Rush of interest in Northland gold

EMO, Ontario — Just 40 miles northwest of International Falls, amid hayfields and swampland and forest that look much like northern Minnesota, New Gold Inc. is digging an all-new gold mine.

Drill rigs are boring deep into rock. Giant shovels have already dug a hole nearly mile long and quarter-mile wide. Beefy 240-ton haul trucks are carrying thick clay and overburden away to expose veins of gold-bearing rock. A massive crushing and processing plant is under construction nearby.

The open pit operation, which will later include underground mining as well, is expected to start producing, by mid-2017, an estimated 325,000 ounces of gold and 480,000 ounces of silver each year.

For those keeping score at home, the so-called Rainy River mine would gross more than $430 million each year at current gold and silver prices. The mine is expected to produce for 15 years or more.

But Toronto-based New Gold isn’t the only one that has found gold in the region, and geologists note that the same Superior Province rock formation that supports successful gold mines across Quebec and Ontario runs right across the Minnesota border and into the northern counties of the state.

“Two-billion-year-old rock doesn’t care about 200-year-old political boundaries. It’s the same formation here,” said Don Elsenheimer, geologist for the Minnesota Department of Natural Resources.

Combine an historically solid price, with gold now above $1,300 per ounce, add some pent-up demand after several years of little or no prospecting when gold prices were down, then throw in increased evidence that more gold lies below Minnesota fields and forests — and the region is suddenly a hotbed of gold interest.

Gold prices launched from $400 per ounce in 2004 to $1,900 in 2011 before settling in the $1,300 range recently. New Gold says it can make money at the new Rainy River mine at less than half the current price.

“With prices where they are, there are good margins for gold right now for most companies. Couple that with some pretty substantial findings and that’s why you are seeing gold interest in northern Minnesota and that’s why they are building a mine just across the border,” said Rick Sandri, president of Minneapolis-based Vermillion Gold.

As long as gold remains above $1,200 per ounce, Sandri said, Minnesota will continue to draw interest and exploration.

In addition to New Gold’s Rainy River project:

  • Two other Canadian companies are looking for gold in projects just outside Quetico Provincial Park — the Hammond Reef and Moss Lake projects — where old gold mines operated decades ago, not far from Atikokan.
  • On Minnesota’s Iron Range, just outside Virginia, Vermillion Gold is prospecting in a promising area of called the Virginia Horn. “We’ve intercepted gold in multiple locations in the Horn,” Sandri said. The company also is looking hard in northwestern St. Louis County, north of Cook, with the Department of Natural Resources announcing earlier this month that Vermillion Gold will drill 10 new drill holes using sonic drills that essentially capture soil samples.
  • AngloGold Ashanti is exploring in southeastern Koochiching County, not far from New Gold’s focus. AngloGold is based in Johannesburg, South Africa, and has a North American office in Centennial, Colo. It is the third-largest gold mining company in the world with 17 operating mines in nine countries. The company also has several exploration programs in both established and new gold-producing areas.
  • Both PolyMet and Twin Metals have identified large amounts of gold mixed in with the copper and nickel they plan to mine — so much so that they are counting on gold (along with major deposits of silver, palladium and platinum) in their business plans.
  • Over the past two years the Minnesota Department of Natural Resources Lands and Minerals Division has released reports of major discoveries of gold grains on the forest floor, including a hotspot near Tower. It’s the same type of prospecting used to encourage more exploration where the New Gold mine is going in now. “This new data set strongly points towards the presence of gold within the focus area’s underlying bedrock,” the DNR said in a January report on the Tower-area finding.

Big investment

That there’s gold under the Northland’s forests and swamps isn’t geologically questioned. The questions until now have always been how much, and is it worth it to start digging?

The answer to the first question is, apparently, lots. New Gold is quickly answering the second with their $900 million project employing nearly 400 workers when open pit operations start next year and as many as 600 when underground operations begin a few years from now.

Exploration at the site started as early as 1967. And even though there is no gold-bearing rock formation sticking out of the ground in this area, Canadian government geologists in the 1990s found gold grains in the soil in the area with strong indication they were from nearby. Rough gold grains indicate they came from nearby underground deposits. Smooth grains indicate they were scraped by glaciers and could be from gold deposits that are hundreds of miles away.

“The word we like to use is gnarly,” Sandri said. “And we’ve been finding those gnarly grains. It’s not a guarantee. But it’s becoming more accepted as a very good indicator” that mineable gold lies below.

It wasn’t until June 2005, when Rainy River Resources acquired rights to the area, that exploration honed in on the current mine site. New Gold acquired the Rainy River project in the fall of 2013. According to company reports, some 1,435 holes totaling more than 2 million feet of rock sample have been punched into the property since prospecting started in the ’60s.

The Rainy River project received its environmental approval in early 2015 from the Canadian Environmental Assessment Agency and the Ontario Ministry of the Environment and Climate Change.

Construction started in earnest last year.

A mid-sized player in the global gold market, New Gold currently has four operating mines — the New Afton copper-gold mine in British Columbia, the Mesquite gold mine in California, the Peak gold-copper mine in Australia and the Cerro San Pedro gold-silver mine in Mexico.

At Rainy River, the main pit will be about a mile long and about that wide and will step down over 25 benches to more than 650 feet deep. The company will use 22 big haul trucks to move the ore out of the mine to the new processing plant a quarter-mile away.

The operations, now being scraped and dug and formed out of what had been undeveloped land, look like a smaller version of a Minnesota taconite iron ore operation. Drill rigs and explosives will rip the ore off the mine wall. Giant shovels will fill haul trucks which will take the raw product a to a primary crusher. A series of crushers will pulverize the ore.

From then on the process is different, with a chemical process — using hydrogen cyanide — used to pull the valuable gold and silver away from the waste rock. There’s no heating or pelletizing of the finished product.

The gold will leave the processing plant in bars, in armored cars, likely headed for a Canadian mint to be further refined for purity.

Waste rock will go to stockpiles or slurried to a huge tailings basin impoundment, much the way Iron Range operations work.

New jobs, new life

The Rainy River site was touted, much like northern Minnesota is marketed, as an easy-access, mining-friendly location free from political tumult and social unrest. The site also has easy access to electricity, highways and to nearby Fort Frances, a city of 10,000 people that has an available workforce that was hard hit by the downsizing of the region’s forest products industry.

The New Gold mine is offering jobs for many of the former paper mill workers, truckers and loggers who have lost their jobs over the past decade, local business owners said.

Emo, a half-hour west of Fort Frances, is the closest developed area to the mine, with 1,300 residents, grocery and hardware stores, gas stations, schools and homes for sale and rent.

“There were 1,000 people in the (Fort Frances) paper mill when I was in high school. They had 250 people in there when it closed” in 2012, said Dave Goodman, owner of an ATV and snowmobile shop in Emo. “A lot of those people had to go up to Alberta (oil fields) or Red Lake (Ontario gold mines) to get jobs. Now they have a chance to come and work at home again and still have a good job.”

There have been promises of a gold mine opening here for nearly 20 years, Goodman noted. More than 15 years ago developers built a new subdivision in Emo. Now, it’s starting to fill up. Another subdivision opened recently. Local construction companies are expanding, hired by New Gold to build roads and water diversions at the mine site. Stores are busy again with New Gold and its employees buying supplies. The city more than doubled the size of its sewage treatment plant to be ready for growth.

Housing is so tight that Goodman purchased a home in Emo so a new mechanic technician had a place to live.

“I wouldn’t say it’s a boom town. There’s isn’t a lot of new businesses going up. But you can tell there’s more business. There’s more optimism. People are expanding. People are buying,” Goodman said. “I think the fact we’ve seen this out there for 15, 20 years, has helped give people time.”

But Goodman also has a warning for any entrepreneurs anywhere a new mine is first proposed.

“Don’t go build a brand-new motel when they first start talking about it because you’ll be redecorating the rooms before the mine actually opens,” he said.

Indeed, it took more than 10 years for the Rainy River project to get through the planning and environmental review stages — much like the PolyMet copper mine proposed for northern Minnesota.

“That’s just they way it goes with mining projects in this day and age. It’s a very complicated process. We underwent the most stringent environmental review of any mine in Canadian history,” said Grant Goddard, general manager in charge of opening the New Gold mine.

Goddard said the project has gone well, with the focus now on expanding from the current 200 employees to more than 400 by year’s end.

The company is holding job fairs across the Rainy River region this summer. So far, more than 75 percent of employees are local, and more than 35 percent of the new workforce are from local Ojibwe bands.

New Gold officials say they don’t necessarily need workers with mining experience. Instead, they are looking for people “with shared values” that the company espouses.

“We can teach people to operate machinery, if they have the right values,” said Goddard, who has 37 years in the mining industry in several countries. “That’s why I came on with New Gold. They do things differently. They take the long approach.”

Little opposition, smaller footprint

The New Gold mine is close to the Pinewood River, which drains into the Rainy River that runs along the Minnesota-Ontario border before running into Lake of the Woods, with the water continuing north to Hudson Bay.

The New Gold project saw little formal opposition, unlike proposed Minnesota copper mines. While some Ojibwe elders expressed concerns over mine runoff and potential water pollution, there’s been little public criticism. Far from any major Canadian population base, New Gold found open arms near Emo.

“Nobody around here would say no to these jobs,” Goodman said. “They (New Gold) have been a very good company to work with. They’ve become part of the community.”

New Gold is using electric-powered haul trucks to reduce noise. They are working to keep lighting minimized and pointed down to avoid illuminating the rural night sky. And they are holding regular meetings with neighbors to get input on issues such as construction trucks on local roads.

The project underwent years of environmental review by both Canadian and Ontario agencies, with permitting issues similar to Minnesota mines. Like Minnesota, much of the focus has been on water quality. New Gold has spent millions of dollars to dam water that previously flowed through the site and move it around the mine site so it doesn’t mingle with water used in the mining process.

Moreover, most of the gold is not locked inside high-sulfur rock, Goddard and geologists note, so there’s less concern about sulfide-tained runoff.

“If we run into acid-generating rock we set that aside, on a lined disposal area. But for the most part, that’s not an issue here,” Goddard said. “We have great neutralizing capacity” in the rock in the area of the mine that mitigates any acidity.

The DNR’s Elsenheimer agreed that extracting gold, in general, has less potential to spur water problems.

“Gold is a different animal,” he said. “It’s not that there aren’t concerns with gold mining. … But gold is a native element mineral. When you find a gold deposit it’s going to be in a rock that has far less sulfur content than a deposit of copper and nickel…. Copper and nickel are bound in sulfide minerals.”

Vermillion Gold’s Sandri said gold mines are generally smaller than iron ore or copper mines, handling less rock and producing less waste material.

“Gold mines have a much smaller footprint. You’re are going after a much smaller pocket” of valuable material, Sandri said. “In gold, we talk in terms of grams and ounces, not tons.”

At an iron ore mine, shovels have to dig up about 300 tons of rock to get 100 tons of good taconite. In a gold mining operation, you need to dig about a ton of rock just to find one gram of gold, Sandri said. There are 31 grams in each ounce.

“But you have to realize that, while we are talking very small volumes, it’s very valuable,” Sandri said. “One gram of gold right now is worth about the same as one ton of finished taconite, so it doesn’t take a lot to make it pay.”

“That,” he added, “is why we’re looking for it so hard right now.”

Golden fact

The American Museum of Natural History reports that gold is so rare, even though it’s been mined by people for 6,000 years, that all of the gold ever produced by humans, 152,000 tons, would fit in a cube measuring just 66 by 66 feet. In comparison, each year 907 million metric tons of iron are produced worldwide, or 6,000 times the total gold produced throughout history.

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