June 25, 2012
Frank PEEBLES
Citizen staff
fpeebles@pgcitizen.ca
Economic uncertainty around the world is, counter intuitively, a golden opportunity for the local economy.
One of the reasons the Blackwater gold/silver exploration site is employing hundreds of people today, and holds the promise of thousands more person-years of work in the near future, is the high price of gold. Gold is the main commodity investors turn to when the overall market seems risky and volatile.
Due to the science already done to prove the presence of gold and silver at the Blackwater site on Mount Davidson, about 110 kilometres south of Vanderhoof, and due to the high commodity price of gold, this project is moving ahead aggressively for claim owners NewGold.
The price of NewGold's shares (NGD on the TSX and NYSE-AMEX) is hovering around the $10 mark. It has been as high as $14 in summer, 2011, and as low as $1 in 2008. Since that basement, however, it has shown steady increases that are holding today.
NewGold's president and CEO Robert Gallagher said one of the reasons for the robost stock performance was their New Afton project near Kamloops which took an exhausted Teck Resources mine and unearthed more gold directly under the old open pit.
"The underground operation is expected to produce, on average, 85,000 ounces of gold and 75 million pounds of copper per year over a 12-year mine life," said a NewGold statement. Gallagher said New Afton was so close to ready he expected to see ore extraction begin within days.
The success of that mine, coupled with the certainties at Blackwater, created the financial climate to attack exploration on Mount Davidson like no other project the staff there has ever seen.
"I was retired when I joined on with Richfield [Ventures Corp.] and I stayed on with NewGold because it is an exciting project, it's rare. I want to see it turn into a mine," said camp manager John Nicholls of Quesnel. He said there was a crew of about 50 all living in wall tents less than two years ago and now it was more like a full-service village with apartments and dining hall and recreation programs.
Richfield was the main company that made the Blackwater discovery. Gallagher said many miners had checked the area over "but they just scratched the surface, they didn't find the rich layers down below, but Richfield under Peter Bernier really did great work to uncover it."
The area was coated in glacial till, not a lot of open stoney ground. But there were some streams that gave some hints to Bernier and they have, to coin a mining phrase, panned out for NewGold which bought the venture in April, 2011 (plus the shares of a minority partner, Silver Quest Resources).
At the time of the buyout, Bernier called the transaction "thrilling" and a "win-win" for both companies' shareholders. Gallagher said it was customary in mining for junior companies to do the initial exploration work, a high financial risk in most cases, then sell the best ones up to larger extraction companies like NewGold simply because the smaller groups don't have the money to dig the minerals out anyway.
The hardest part now, in the march towards a mine, is keeping the geological employees happy on the mountain so they stay on the job. That is why the diesel generators are humming to support a mini-village that Gallagher called "posh, as exploration camps go."
He said one of the key elements was getting adequate communications systems built. "We are paying Telus $2 million to install that for us" so the residents at the camp can have standard contact with their loved ones by phone and computer, and so the massive amounts of computerized information from the field can be emailed to labs and other contact points around the world. (NewGold is simultaneously developing an even bigger prospective gold mine in Chile.)
More than 100 people currently call the top of Mount Davidson home with hundreds more expected, and they are stuck their during their days on shift. For safety, the workers are all shuttled to the site by bus, it is strictly devoid of drugs or alcohol, it is piled in snow during the winters (most buildings are connected by heated corridors or short paths) so feeling comfortable is a necessary concession NewGold is happy to make.
The one segment of skilled labour there was no shortage of, Gallagher said, was drill rig crews (each rig has a direct crew of five). There are 19 rigs working around the clock on the Blackwater test site (a patch of mountain 1 km wide by 800 metres long, plus some other experimental spots).
"Most of these drillers have been working overseas but they are mostly B.C. people," he said. "When you have a big project right here in their own back yard, no problem, we got three main companies with little trouble and they had their crews."
Another employment burst provided by NewGold is the ore analysis lab they built in Vanderhoof to prevent the need for trucking the thousands of kilograms of rock samples to faraway facilities.
"Nobody else does that," said Gallagher. "It's hard to do, it's expensive to do, but it is running now for us and it is going to at least break even for us. Plus, we've run into labs that were backed up, in the past, so you had to wait for your analysis. This way, we know we control our own destiny."
NewGold's projections, assuming environmental and First Nations components of the project are realized as anticipated, they will begin construction in 2015 (800 person-years of employment in this phase) and ore extraction in 2017. NewGold is projecting more than 1,000 person-years of employment during the mining phase which they conservatively anticipate will last at least 12 years. The economic injection, mostly into the economies of Vanderhoof and Prince George districts, is estimated at $75 million during construction and $25 million per year during mining.