Picking up the Clavos Mine near Timmins has been about as turn-key as a mining project gets for Sage Gold.
Things have fallen nicely into place for the Toronto developer as the company transitions from being a pure exploration player to becoming a mine operator in one of the world’s richest gold camps by early next year.
The Clavos Gold Project, 32 kilometres northeast of the city, was one of the few fully permitted mines in Canada that was sitting in mothballs in the East Timmins gold camp.
Sage completed its phased-in acquisition of the former St. Andrew Goldfields mine last fall and had the provincial government reactivate the mine’s production permit.
With a private equity partner on its side, the company raised $11.5 million last November, and has raised a few million more since then.
A good chunk is devoted to refurbishing the portal-and-ramp mine with the aim of restarting commercial production by the second quarter of 2018.
A preliminary economic assessment completed in 2013 had Clavos producing more than 145,000 ounces over seven years, numbers that are sure to change come fall with a large exploration program underway.
Dewatering the mine began in January with that process, down to the 300-metre level, expected to be done by year’s end.
Bill Love, Sage’s vice-president of business development, said they’ve been very fortunate that there’s very little rehabilitation work to do.
St. Andrew spent $60 million on above and below ground infrastructure prior to the halt of gold production in 2007.
“We’ve had very good ground conditions,” said Love. “The screening, bolting, the underground (mine workings) are all in place.”
Back in 2008, Sage got caught in the global financial meltdown which dried up exploration capital.
At the time, the company had exploration properties in the U.S., Quebec, and northwestern Ontario, but didn’t have a single producing asset.
That didn’t sit well with Sage president-CEO Nigel Lees.
“We made a conscious decision not to remain strictly in exploration,” said Lees. “We wanted to acquire and develop a resource and actually have cash flow.”
The search led them to Clavos.
Management at St. Andrew had changed, leading them to shutter the mine and sell off the nearby Stock Mill.
Sage inherited a mine site with good infrastructure, seven kilometres of underground workings,and reams of data to shift through.
“They abandoned everything,” said Lees, even the old core samples at the mill.
The reactivated production permit enables them to produce 700 tonnes a day. A toll milling agreement with Primero Mining – the owners of the Stock Mill, 10 kilometres away – will allow them to process up to 200,000 tonnes annually from Clavos. A private heavy truck haul road connects the two sites.
The mine life is currently pegged at seven years but the company believes it has greater longevity.
A resource estimate first compiled by Sage in 2012 showed Clavos with a 316,000-ounce indicated and inferred gold resource.
Both Love and Lees expect those numbers to jump dramatically in a few months when the results of two combined underground infilling and step-out drilling programs come out.
The company is eyeing expansion ideas to the east and at depth, which is the focus of their exploration between the Main Zone and the 960 Zone.
Using a grade thickness model, Love said they’ve developed a new interpretation of the property’s geological structure that has the potential to be “transformational” in adding ounces to the ore body.
Beyond the traditional view that the vein systems were east-west trending, they’ve found evidence of other vein arrays running north-south.
Those arrays wills be explored, which they anticipate will grow the resource significantly.
Once all the drill results are in, an updated resource estimate will be out by fall with plans to proceed to the prefeasibility study stage soon afterward.
Heading into the fall, Love and Lees remain optimistic about the project proceeding on time and on budget.
The only X-factor has been their concerns over the price of grid electricity. Powering the entire operation – toll milling included – requires about 2.5 megawatts.
So Sage plans to tap into the main natural gas line that feeds Timmins, only 1.6 kilometres away from the mine site, for a combined heat and power modular system.
“Where the grid costs are now, it’s not a deal-killer,” said Love, “but in 10 to 15 years it may be different story.”
Love said they’ve spoken with Union Gas, various financial partners and a group that builds CHP systems.
“We’ve done a lot of work with Union Gas and some external consultants and we’re at a point where we’ve had long discussions with various financial partners and with a group that builds the infrastructure.”
Love said the advantage of using natural gas means locking in their electricity costs for 10 years and allows them to stop using propane for underground heating, no longer allowed by the Ministry of Labour.
In June, Sage’s on-site workforce was in the 15-20 range. Those ranks are expected to swell to 50 later this year as they advance toward production.
Directing the project is Bob Ritchie, a 40-year professional engineer, who’s been involved in mine management, development and construction for Goldcorp, Noranda Mines and with St. Andrew Goldfields in the construction of the Stock Mill.
In transporting the ore from mine to mill, Love said they’ll be hiring a Timmins-area trucker to do the haul using 40-tonne trucks. Ore will be stockpiled in August in preparation for running the first batches through the mill by September.
In the Timmins camp, Lees said Sage remains very much in property acquisition mode.
“We’re always looking. If we can do some consolidation by acquiring other deposits in the area, we’ll look at it.
“It’s not a buoyant market, it’s still tough, and we’ve been very lucky having some very good sponsors in a private equity group out of New York. We have access to capital and I think some of the neighbours don’t, so that’s something that if we do an acquisition I think we can finance it.”
