Nunavut – a new mining frontier

Materials World magazine
,
1 Sep 2017

Michael Schwartz examines mineral resource development in the northernmost territory of Canada. 

Nunavut is the largest of the Canadian territories. It is not a province of Canada, as is, say, British Columbia, but it reports back to Canada’s federal government in Ottawa. Nunavut was formed in 1999 as a result of a land claims settlement – the Inuit are the landowners and environmental assessment and permitting are legislated through the Nunavut Agreement.

Mineral resource development is important to Nunavut. However, while there are massive reserves of gold and diamonds, there are challenges in transporting personnel and supplies to the mines, not least in view of the exceptionally cold climate, lack of infrastructure and the sheer size of Nunavut.

Nicole Hoeller, Vice President, Communications and Corporate Secretary at Sabina Gold & Silver Corporation, explained to Materials World, ‘Nunavut was formed as a result of extinguishment of land claims […] we deal with one aboriginal group and the path is clear. The process has evolved over the years to become more streamlined, but with both the territory administering and the feds governing, timelines tend to be somewhat longer than other provinces or territories.’

Peregrine Diamonds Ltd

Located 120km northeast of Iqaluit, the capital of Nunavut, Peregrine Diamonds’ wholly owned Chidliak diamond project is advancing towards its phase one mine development via two kimberlites. Chidliak actually hosts 74 kimberlites, eight of which are believed to be potentially economic.

Under the 2016 Preliminary Economic Assessment, the two kimberlites helped Chidliak to achieve a pre-tax net present value (NPV) of almost CAN$600m at 7.5% discount rate and pre-tax internal rate of return (IRR) of 38.1%, post-tax NPV of nearly CAN$400m with a 29.8% IRR, life-of-mine (LOM) of ten years, operating margin of 72% and LOM average production rate of 1.2m carats/y, peaking at 1.8m carats/y.

Tom Peregoodoff, Peregrine Diamonds’ President and CEO, commented on Nunavut’s status as a territory. ‘In Nunavut, access to Crown Lands and minerals is administered through Indigenous and Northern Affairs Canada (INAC). In most other jurisdictions Crown Lands are administered by a provincial/territorial branch of government. From our perspective, whether it is Nunavut or Canada does not make any difference.

‘The major benefit that we have in Nunavut is the fact that the land claims are settled, providing investors with certainty over mineral ownership from the start. The same cannot be said for other provinces and territories in Canada.’

Peregoodoff also points out that Nunavut is mining-friendly. ‘The Government of Nunavut has produced a mineral exploration and mining strategy called Parnautit. A key plank in this document identifies responsible resource development as part of the economic development strategy for the territory.’

Two key challenges of mining in Nunavut are the remote locations of mines and the climate. Peregrine is equal to these challenges as Chidlaik lies 125km from Iqualit. During the summer, access is via fixed-wing aircraft and helicopters. In the winter there is overland access via a winter trail and also by air.

Sabina Gold & Silver Corp

Sabina’s mission is to become a significant gold producer by developing its 100%-owned Back River gold project in southwest Nunavut, roughly 520km northeast of Yellowknife in Canada’s Northwest Territories. Back River comprises several gold deposits in banded iron formation within an 80km district – the company reports highly prospective opportunities for new discoveries and for expansion from existing deposits.

Hoeller identifies Nunavut as mining-friendly, too. ‘Nunavut – especially the Kitikmeot where we operate – is very pro-responsible development. We heard this loud and clear through all of our community engagement and at our final public hearings in late May, early June. Yes – we believe that Nunavut is mining friendly.’

Back River is one of Sabina’s more remote mines. Hoeller describes the somewhat arduous process of bringing equipment to the mine, and is forthright. ‘We are in the middle of nowhere and our camp is fly-in/fly-out access only. When we start mining, we will bring our supplies (fuel and equipment) in by sealift during the open-sea season, lay it down at a marine lay-down area, freeze it in, then transport it by ice road to the mine site (around 150km from tide water). This is tried and true logistics in the north and what other projects and all communities do. There is no infrastructure or power. Our people and consumables and our gold will continue to be flown in and out.’

One economic factor is that Sabina does not use grammes per tonne as a main economic indicator but employs IRR – the operation focuses on which deposits can provide the best rate of return. Hoeller comments that each deposit differs in terms of cut-off grades – Sabina’s feasibility being based on CAN$1,150 for gold, considered conservative by most measures. ‘We are lucky because our grade is so high,’ she says.

Auryn Resources Inc

Auryn Resources concentrates on high-grade gold deposits in established mining jurisdictions, including the Committee Bay and Gibson MacQuoid gold projects in Nunavut. In September 2015 the company acquired 100% of Committee Bay from North County Gold Corporation, subject to 1% Net Smelter Royalty over the whole project and 1.5% NSR over 7,600ha. Committee Bay spans 380,000ha overall, extending over 300km to the shores of Committee Bay.

Infrastructure is ample, comprising bulk-storage fuel facilities, high-efficiency drill rigs, heated drill-water system, heavy equipment on site and a 100-person camp at the Three Bluffs deposit area, as well as two satellite camps in the southwest of the belt.

Auryn has also acquired prospecting permits along Nunavut’s Gibson MacQuoid greenstone belt 125km from Baker Lake and 136km from Rankin Inlet. Around 120km strike length of the prospective greenstone belt is encompassed by 19 prospecting permits, totalling 329,000ha collectively. The permits cost approximately CAN$80,000 and provide exploration rights for three years with the exclusive right to stake minerals claims.

Peter Rees, Auryn’s chief financial officer, summarises the minerals potential. ‘Nunavut’s gold mines have typically been in the top quartile in terms of grade. This is partly driven by the increased costs of operating in remote areas but can be offset by near surface discoveries.

‘Auryn’s Committee Bay project is considered to be extremely high grade and thus any development scenario would likely take advantage of this grade but large bulk tonne operations can still be successfully undertaken.’

Rees added that Nunavut’s status as a territory does not significantly impact the exploration or mining processes. He concludes that these processes undergo a similar level of scrutiny as in the provinces and that Nunavut ‘has a strong track record
of approving mining projects’.

First Nations and CSR

All three companies were asked about First Nations and corporate social responsibility (CRS). Hoeller notes that, while Sabina involves these communities, ‘Inuit like to be regarded as aboriginal people or Inuit […] we have an Inuit community liaison officer and an office in Cambridge Bay. We have been working […] for a decade and have built many strong relationships […] with community members, members of government and with the Kitikmeot Inuit Association (the land owner that administers properties in the Kitikmeot).’

Peregoodoff stresses that consultation leads to all stakeholders providing their input into Peregrine’s plans. Peregrine regularly hires ‘members from the communities of Pangnirtung and Iqaluit for our field activities,’ he said. ‘Many of our local workers are return employees who have been with us since 2009.’

Finally, Auryn’s policy is to maintain an open and productive dialogue with the Kitikmeot Inuit Association (KIA). Auryn holds permits with the KIA on Inuit-owned surface and sub-surface parcels as well as water use permits, and also enjoys a mutually beneficial relation with communities adjacent to Committee Bay.

CSR is crucial to all three companies, examples being early environmental baseline work with detailed ecological mapping and also local hiring (Peregrine), over 350 engagements in the last four years (Sabina) and sharing the benefits of exploration and mining with local and regional communities and maximising local content in terms of workers and suppliers (Auryn).

How do all three companies sum up their activities in Nunavut? Rees responded, ‘Auryn is actively focused on making world-class high-grade gold discoveries along the Committee Bay and Gibson Macquoid greenstone belts. To date multiple high-grade discoveries have been made including the 1.2Moz Three Bluffs deposit. In 2017, Auryn will drill at least 25,000m on newly defined targets to support this goal.’

Peregoodoff replied that Peregrine – and other mining companies – are ‘making a positive impact on the future development of Nunavut and on the people who live there’.

The last words are Hoeller’s. ‘Back River is a district that we believe will offer multi-generational gold mining opportunities. Logistics planning is everything. Also, all our power is diesel and that makes things pretty expensive.  That's why grade is so important […] It's a territory prolific for geological discoveries and, we believe, a new mining frontier in North America.’