With the metals market mired in a slump, most mining executives are waiting for the arrows on their price charts to climb upward before pursuing new projects.
But Patrick Soares, head of Foran Mining Corp, the company that owns the proposed McIlvenna Bay mine outside Creighton, sees opportunity in this depressed cycle.
Soares says mining-related costs are lower now than they would be in an up cycle, meaning McIlvenna Bay could be developed at a bargain price.
“Suppliers are willing to really cut costs to very, very thin margins because they’re just not selling their products,” he said in a phone interview. “So it would just give us that advantage.”
Another silver lining, Soares says, is that mineral slumps generally last seven years. He says the current nose-dive began in 2011, so the market might start recovering in 2018. In a best-case scenario, McIlvenna Bay mine would open in 2019.
“If you look at it in today’s prices, probably very hard to get one’s mind around [opening a mine],” he said. “But if you look at the fact that this thing won’t be in production at very earliest for three years…you might be going in production just at the right time to catch the cash flow to kick in to pay this thing back very quickly. That’s what we’re hoping.”
The plan being examined at this time, Soares says, would see McIlvenna Bay developed as an underground mine with no initial head frame. Foran would then hope to pay Hudbay to process the ore in Flin Flon, with Foran selling the end product.
“Our timing could be good to get underground and have a source of feed for the concentrator there in Flin Flon,” he said, referencing Flin Flon’s 777 mine, which Hudbay says will close in five years with a limited possibility of a longer lifespan.
Foran does not have an ore-processing agreement with Hudbay. Hudbay has said its wants to maximize its processing capacity and that it is examining the possibility of taking in ore from outside of its own operations.
“We would have to get a quote from Hudbay as to how much this was going to cost…and see if they were interested in treating our ore,” Soares said.
In 2014, McIlvenna Bay underwent a preliminary economic assessment that found the mine would be feasible and cost $399.1 million to develop, but an actual feasibility study is still needed.
Soares says Foran has been in talks with Quebec-based G Mining Services about a feasibility study. He estimates Foran could have requisite dollars for the study by the end of 2016.
He has confidence in G Mining Services head Louis Gignac for building a number of mines, including one that came in nearly $300 million below its initial cost estimate.
“His feeling is, and we would agree with him, is this is the best time, while things are slow, while people are not focused on the mining, to get really good prices for materials and get this [McIlvenna Bay] project on the go,” Soares said.
Soares says Gignac is contemplating starting the mine by ramping underground to access ore without first building a shaft. Mining would start about 50 metres underground.
“We [have] looked at various ways and chatted with various people on ways to move this ahead,” said Soares.
Soares says Foran is not currently conducting drilling at McIlvenna Bay because it feels it has already defined the deposit, located 90 road km west of Creighton.
“We are looking at how to best spend [our] money and right now doing a drill program will not really fulfill that,” he said. “Once we decide to make a feasibility decision, then at that point there may be some more drilling required.”
Foran is not immune to the challenges facing junior miners and mining companies in general. Soares says the Vancouver-based company has instituted cost-saving measures such as reduced workweeks.
Foran lost $1.58 million in 2015 and as of March 31 had
$717,712 in cash and cash equivalents.
“At this time, knowing that there’s not a lot of cash around, we’re going to be very, very careful about how we’re going to spend dollars,” said Soares.
