Mining’s last frontier? — Nunavut’s cold, remote and potentially very, very rich – by Greg Klein (National Post – March 8, 2012)

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Canadian explorers and miners operate in over 100 countries, but one of their last frontiers might be within our borders. Nunavut certainly holds potential but, at least for the present, it takes the financial resources of an Agnico Eagle (TSX:AEM) to bring subterranean resources to surface.
 
Even then the territory can prove a costly disappointment, as the company’s Meadowbank Gold Mine write-down shows. Last month came news of an even bigger disappointment, Newmont’s (TSX:NMC) $1.61-billion write-down of its Hope Bay Gold Project. Curiously, the failure was offset to some extent by an announcement made just yesterday. A privately held upstart, HTX Minerals, has formed a strategic alliance with an Inuit organization to explore the region encompassing Hope Bay.
 
Newmont’s February 23 write-down dramatically portrays the risks of working in the Arctic. Located in western Nunavut, 150 kilometres north of the Arctic Circle, Hope Bay suffers long winters of 24/7 darkness and minus-30 temperatures, environmentally sensitive tundra and, of course, isolation. As for infrastructure, you bring it or build it. Newmont refers to Hope Bay as “one of the few remaining undeveloped Greenstone districts in the world.” Despite the $1.61-billion investment, that description will hold for some time.

By comparison, Agnico’s $644.9-million write-down on its Meadowbank Gold Mine in western Nunavut seems relatively benign, even if it is the territory’s sole operating mine. An open-pit that began production in 2010, it saw lower-than-anticipated grades and higher production costs. By the end of 2011, new figures chopped three years off the mine life, now projected to 2017 with annual production estimates 29% lower than original. Proven and probable reserves dropped by 1.3 million gold ounces to 2.2 million ounces. Cash costs for 2011 were $1,000 an ounce and are expected to rise to $1,040 for 2012.
 
Even Nunavut’s wildlife conspires against enterprise. That became apparent last year when a solitary wolverine racked up $18 million in direct costs and caused a 14% drop in Meadowbank gold production for 2011. The oversized weasel prevented an electrician from performing maintenance, leading to a short circuit that burned down the kitchen. That, in turn, necessitated a mine shutdown and evacuation of all but a skeleton crew.
 
Nunavut is by its nature difficult, but even Quebec’s infrastructure-rich Abitibi region has let Agnico down. Last October, the company suspended operations at its Goldex Mine due to rock instability.

Agnico is still bullish on Nunavut, however. Some 300 kilometres north of Meadowbank, Agnico is pushing its Meliadine Gold Project towards 2013 feasibility, 2014 construction and 2017 production. As President/CEO Sean Boyd tells ResourceClips.com, “Meliadine will benefit from its size, its grade and its proximity to Rankin Inlet. All that will help the economics of Meliadine versus Meadowbank.”
 
For the rest of this article, please go to the National Post website: http://business.financialpost.com/2012/03/08/minings-last-frontier-nunavuts-cold-remote-and-potentially-very-very-rich/