Kaminak: Could it be ‘The One?’

Yukoners have talked a lot about the parlous state of our mining industry. Of the three operating mines we had in 2013, only Minto is still running.

Yukoners have talked a lot about the parlous state of our mining industry. Of the three operating mines we had in 2013, only Minto is still running. Bellekeno and Wolverine have shut down (and North American Tungsten, just across the border in the NWT, announced layoffs last week).

Victoria Gold, one of the more advanced proposals on the table, still hasn’t announced financing to proceed with its Eagle project, and the company’s share price languishes at 14 cents.

Work continues on the Casino and Selwyn projects, but the scale of their environmental impacts raises questions about whether the Yukon public, and the politicians who seek their favour, will support them. If drilling a few 8-inch wide holes in the Liard gas fields elicited so much opposition, how popular will a tailings pond dam almost as tall as the Eiffel Tower be?

Furthermore, the Wolverine mess has taught us the important distinction between mines with marginal economics and ones that keep running through the whole cycle.

What the Yukon is looking for, it seems, is a very specific kind of mine. It should have a smallish footprint and not a lot of inconvenient ore trucks. It should have excellent ore grades, so it stays open through thick and thin. This means it will also have lots of cash to share with the Yukon and First Nations governments via royalties and various partnership arrangements. The ore should be accessible through battle-tested mineral extraction techniques, not some newly-invented technology that might suffer hiccups. And it should be located in an area where mining is expected, not a pristine wilderness area.

Where, you ask, could such a wonder-mine be found?

The answer is as easy as looking up “KAM” on the TSX Venture stock exchange.

Kaminak Gold Corporation’s Coffee Gold Project is located just to the west of the Yukon River, in between Fort Selkirk and Dawson City and just upstream from the confluence with the White River. The company is currently working on a formal feasibility study, scheduled to be completed in the first quarter of 2016.

While preliminary, the information released so far by Kaminak fits many of the “wonder-mine” criteria. It’s a gold mine, so its output is measured in ounces not thousands of tonnes. The ore is apparently very rich: a “new deposit style for the Yukon: High grade, structurally hosted, hydrothermal gold.” The preliminary economics look good: its “all-in sustaining cash cost” estimate is US$687 per ounce, healthily below gold’s current price of around US$1,200.

Kaminak also claims that its property is one of the “world’s highest grade, undeveloped heap leach gold projects.” The company’s investor presentation shows just three other heap leach projects with processed grades over one gram of gold per tonne. Most other projects are below this threshold, which raises the hope that even if gold prices go through a low period, it would be other mines that are forced to close first.

Assuming gold doesn’t plummet back to where it was 15 years ago, around US$300 per ounce, this gives the prospect of healthy profits and lots of money to share around the territory with stakeholders.

One potential public-relations blemish for wonder-mine status is the phrase “open-pit heap leach.” These words are less toxic than “fracking,” but environmentalists will not like how Kaminak’s 2014 Preliminary Economic Assessment document drops laconic references to “sodium cyanide briquettes” being delivered in “one tonne super sacks.” The map shows a heap leach facility almost a kilometre across, and uphill from the Yukon River.

Nonetheless, investors will be reassured that open-pit heap leach is a mining technique whose effectiveness is well understood.

Another part of Kaminak’s good-news story is that the company is said to have carefully developed better relations with First Nations than many other mining companies, establishing relationships with the Tr’ondek Hwech’in, Selkirk First Nation, White River First Nation and Little Salmon/Carmacks First Nations. You may recall some controversy in 2013 over whether the traditional territory of the White River First Nation, which has not ratified a final agreement, extends as far as the mine property. Investors will be watching carefully to see if the apparently cooperative relationship continues between Kaminak and First Nations in the region.

All in all, Kaminak is as well positioned as any mine to proceed through the regulatory hoops to production. Indeed, you could almost say that if Kaminak can’t do it, no mine can in today’s Yukon.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He won this year’s Ma Murray award for best columnist. You can follow him on Channel 9’s Yukonomist show or Twitter @hallidaykeith