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Colomac Gold Mine to be revived
Merc International Minerals Inc. already holds mineral claims completely surrounding two-time producing mineThandiwe Vela Northern News Services Published Wednesday, December 21, 2011
The two-time producing Colomac mine, located about 220 kilometres northwest of Yellowknife, will now fold into Toronto-based Merc International Minerals Inc.'s Indin Lake gold camp, which is comprised of more than 200,000 acres, completely surrounding Colomac. "For lack of a better term, the Colomac mine was like the donut hole in the property," Merc president and CEO David Wiley said. "We have 210,000 acres we've already been actively drilling and active on for the last few years, and Colomac is right smack dab in the middle of it." Discovered in 1945, the open pit mine historically produced more than 500,000 ounces of gold, starting with Neptune Resources Corp. in 1990. Due to unfavourable gold prices, Colomac was shut down in 1991 after producing about 139,000 ounces. Royal Oak Mines Inc. took over the mine in April 1993, and began gold production the next year. Again, low gold prices led to the closure of Colomac in 1997, with Royal Oak filing for court protection from its creditors two years later. "The price of gold at the time a lot of them were doing their work was below $400 (an ounce)," Wiley said of the prospectors who set their sights on the greenstone belt in the past. With gold prices reaching all-time highs this year, and now sitting well above $1,500 an ounce, reviving production at Colomac today might be more economically viable, although the mine is still years from production. "Our ability to take advantage of these prices won't be apparent until we're actually producing," Wiley said. "So the price at that time will really be the one that tells the tale." Merc, which began taking control of the Indin Lake land position in 2008 just south of Colomac, is still early in its exploration phase, with mine construction targeted to take place in about three years. Structures and other capital items used while Colomac was operating, including the mill, were all cleaned up by Aboriginal Affairs and Northern Development Canada, after Royal Oak went into receivership, leaving the remediation task to the government. The total cost of remediating the Colomac Mine site was $135 million. Only a 5,000-foot airstrip and a large steel warehouse remain at the Colomac mine site after the clean-up, which reached completion last summer, and included the clearing of polluted tailings ponds, barrels with oil and fuel, and diesel spills on the ground. Merc is not responsible for any historical environmental liabilities associated with Colomac, but in exchange for the mineral claims and leases over the property, has agreed to reclaim three other disturbed historic exploration sites near Colomac, called Diversified, Chalco Lake, and Spider Lake. To close the deal, Merc must post $5 million security, representing the maximum cost of reclamation. "It's a very favourable deal from both our perspective and Merc's perspective," said Malcolm Robb, manager of Aboriginal Affairs and Northern Development Canada's mineral development division. "We're actually getting a private sector company to put up $5 million, go out, do some remediation work ... and in return we're giving them the subsurface rights, which are the mineral claims, and they get to explore those mineral claims." The transaction is scheduled to close in January. Merc, which spent about $6 million on exploration in the Indin Lake area last year, plans to begin further exploration at Colomac and other target areas of its Indin Lake holdings next year. A mineral resources estimate for the property is expected to be complete by early 2012. Shares of Toronto-based Merc International Minerals Inc. closed at $0.25 Monday on the TSX Venture Exchange.
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