Gold Mines Reopening In B.C. Because Of Higher Prices

In a sense, this story is old news. Royal Oak Mines pioneered reopening old mines back in the 1990s; for a time, it was the darling of Bay Street. It went bankrupt in 1999 because of low gold prices.

With gold much higher now, Royal Oak is proving to be ahead of its time. As recounted in Gold Investing News, small-scale mines in B.C. are being rehabilitated and reopened because it's now profitable to mine the leavings. Gold's soaring has made previously uneconomic portions of the ore bodies profitable now.

“We’re seeing several projects being reevaluated currently with an eye to reopen, in light of the rise in metal prices that has been going on for six or seven years. I think you can track back metal prices to 2003 when they started to climb, particularly gold,” said Bruce Madu, Regional Geologist for South Central British Columbia. “A lot of mines shut down in BC through the 1990s as metal prices were particularly depressed in that period. I would characterize us as being onto a second or even a third generation for some of the projects.”

There have been 12 mines opened in BC since 2001 and eight in the last five years, including two small-scale vein gold mines in 2009. The most recent gold mine to reopen is the Bralorne Mine, which began producing in mid-April 2011 for the first time in nearly 40 years. Bralorne is a small operation, producing 100 tons [of ore] a day, and could expand to 280 tons a day by 2013. The mine closed in 1971 when gold was $35 an ounce after producing 4 million ounces in its 50 years of operation. As a past producer, Bralorne had an existing permit, as well as a mill and other infrastructure already in place, allowing production to begin in a matter of months....

Of course, it's often not that simple to reactivate a mine. There's flooding to cope with, not to mention the need to sample the ore that's left. Both take time and money. Repermitting takes time, and environmental requirements are more rigourous now. But, the price-cost differential has shifted enough to make old mines worth a new look.

The article points out, though, that reclaimed mines often have a short life. The bulk of the pay rock was cleaned out when the mine was originally running. A mining company that goes into production with a mine of this sort has to use it as a springboard to finding a more durable project or else it'll wind down fairly quickly.