Northwest Territories – Exploration may be down, but not out

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The year of 2015 finds us in very challenging times, and the NWT is not immune to what’s happening elsewhere on the globe. Declining markets are affecting our mining industry directly, and the fallout of weak markets is that exploration investment also takes a hit. Compounding that, investors’ aversion to risk has not improved, helping contribute to declining exploration financings.

The NWT continues to be a major global producer of diamonds, and mining continues apace at our three diamond mines. Kimberley Process statistics show that the NWT continues to be the third most valuable producer of diamonds in the world, and has moved up to number four in terms of carats mined. NWT diamond production in 2014 was 11.3 million carats, up nearly 15 per cent from the previous year. The price our miners fetched for their rough stones was also up 15 per cent from the year previous at just shy of $1.8 billion. Since mining contributes a lot of northern jobs, businesses and tax benefits, we are hoping that diamond price reductions the mines are facing this year won’t significantly affect these.

Unfortunately, our tungsten mine hasn’t fared so well. As the markets for that commodity fell, the mine was pushed below profitability. As a result, the mine is being put on care and maintenance until markets improve. But Cantung has proven to be a survivor, and past market downturns have affected it similarly. We are hopeful that the mine will re-open at some future time as markets allow.

Looking ahead, construction of the NWT’s fourth diamond mine, Gahcho Kué, continues on plan and budget for first production in the second half of 2016. The project is a joint venture between De Beers (51 per cent) and Mountain Province Diamonds (49 per cent). At the time of writing, the project was reportedly more than 70 per cent complete. The over $800 million investment to construct the mine is very welcome in the North. Its expected 12-year mine life should help keep those benefits robust, and keep the NWT a global diamond mining force for many more years to come.

This coming year may also see a return to some gold production, albeit from a small operation. New Discovery Mines has received final permits to install and operate a 100-tonne-per-day mine and mill complex at their MON property just north of Yellowknife.

Attracting exploration investment continues to be problematic. Natural Resources Canada projects that spending in 2015 will be down to $93 million, a drop of $8.7 million (nine per cent) from 2014 expenditures of $101.7 million. But while exploration may be down, it’s not out.

The most active exploration is at Kennady Lake, an area of high diamond potential adjacent to the Gahcho Kué mine currently under construction. Kennady Diamonds Inc (KDI) has outlined a significant kimberlite resource and in November outlined an ambitious 2-year vision that includes defining up to 16 million tonnes of resource at two to 2.5 carats per tonne at their Kelvin – Faraday kimberlites, to define resources at the MZ and Doyle kimberlites, to discover additional kimberlites, and to build a mine. They are also very bullish on their ability to finance, and want to be fully funded to support a decision to build at the end of 2017. That the president of KDI also heads up the joint venture partner in the new Gahcho Kué mine, is likely not lost on investors.

Two other explorers are investing in the shadow of former gold producers.

TerraX Minerals continues to uncover highly-anomalous gold values in the Yellowknife gold belt, north of the former Giant gold mine, through both prospecting and drilling. This summer, TerraX acquired additional claims but now south of the former Con gold mine, putting them into control of one of the six major high-grade gold camps in Canada – and the least explored according to TerraX. Its two past producing mines yielded 14.2 million ounces at an average grade of 16 g/t Au over their 60-year life span; and being in close proximity to Yellowknife, TerraX’s project is close to vital infrastructure, including transportation, service providers, hydro-electric power and skilled tradespeople.

Some 200 kilometres to the north, Nighthawk Gold conducted a diamond drill program this year on their Indin Lake project, site of the past producing Colomac gold mine. The company now holds most of the land in the gold belt, where they continue to identify and explore a number of interesting gold targets. Latest figures show an inferred mineral resource estimate of 39.81 million tonnes with an average grade of 1.64 g/t Au for 2.101 million oz gold using a cut-off grade of 0.6 g/t gold.

A number of smaller exploration projects are underway in the NWT for diamonds, gold, and base metals by companies including Canterra, DEMCo, Proxima Diamonds, Panarc Resources, North Arrow Minerals, and Songful Resources. While it’s a far cry from what we need and wish for exploration activity, given the current situation, we are happy for the investment.

Recognizing industry’s challenges, the NWT government (or GNWT) is trying to make a difference. This year under the guidance of their new Mineral Development Strategy, the GNWT awarded exploration assistance grants under the Mining Incentive Program, announced mineral tenure relief, created a Mineral Industry Advisory Board, and announced plans for a core library. The government also partnered with industry members and Aboriginal groups to deliver three prospector training programs in an attempt to reinvigorate an aging prospecting fraternity with younger blood. With continued focus on Aboriginal communities, the program can not only help provide new opportunities but also new exploration eyes throughout the territories. The NWT government has also unveiled a 25-year transportation strategy, which looks to develop three priority transportation corridors that will help with resource development: the Mackenzie Valley Highway, an all-weather Tlicho road, and improved access into the Slave Geologic Province from Yellowknife to Nunavut.

With the fall elections now over, the Chamber of Mines and is members will be renewing their work with the new governments to seek improvements in the NWT’s investment climate. Given that the territory’s economy is taking a financial hit due to the depressed market prices and lowered exploration expenditures, voices of support for mining exploration and development are growing stronger. Along with some of the most attractive geology on the planet, that kind of support can go a long way in reinvigorating investment in the NWT.

By Tom Hoefer, executive director, NWT & Nunavut Chamber of Mines



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December 28, 2015

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