Bumpy ride ahead for NWT mining

While mining activity remained strong in the Northwest Territories in 2019, industry and government officials alike worried that the robust sector, driven largely by production at three diamond mines, has entered a prolonged downward slide.

The near-term economic outlook for the territory, which covers 1.3 million square kilometers in Canada's central Arctic region, continues to be bleak as its diamond mines that have now passed peak production and replacement projects are in short supply, according to a report published in July by the Conference Board of Canada.

Two of the three operating diamond mines in the territory - Diavik and Gahcho Kué - are set to close within the next decade. The third, Ekati, is projected to produce diamonds well into the 2030s, assuming a planned open pit is built.

The focus of NWT mining is expected to shift to other minerals, including zinc, cobalt and rare earth elements, which are typically produced in smaller operations that cannot add as much value to the territorial economy as diamond mines.

Due to the decline in diamond output, economists forecast annual growth of the NWT economy to average two percent during the next two years, before becoming more uneven, with multiple years of negative growth.

They predict the mining downturn will lead to job losses across a number of industries, particularly construction, and put strain on the territorial government's finances.

The gloomy forecast is spurring territorial government and mining industry officials to speak out about the urgent need for federal policymakers to address the Canadian Arctic's needs.

The Northwest Territories is home to 44,000 residents who live in 33 communities spread across a territory slightly smaller than Alaska.

"To put that into perspective, we are a jurisdiction that is approximately 500,000 square miles and our entire population is just a little bit bigger than the Belltown neighborhood here is Seattle," NWT Premier Robert McLeod told participants in the Arctic Encounter Symposium in April.

"Our gross domestic product today is close to C$1 billion less than what it was in 2008, while our neighbors to the east and west – Yukon and Nunavut – have increased their GDPs in the hundreds of millions and even billion-dollar ranges during that time," McLeod said.

Between 2007 and 2016, the Northwest Territories economy shrank from $4.5 billion to $3.7 billion, he said. During that same time, territorial unemployment rose from 5.7 percent to 7.4 percent, which resulted in 800 fewer jobs in the territory.

"The Northwest Territories remains the only jurisdiction in Canada that has yet to recover from the global financial crisis," McLeod observed.

While many policymakers do not realize the importance of mining and other resource development in the North, the premier said NWT planners have charted a long-term vision and strategy to ensure the territory's future economic well-being.

"These take into account the new realities that we are facing in the NWT, and clearly explain where we, as a territory, want to be by 2030 to our partners, industry, investors and public, he added.

McLeod outlined the NWT's critical need for roads, electrical grids and renewable energy projects that will lower the cost of living for residents and the cost of doing business in the territory.

Observing that most Canadians take such infrastructure for granted, he said, "Closing the public infrastructure gap in Northwest Territories and Canada's Arctic should be one of the greatest strategic priorities of the government of Canada."

Roads, power funding

In February, the territorial government awarded a contract to construct the Tlicho All-Season Road (Tlicho Road), a new 97-kilometer- (60 miles) long, two-lane gravel highway to provide year-round access to the community of Whati from Highway 3.

NWT officials called the contract a significant step in advancing the territory's transportation infrastructure and in benefitting the mineral industry. Construction and ongoing maintenance of the road, funded by a public-private partnership, is expected to be completed in early 2022.

The total contract value of the project is C$411.8 million over a 28-year period, and local indigenous people hold a 25 percent equity interest in the project.

"This new road, which includes Indigenous participation from the Tlicho Government, is great news for our industry and a positive step forward in addressing the infrastructure deficit in the Northwest Territories," said Gary Vivian, president of the NWT & Nunavut Chamber of Mines. "Improved year-round road access will open up vast areas of prospective geology to lower the cost of exploration, and it will improve the economic viability of the Nico and Indin Lake projects."

All-season road access is a key factor for Fortune Minerals Ltd. to develop its Nico cobalt-gold-bismuth-copper property located 50 kilometers (31 miles) north of Whati. Fortune has already received environment assessment approval for an open-pit mine and concentrator at Nico as well as a spur road from Whati to the mine site. The spur road is a private sector incremental extension of the Tlicho Road that also will improve access into areas with known deposits and mineral potential, Vivian explained.

In addition, the Tlicho Road will improve winter road access for Nighthawk Gold Ltd., which is exploring a large land package in the Indin Lake Belt west of Wekweeti. The project includes the former Colomac gold mine that ceased production in 1997 and a number of satellite deposits.

Federal officials, meanwhile, appeared to heed the call in early 2019 for more investment in public infrastructure in the North, having funded several major roads and at least one hydropower project in the past couple of years.

In March, the Canadian government allocated C$5.1 million in funding for projects that will support ongoing resource development in the Slave Geological Province, the mineral-rich region of the NWT where mining activity historically has flourished.

The money, matched by nearly C$1 million in territorial funds, will finance early development work on a 413-kilometer (256 miles) gravel road that will provide overland access to the region and other initiatives to spur mineral exploration within the highly prospective 213,000-square-kilometer (82,218 square miles) area.¬¬

The historic value of mineral production from mines within the Slave Geological Province exceeds C$45 billion.

In late January, officials also unveiled plans to expand the Taltson Hydroelectricity system with more than C$1.2 million in federal and territorial funding.

The proposed Taltson hydroelectricity expansion project will deliver 60 megawatts of energy to the North Slave hydroelectric system, more than doubling the NWT's current hydroelectricity capacity, according to the government. The project will remove up to 240,000 metric tons of polluting emissions from the air each year, stimulate local economies, and provide employment opportunities for indigenous people and all northerners, officials say. Later phases of the expansion will connect the Taltson hydroelectric system with provincial electricity networks, creating a more integrated energy system that will allow for increased north-south energy trade.

The Taltson River system has 200 MW of electrical generation potential, according to Canadian officials. The run-of-river Taltson hydroelectric project will expand the existing Taltson generating station, which is owned by Northwest Territories Power Corp. and has a capacity of 18 MW.

"The Taltson Hydroelectricity Expansion project is more than a transmission project. It represents a key element in the Government of the Northwest Territories' vision for a lower carbon economy that will increase the availability of clean, renewable energy to help us achieve our mandated commitment of displacing diesel generation, as well as lowering the cost of living for residents, and allowing the territory to meet its commitments to address climate change," said Wally Schumann, the NWT's minister of Industry, Tourism and Investment. "This project also reflects the important role clean energy infrastructure plays in growing and stimulating the economy."

Robust claims staking

Global developments, meanwhile, affected the tempo of mineral exploration in the NWT in 2018 and the first half of 2019.

"Trade negotiations, rising interest rates and newly-implemented trade tariffs made it difficult to gain an impression of the mood of the minerals industry in the Northwest Territories," the NWT Geological Survey said in its annual mineral exploration survey.

One of the most reliable indicators of mineral exploration health – claims staked vs. lapsed – continued an upward trend that began in 2018, according to the geological survey. In 2018, 268 claims covering 184,985 hectares (457,097 acres) were added and only 70 claims covering 58,876 hectares (145,483 acres) were released, a significant increase in area covered by mineral claims. New staking included large areas in the Mackenzie Mountains, complimented by a re-staking of claims in the Lac de Gras region and an expansion of claims in the Yellowknife area.

Although diamonds remained the only commodity mined in the NWT in 2019, several new projects targeting gold and technology metals emerged or advanced.

For example, Newmont FN Holdings ULC, a subsidiary of Newmont Goldcorp has designated for option Evrim Resources Corp.'s Astro exploration project, a 23,250-square-kilometer (8,975 square miles) land package that parallels the NWT-Yukon border that is prospective for carbonate-style gold. Evrim has identified a 9.5-kilometer- (5.9 miles) long corridor of gold anomalism using surface soil and rock chip sampling of gossans in the area. In March the junior said it planned to spend at least US$1.2 million this summer on an exploration and drilling program at Astro.

Zinc, lithium, cobalt and REE were among other minerals sought by active explorers.

Demand also remained high in 2019 for the C$1 million in mineral exploration incentives offered annually for the past five years by the NWT government to qualified explorers.

New frontiers in diamonds

Dominion Diamond Mines reported ongoing production at its Diavik and Ekati diamond mines in the NWT, and exploration advanced at the Lac de Gras property, which the company held in a 55-45 percent joint venture agreement with North Arrow Minerals Inc.

The Lac de Gras property forms a very large, contiguous block within the diamondiferous kimberlite field that also hosts Diavik, located 10 kilometers (six miles) to the north and Ekati less than 40 kilometers (25 miles) to the northwest. The trend line defined by Diavik's kimberlites runs directly through the center of the JV property, while the trend line defined by Ekati's kimberlites crosses the western portion of the field.

North Arrow said it will follow up on the 2018 discovery of kimberlite 465 on the Loki project at Lac de Gras with a C$2.8 million, three-week summer program of prospecting, till sampling, and ground geophysics to confirm and prioritize targets for further exploration drilling in the winter of 2020. The 2019 program, which continued through July, was fully funded by Dominion and reduced North Arrow's interest in the JV to 21 percent.

Ken Armstrong, president and CEO of North Arrow, observed that kimberlite 465 was the first new kimberlite discovery in the Lac de Gras region in more than five years.

"Since then, the pace of discovery in the region has increased with the reported discovery of at least seven more kimberlites," including one reported July 8 in the first hole of the 2019 drilling program, he said.

At Dominion's Ekati diamond mine, the Koala, Lynx, Misery, Pigeon, and Sable kimberlite pipes were actively mined in 2018. Current surface operations include the Pigeon, Sable and Lynx open pits. The Misery underground project also is underway.

The mine life of Ekati, including the Misery underground and the Jay project, currently extends to 2034 and exploration of other areas, including the Fox Deep project, could extend the mine life of Ekati to 2042.

At the Gahcho Kué Mine, located 280 kilometers (170 miles) northeast of Yellowknife, the recent discovery of the Wilson kimberlite is the latest in a series of finds that have the potential to extend operations at this diamond mine, according to De Beers Canada Inc.

De Beers shares ownership of Gahcho Kué in a 51-49 percent split with Mountain Province Diamonds Inc. The mine currently has a 12-year mine life. Last year, explorers discovered a smaller kimberlite pipe named Curie that, like Wilson, is located within the mine's Tuzo pit design limits.

At its Kennady North project, Mountain Province reported in February the start of a 2,000-meter winter exploration program. The Kennady project covers 67,164 hectares (165,962 acres) of prospective claims and leases adjacent to the Gahcho Kué mine.

The winter program focused on drill-testing several combined indicator and geophysical targets located west and southwest of Gahcho Kué's Hearne kimberlite.

Explorers seek other minerals

Explorers also undertook gold, base and technology metals projects in the NWT in 2019.

Nighthawk, one of the NWT's most active explorers in 2019, focused on advancing its Colomac Gold Project in the Indin Lake Greenstone Belt located some 200 kilometers (120 miles) north of Yellowknife, as well as advancing other regional gold deposits and showings within a largely underexplored Archean gold camp.

Since its initial drill program at Colomac's Zone 2.0 in 2012, Nighthawk's exploration strategy has evolved to focus on discovery and delineation of higher-grade shoots within the sill. All 38 drill holes reported by July 31 (12,824 meters of a 35,000- to 40,000-meter drill program) intersected mineralization.

In May, Osisko Metals Ltd. said it completed an active program of definition drilling begun in 2018 at its exploration project in the Pine Point Mining Camp, located on the south shore of Great Slave Lake. The project currently hosts an NI 43-101 inferred mineral resource of 38.4 metric tons, grading 4.58 percent zinc and 1.85 percent lead, making it the largest near-surface, pit-constrained zinc deposit in Canada.

Jeff Hussey, president and CEO of Osisko Metals, said drilling results from the initial campaign at Pine Point will be incorporated into the project's next mineral resource estimate, due in the third quarter.

Osisko expects most of the project's existing inferred resources will be upgraded to the indicated category.

The company also planned a brownfield exploration program during the summer at Pine Point, focused on increasing the resource base and making new discoveries.

"We believe the property holds significant exploration upside at depth and along its 65 (kilometers) of strike length," Hussey added.

The objective of the 2018–2019 drill program was to convert the Cominco Ltd. unclassified near-surface historical resources into current mineral resources and to locally extend known zones of mineralization.

Closer to Yellowknife, TerraX continued drilling gold targets in 2019 including the Crestaurum shear and the extension of the Sam Otto zone on its Yellowknife City Gold Project with good results.

In early 2019, TerraX identified four top priority targets. Comprehensive review of the targets including the use of historical data and 2019 assays of historical core, led to a focus on deposit expansion at Crestaurum and Sam Otto, as well as further targeting on the North Giant Extension within the Barney Deformation Corridor. In May, the company confirmed the extension of gold mineralization on structures that hosted the Giant Mine onto TerraX property.

A drill program focused on high-grade deposit expansion will center on the Crestaurum Main zone, the previously undrilled Crestaurum North (Shear 17), and the Crestaurum hanging wall structures, particularly in the favorable yet underexplored area where these zones intersect the Barney Deformation Corridor. Step-out drilling also will target Sam Otto South, which features higher grade gold lenses within a 100-meter wide-bulk tonnage zone.

TerraX said the identification of this through-going structure has provided the possibility to expand the deposit significantly, with potential to extend the 1,000-meter strike to 4,000 meters. The explorer said it also will conduct surface work, including geophysical and geochemical surveys for future drill targeting, and continue a review of historical core data.

Far Resources intersected high-grade lithium concentrations in its maiden drill program in 2018 at the Hidden Lake lithium project, located 45 kilometers (28 miles) east-northeast of Yellowknife in the Yellowknife Pegmatite District. A total of 1,079 meters of core was drilled to target pegmatite with high-grade lithium assays in surface outcrop. In October 2018, the explorer said it planned a program of soil sampling and further drilling for the next phase of work on the property.

Avalon Advanced Materials Inc., reported in June that it finalized a deal with Cheetah Resources Pty Ltd., an Australia-based junior, that could lead to startup of small-scale production of rare earth elements in 2020 at the Nechalacho project, located at Thor Lake in the Mackenzie Mining District of the NWT. Nechalacho hosts a rich polymetallic rare metals resource, with potential for economic recovery of the heavy rare earth elements neodymium, praseodymium, lithium, zirconium, beryllium, niobium and tantalum.