Doug Ashbury
Northern News Services

NNSL (Oct 04/99) - When Echo Bay Mines mothballed Lupin, the company said a recovery of gold price would drive a restart.

That time may have come.

With gold regaining some of its glister, Echo Bay directors will decide at a Nov. 2 meeting whether or not to recommission the mine.

"We have to decide at the start of November," Echo Bay Chairman and CEO Robert Leclerc said during a radio interview Wednesday.

Lupin will be an "active topic" at the meeting, he said.

To resupply the mine, Echo Bay will need to meet the ice-road window. The ice road is open for about 75 days in first quarter.

If the mine is to go to operation in first-half 2000, supplies will have to be on the ice road this winter. The company will also have to recruit workers soon.

Echo Bay will again this year contract out the building of the winter road to Nuna Logistics. Whether Lupin is recommissioned or not, the road will be built because other companies use it.

Another factor in the Lupin mix is the Canadian dollar.

The vast majority of Echo Bay's spending, as it relates to Lupin, is in Canadian dollars. Echo Bay executives may decide the time is right to buy Canadian currency to prepare for a Lupin restart.

If restarted, Lupin will have a new hoisting system which will get ore from lower levels to the surface cheaper. Historically, cash costs at Lupin have climbed as mining went deeper.

With the new hoist, Echo Bay estimates cash costs at Lupin will be about $250 US an ounce (all figures in US dollars). In 1997, cash costs were $284.

Restarting the mine will cost $8 million. About half would be for the first phase of the new hoist system with the rest for resupply. An operating Lupin requires about 325 employees, Echo Bay spokesperson Robbin Lee said.

In the past, Echo Bay has bought supplies from Edmonton and some from Yellowknife.

Leclerc believes gold's recovery is bona fide. He suggests $325 is possible but something around $310 is more apt to be the case.

"This rally is for real. Yes, there will be oscillations," he said.

Last week, gold hit $317 in London, a level not seen in two years. In New York, the spot price spiked at $322.

When Lupin was mothballed in January 1998, gold was trading an 18-year low.

By the middle of last week, the price of gold bolted up about $60 in a three-week period.

But the precious metal lost some of its lustre Thursday, dipping to $299.

Gold gained after a decision by European central banks to limit sales. As well, prior to last Sunday's central bank move, a gold sale in London fetched above market prices.

Previously, central banks were maligned for selling off gold, driving the price down.

- The Lupin gold deposit, located 80 kilometres south of the Arctic Circle in Nunavut, was discovered in 1960 by Inco subsidiary Canadian Nickel Co.

- In 1979, Echo Bay obtained an option on the Lupin property.

- Mine construction started in 1980 and was completed on schedule in 1982.

- Lupin cost $135 million to bring to production. Adjusted for inflation, a $135 million project in 1982 would cost $243 million in 1999 (GNWT Bureau of statistics).

- Everything needed to build Lupin was flown in. During the 20-month construction period, a Hercules aircraft made 1,100 flights carrying 25 tons of material per trip. Personnel were transported to the site by Convair 640 which also carried seven million pounds of supplies.

- At peak, 400 workers were on site building the mine.

- Ore reserves are two million tons at .269 ounces per ton for 543,000 ounces gold. Also, an inferred resource of 685,000 additional tons contains 221,000 ounces.

- When Lupin opened in 1982, proven and probable gold reserves were about 850,000 ounces.

- Since 1982, Lupin has produced 2.8 million ounces gold. Lupin owners have a mine plan which calls for production of 150,000 ounces a year over seven years but exploration could extend mine life.

Source: Echo Bay February 1999 report.