Yukon wraps up banner year for mining

A revitalized Yukon Territory is ushering in a new era of mining prosperity as two more mines enter production this winter.

"For the first time in a generation," the territory will have three operating mines that together will employ more than 400 workers and provide 100 direct service jobs and countless indirect positions and generate C$800 million for the Yukon economy annually," said Yukon Premier Dennis Fentie. "That's almost as much as the Government of Yukon's entire C$1 billion yearly budget."

The recent startup of Alexco Resource Corp.'s Bellekeno silver mine and Yukon Zinc Corp.'s Wolverine silver-rich zinc-lead mine, set to officially begin production by March, appear to be the first in a pipeline of mining projects moving toward production in the territory, Fentie told a record crowd of more than 500 delegates who attended opening presentations Nov. 22 at the three-day annual Yukon Geoscience Forum in Whitehorse.

Other advanced mine projects include: Victoria Gold Corp., which is working to bring its Eagle Project into the mine permitting process by the end of December, and the Selwyn Project, which was still drilling in its C$30 million exploration program for 2010 in November. Fentie said project developer, the Selwyn-Chihong Joint Venture, was expected to submit a permitting application by year's end and North American Tungsten Mines Ltd.'s Mactung Project is already in the permitting process.

The premier also pointed to accelerating exploration activity, especially among gold explorers, saying exploration expenditures for 2010 in the Yukon was expected to top C$150 million.

As a sign of the times, Fentie also cited the ongoing staking rush in the territory in which 48,000 new placer and quartz claims were staked between January and September, bringing to more than 150,000 total claims staked in the territory.

"By comparison, at the height of the Gold Rush (in the 1890s), we had 17,000 claims staked," he said.

Fentie also said Yukon's stringent regulatory process is serving the territory well as it gains a reputation as a jurisdiction with an attractive business climate for mining.

"I'm pleased with the outcome of our regulatory progress," he told Mining News.

Of the recent challenges to some proposed mine projects, Fentie said, "people always have options" and "there are always going to be challenges. We maintain a consistent approach to our assessments, and I think it shows in the success we've had in permitting projects.

"There is no doubt that the mining sector is alive and well in Yukon, and we have much to offer on a global scale. The world is watching," he told the delegates.

Partnerships needed

Grand Chief Ruth Massie of the Yukon Council of First Nations called on the miners to work closely with the territory's First Nations as they pursue their projects.

"Now that Yukon First Nations have 5-15 years of experience in the government structure under their belts, their focus has shifted to economic development and the vast opportunities in business and industry that lead the way to prosperity," Massie told the forum delegates.

"For some who see mining as an opportunity for development, they have a lot to learn from you. You are the experts at work in the field, but so are they experts in stewards of the land within their traditional territories," she said.

As a result, it would only make sense for the mining industry and the First Nations to build relationships and partnerships and work together.

"For the First Nations, this stabilizes their economies as they watch over the land. There are things we do and don't do on certain parts of our land according to our traditions. You need to learn that and we need to teach you that. Dialogue goes a long way," Massie observed.

She added that mining in the Yukon has a bright future "if we all take the shared responsibility of doing business the right way."

Flat placer gold output

Placer mining production is leveling off in Yukon despite record gold prices and more mines in operation, according Yukon Geological Survey placer geologist Bill Lebarge.

Still, the higher prices are affecting the placer operations.

Jim Christie, president of Gimlex Gold Mines, said the higher gold prices, simply put, meant more fuel for his placer operations in 2010. Last year, 100 ounces of gold purchased one load of fuel and this year, 100 ounces purchased three loads of fuel. "That's a lot of fuel," he said.

Some 140 placer mines reported significant gold production in Yukon in 2010, up from 131 comparable operations last year; but in the past five years, production has actually decreased even as gold prices dramatically increased, Lebarge told the miners Nov 22.

"I think it is starting to show that something is going on out there," Lebarge said. "We don't have a lot of available land out there for placer mining right now."

As of Nov. 19, Yukon placer miners had reported 51,283 ounces of gold production, about 4,000 ounces less, so far, than in 2009. Placer output through Nov. 19, 2010 was valued at C$51.2 million, or roughly C$5 million more than comparable production last year.

"I think we're probably going to get about 2,000 or 3,000 more ounces by the end of the year," Lebarge added.

Year-round exploration

Mike Burke, head of mineral services for the Yukon Geological Survey, offered the miners an overview of 2010 hardrock mining activity in the territory.

"It's no secret that it's been a pretty busy year for mining in Yukon this year," Burke said.

Miners pursued prospects and projects in every region of Yukon with gold exploration dominating the activity, despite significant spending on silver, lead-zinc, molybdenum, tungsten, copper programs.

Spurred by discoveries in the White Gold District of the Dawson Range and at the Rau Property in the Selwyn Basin, gold exploration overshadowed everything else, Burke said.

"Half the room is still out there staking and drilling; five drills are going at the Selwyn (lead-zinc) Project, five or six drills are turning on Alexco's Keno Hill (silver) properties, and drilling is still underway at (Yukon-Nevada Corp.'s) Ketza River Project, (Golden Predator Corp.'s) Brewery Creek Project, and you name it," he said.

"It used to be that the exploration season went from April to September, but with technological advancements and new developments, the exploration season certainly isn't three months anymore. People can work year-round," Burke said.

The government geologist pointed to a steady increase in yearly exploration spending in Yukon Territory dating back to 2003 when the territory took over oversight of its mine regulatory process from Canada's federal government.

The startup of two more mines signals a shift in the mining sector from the industry's knowledge-based phase of exploration to its wealth-generation phase of production, Burke said.

But exploration is showing no signs of slowing down. "People have realized that there are vast portions of the Yukon that have a heightened mineral potential. So they are out staking like crazy," he said. "You know it was really telling when Billy Connolly came up and started staking claims. When a Scottish comedian gets into a staking rush, you know it's not just rumors from 'Bert the Barber.' You know it's real."

Three operating mines

Burke said the Minto Mine continues to be the cornerstone of the Yukon mining industry even though production dipped this year because of problems associated with unusually heavy rainfall last spring. The mine is expected to report annual output of 40 million pounds of copper with gold and silver credits from ore with head grades of 2 percent copper, nearly 1 gram per metric ton gold and almost g/t silver.

Stephen Quin, president and chief operating officer Minto's owner company, Capstone Mining Corp., told Mining News Nov. 21 that the mine will generate about half of the company's anticipated C$100 million in profits this year.

Following up on Titan 24 deep-imaging induced polarization surveys in 2008 and 2010 that covered the entire Minto property, Capstone also reported a new discovery in 2010 - the Wildfire deposit - as well as new mineralization in the Minto East and Copper Keel deposits.

"Minto will probably morph into a combination open pit and underground operation over the next few years," Burke said.

In the Keno Hill silver district, Alexco Resource Corp. has completed the commissioning of its new Bellekeno Mine, making it Canada's only primary silver producing mine, Burke said.

At Bellekeno, Alexco's mine plan calls for recovery of 42,043 dry metric tons of lead/silver concentrate and 29,293 dry metric tons of zinc/silver concentrate over the initial four years of mine life from a total of 321,941 metric tons containing an estimated 871 grams per metric ton silver, 9.5 percent lead and 5.6 percent zinc on a payable metal basis.

Alexco Dec. 2 said it entered into lead and zinc concentrate off-take agreements with Glencore Ltd., Stamford, a branch of Swiss-based international natural resources group Glencore International AG. The signing of these agreements with Glencore coincided with the start of concentrate shipments from the Bellekeno Mine.

Alexco and Glencore inked two off-take agreements, one for lead concentrate and a second for zinc concentrate.

Over the initial two-year term of the off-take agreements, it is anticipated that about 42,800 metric tons of concentrate comprising 27,300 metric tons lead concentrate and 15,500 metric tons of zinc concentrate at nominal concentrate grades of about 70 percent lead with more than 6,200 g/t silver in the lead concentrate, and 54 percent zinc with more than 300 g/t silver in the zinc concentrate will be shipped from Bellekeno for smelter treatment and refining.

Alexco Nov. 30 also reported that step-out surface exploration drilling conducted to the southwest of the newly commissioned mine successfully located new high-grade lead-silver mineralization about 130 meters down plunge from the existing Bellekeno resource.

The one drill hole for which assay results have been received targeted the silver rich "48" vein at depth and within a stratigraphic sequence not previously tested at Bellekeno. Hole DDH K10-260 cut an interval grading 2,729.0 g/t silver (79.6 ounces per ton), 0.472 g/t gold, 52.16 percent lead and 6.29 percent zinc over 0.40 meters from 508.15 to 508.55 meters within a wider interval grading 690.1 g/t silver (20.1 ozs/t), 0.303 g/t gold, 13.56 percent lead and 9.62 percent zinc over 1.91 meters from 508.15 to 510.06 meters.

Alexco's 2010 25,000-meter drilling program also tested numerous other areas of the district, including the Onek, Lucky Queen and Silver King deposits and the Elsa tailings with good results.

"Alexco has to clean up the Elsa tailings under its contract with the federal government so why not see how much silver is in them. If you've got to move them, then why not offset the cost of moving them by mining the silver in them?" Burke observed.

In May, the miner reported an initial resource estimate for the Elsa tailing of 2.5Mt with more than 9.5 million ounces of silver and 9,600 ounces of gold in contained metal.

Alexco is also starting to get spectacular grades (up to 397.4 g/t or 11.6 ozs/t over 0.93 meters) silver, along with significant quantities of gold, lead and indium out of the Onek deposit.

At the Wolverine Project in southeast Yukon, the territory's Yukon's third producing mine is being commissioned and currently operating at about 30 percent capacity. Owner Yukon Zinc Corp. plans to ramp up production to design capacity of 1,700 tpd during 2011. Maple Leaf Loading began hauling concentrate from the mine to the Port of Stewart in northern British Columbia in late October for subsequent shipment to Asian smelters.

Burke said Wolverine is a pretty spectacular silver-zinc deposit reflecting the considerable mineral potential of the Finlayson Mining District.

"I'm sure Wolverine won't be the last mine in the area, just the first," he said.

C$100 million investment

Burke said the big news among the territory's advanced exploration projects in 2010 came from the Selwyn Project, the giant lead-zinc deposit currently under development in the Selwyn Basin on Yukon's eastern border with Northwest Territories. Selwyn is composed of 14 zinc-lead deposits over a strike length of 37.5 kilometers, or 23 miles, and most of the deposits represent the near-surface expression of one continuous, large mineralized stratum that is locally disrupted into discrete deposits by faulting.

Selwyn Resources Ltd. attracted a partner in 2010, Chihong Zinc & Germanium Co. Ltd., a company controlled by China Yunnan Metallurgical Group, a Chinese state-owned enterprise based in Kunming, China. Chihong owns and operates several zinc-lead mines in Yunnan province and a fully integrated zinc and lead metallurgical facility in Qujing, Yunnan that produces refined zinc, lead and germanium, sulfuric acid and other products.

In August, Chihong invested C$100 million in the project and joined Selwyn in forming Selwyn Chihong Mining Ltd., a 50-50 joint venture, to operate the huge project. The infusion of cash is intended to finance the project through completion of a bankable feasibility study set for completion in mid-2011.

Selwyn mounted a C$30 million exploration in 2010 in which it completed at least 53 drill holes totaling more that 14,000 meters in the XY Central, XY West and Don Deposits.

The majority of the drilling was designed to upgrade inferred resources in the deposits to the indicate category, while a minor portion was condemnation drilling near infrastructure to evaluate mineral potential before the start of engineering studies.

As of February 2009, the deposits had resource estimates as follows: The high-grade underground XY Central deposit, 10.74 Mt of indicated resources grading 10.38 percent zinc and 4.41 percent lead and inferred mineral resources of 2.85Mt grading 10.86 percent zinc and 4.41 percent lead; the XY West deposit, an inferred mineral resource of 1.91Mt grading 7.70 percent zinc and 2.45 percent; and the Don deposit, 5.33 Mt of indicated resources grading 9.98 percent zinc and 3.86 percent lead and inferred mineral resources of 2.85Mt grading 7.94 percent zinc and 2.95 percent lead

Developing gold mines

Victoria Gold Corp.'s Eagle Project on the huge 28-kilometer-by-15-kilometer, or 17-mile-by-10-mile, Dublin Gulch Property in central Yukon is another advanced project in the development phase. Victoria Gold hopes to finish a feasibility study of the Eagle deposit by year's end in preparation for seeking operating permits for an open pit gold mine. An independent positive prefeasibility study on Eagle reported in April demonstrated planned annual production starting in 2013 at an average rate exceeding 170,000 ounces of gold at a total cash cost of about US$500 per ounce.

Burke said the project looks particularly robust given current gold prices.

Victoria Gold also conducted a 2010 drill program aimed at increasing the size of Eagle's resource, which currently totals 2.5 million ounces gold in 89 million metric tons of mineralization grading 0.9 g/t gold.

In November, the company reported the discovery of numerous new zones containing higher grades of gold and silver over a large area at Dublin Gulch near the Eagle deposit. Some 26 diamond drill holes totaling about 5,500 meters drilled outside the Eagle deposit along with surface sampling and geological mapping resulted in the discovery of zones with gold grades that are much higher than those at Eagle, plus the finding of precious metals outside the granodiorite rocks previously believed to host the gold at Dublin Gulch. Assays returned grades averaging up to 1.93 g/t gold over 20.3 meters and 4.95 g/t silver over 39.59 meters.

At the Ketza River Project, Yukon-Nevada Gold Corp. drilled 98 holes over 14,000 meters in a 2010 program still underway in late November. Burke said the company has finished exploration for the year but was still doing geotechnical drilling for an in-house feasibility study.

A 2008 NI 43-101-compliant estimate for open pit and underground resources at Ketza River pegged measured and indicated resources as 4.08Mt grading 4.93 g/t gold for a total of about 646,400 ounces, plus an inferred resource of 1.08Mt grading 3.26 g/t gold for a total of 112,800 ounces.

Yukon-Nevada Nov. 22 reported assay results with a number of high-grade gold intersections from 2010 drilling, and noted that one of the recent drill intercepts from the Hoodoo, B-Mag, Break, and Connector zones were included in data used for the 2008 NI 43-101 resource estimate and "therefore are likely to lead to an increase in the resource at the Ketza River project."