Feasibility study finds Lynn Lake glitters with gold

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This article was published 13/12/2017 (2325 days ago), so information in it may no longer be current.

Northern Manitoba is getting some good news for a change, with the announcement a gold mine is a step closer to becoming reality in Lynn Lake.

A feasibility study for Alamos Gold Inc. of Toronto released Thursday estimates two open-pit mines near the northern Manitoba town could yield 1.6 million ounces of gold.

The capital cost to build the mine is estimated at US$338 million, with a potential after-tax return of US$123 million, based on the price of gold at US$1,250 an ounce.

While an Alamos spokesman cautioned there is still a process for the company to go through, a positive feasibility study is usually the catalyst for mine construction.

“It’s exciting for us, but let’s put it in perspective: it’s excitement for the province,” said Jim Fielder, chief administrator for the Town of Lynn Lake.

A mine would mean hundreds of jobs, along with the economic spinoffs that come with it — including a surge in hydroelectricity demand, and requirements for numerous services including food, gasoline and trucking.

Construction is expected to require in the range of 500 jobs. About 500 employees will also be needed when the mine is fully operational, the company said.

Alamos has been conducting mineral exploration since it purchased the mine sites last year for $20 million. Its more recent exploration results are not part of the feasibility study, and could improve the venture’s profitability, a company official said.

However, a mine is probably still at least four years away. Alamos must now go into what’s called the permitting stage: obtaining government permits, including an environmental impact assessment. That can take two years. Construction would likely take another two years.

The new mining activity would be at two former gold mine sites that have been closed for decades.

The MacLellan site was formerly run as an underground gold and silver mine between 1986 and 1989. The other site, the former Gordon mine, operated as two open-pit gold mines, from 1996 to 1999.

Alamos would run both MacLellan and Gordon deposits as open-pit mining operations, said Alamos spokesman Scott Parsons.

“The feasibility study outlines solid economics,” Parsons said. “We’re going to be working to improve the economics before it gets to construction” through further exploration and studying things such as the possibility of contract mining.

The biggest factor making the shuttered mines viable again is gold’s price of $US1,250 an ounce, Parsons said. That’s down from three years ago, when the price reached $US1,800.

Alamos has an exploration agreement with Marcel Colomb First Nation, he said.

Lynn Lake, 820 kilometres northwest of Winnipeg, began in 1950 as a mining town and is the northernmost point in Manitoba reachable by all-weather road.

Sherritt Gordon first began mining copper ore in the area in the 1920s. The town was named after Sherritt Gordon’s chief engineer, Lynn Smith. It has a population of about 700, and is the birthplace of rock musician Tom Cochrane.

In a statement, the province said it is pleased Alamos is progressing with its work in Manitoba.

“We will work with Alamos to ensure that a thorough, transparent and predictable permitting process takes place on our part,” it said.

The company’s shares are traded on the TSX and NYSE under the symbol AGI. Its share price was relatively unchanged Thursday at $7.86. Alamos is a Canadian-based intermediate gold producer with diversified production from four operating mines in North America, including two in Mexico. It employs more than 1,700 people.

bill.redekop@freepress.mb.ca