New mining development critical to Nunavut economic growth

This past weekend's meeting of the G7 Finance Ministers in Iqaluit, Nunavut, brought renewed global attention to the critical need for mining dollars to stimulate the economy of Canada's newest territory.

Author: Dorothy Kosich
Posted: Monday , 08 Feb 2010

RENO, NV -

Canada's newest territory of Nunavut may soon get its first operating mine as Agnico-Eagle's Meadowbank gold project is poised to begin production this quarter.

However, Baffinland Iron Mines' Mary River iron ore project still needs to find C$4.1 billion (US$3.83bn) in financing to start production by a new target date of 2016.

The territory's last mine, Tahera Diamond's Jericho mine, suspended operations in 2008 due to financial constraints and has been put up for sale.

In an interview with CBC News, Larry Connell, Agnico-Eagle's director of sustainable development, said the first gold bar may be coming out of Meadowbank's gravity circuit by the end of this month.

Construction is complete on the C$700 million (US$654mn) project, which is believed to have a probable gold reserve of 3.6 million ounces and a measured and indicated resource of 1.5 million ounces. This year's exploration budget is US$6 million for Meadowbank.

The gold mine is anticipated to produce 350,000 ounces of gold this year, and averaging 350,000 to 400,000 ounces annually over a nine-year mine life. Agnico-Eagle is confident mine life will extend well beyond 10 years.

Meadowbank is located in Kivalliq district of Nunavut 70 kilometers north of the town of Baker Lake, which is 320km inland from the western shore of Hudson's Bay.

Investments at Meadowbank have made Nunavut the fastest growing territory in Canada. However, the global recession has slowed exploration and development in the territory, Nunavut Premier Eva Aariak recently told Bloomberg. Mining industry capital expenditure is believed to have dropped 62% to C$340.2 million last year, according to the Nunavut budget.

As the G7 Finance Ministers met Iqaluit, Nunavut, this past weekend, Baffinland CEO Gordon McCreary was able to introduce his Mary River iron ore project-- located on North Baffin Island, in the Qikiqtani Region-- to an audience of journalists and international visitors.

McCreary told his audience that the German government considers the project to be strategically important to their country and has declared it to be eligible for a $1.2 billion loan. He added that maybe the project should also be considered important to Canada.

The mine is expected to produce 18 million tonnes of iron ore annually. The project has reserves of about 365 million tonnes of ore grading an average of 65% iron, and about 500 million tonnes of ore resources.

Baffinland estimated the cost of the mine to be C$591 million (US$552mn). A railway system will transport the ore from the mine to an all-season deep-water port and ship loading facility at Steensby Inlet where the ore will be loaded into ore carriers for overseas shipment through Foxe Basin. A dedicated fleet of cape-sized ore carriers, capable of breaking ice, will be chartered by Baffinland. Some non-icebreaking ore carriers and conventional ships will also be used during the open water season.

However, just transporting the ore for delivery to German steel mills requires C$1.2 billion in railway infrastructure and a C$706 million port to carry the ore from Steensby Inlet through Fox Basin and Hudson Strait to European ports.

Montreal shipping company Fednav has partnered with Baffinland to form a consortium to obtain the fleet to transport the ore.

Thus far Baffinland has spent C$200 million on the project, according to the internet news site Nunatsiaqonline.com. This year the company expects to spend an additional C$37 million to pay for drilling, the completion of a draft EIS and the completion of a draft impact and benefits agreement with the Qikiqtani Inuit Association.

McCreary said Baffinland has received interest from about 20 companies to partner in the project and hopes to finalize a deal this year. Baffinland is amenable to a joint venture or the sale of an equity stake. It is also willing to be a minority partner for the right company, he added.

The project has received "strong interest" from several global leaders, according to McCreary.

Mary River is expected to be 75% debt financed and 25% equity.