamed up with Alamos Gold. This occurred through the merger between Alamos and AuRico Gold that was finally completed in early July.

AuRico’s stake in Carlisle Goldfields and the Lynn Lake project was transferred to Alamos. “[Through the AuRico merger, Alamos] holds 19.9% of Carlisle fully diluted,” Drost said, noting that Alamos also held a 25% interest in the project and was committed to spend $20-million in feasibility work that would take its stake up to 51%.

Alamos had already spent $5-million, while Carlisle estimated that its spending commitment would likely be completed by end-2016.

“We have a strong partner in Alamos and, while they have a variety of investment options, we think Lynn Lake in Manitoba will provide a high-grade and low-cost investment alternative that also comes with mitigated political risk,” Drost advised.

Alamos stressed to analysts in a recent site visit that it would proceed with its interest in Carlisle and Lynn Lake without interruption, he added.

KEEPING BUSY
Alamos had also agreed to the AuRico merger obligation to fund exploration at Lynn Lake at a rate of $2-million a year – to be matched by Carlisle – for the three-year earn-in period. The exploration would be undertaken through Carlisle’s auspices.

Recent exploration focused beyond MacLellan and Farley into nonfeasibility, high-grade areas. “But if we can also improve the quality of existing assets or pick-up on higher grade along strike extensions of our feasibility assets, then that’s fair game as well,” Drost commented.

Exploration results from the last drilling cycle were encouraging. On June 10, Carlisle announced highlights that included hole DV15-04, which intersected 1.63 g/t of gold from 35.60 m to 46.20 m and 5.63 g/t of gold from 150.80 m to 156.40 m. The work was part of the first round of drilling that followed up on promising surface gold occurrences.

Two exploratory teams had also been on site and worked to assess various historical surface occurrences, while new target areas had also emerged following earlier geophysics work. “We’ve been gathering strength for a significant drill campaign in four of around 20 gold occurrences that will be ranked by priority going forward,” Drost explained.

Meanwhile, he stressed that the company’s treasury was well funded, with $7.5-million in the bank. “So we’re firing on all cylinders. There will be a drill programme in the fall of this year, which is when we’ll also reassess and present our budgets for the following year.”

OTHER PARTNERS
Carlisle’s relationship with nearby aboriginal communities, particularly the Marcel Colomb First Nation, on whose traditional lands the Lynn Lake camp was located, had been a particular success. The company also worked with the assembly of Manitoba chiefs and the provincial government to foster closer ties.

“Friendship needs to be genuine and consultation needs to occur early and often... on a continuous basis. That’s worked well for Carlisle,” Drost said.

An exploration agreement between the company, Alamos Gold, the Marcel Colomb First Nation and its economic development corporation had been the basis of moving forward. In addition, a negotiation protocol was put in place for an impact benefit agreement once the project had been fully defined.  

“And we’re not forgetting about the municipalities either, including the municipality of Lynn Lake and how we can work together to advance the project for the betterment of all citizens in the area,” Drost emphasised.

Being located in mining-friendly Manitoba had helped, with the jurisdiction recognised as one of the most attractive for mining in the world by the Fraser Institute. Drost also highlighted how the provincial government had kept power costs down, pointing out that the prices were competitive at below 5c/kWh, which was comparable with Quebec, British Columbia and some of the lowest power costs in the world.

The province had also recognised that mining companies needed assistance on an ongoing basis and that there was an important balance to strike between protected areas and the ability to tap high-potential mineral areas, he added.

“There’s a strong can-do work ethic from the mining Minister down to his civil servants in Manitoba and, as problems arise in the normal course of events, we find them sensitive and motivated to seek solutions as best as they can,” Drost noted. “In short, we’re happy to be developing a project here and I’d say that Manitoba has got it going on.”