IDM Mining's game plan: build a small mine to fund expansion
IDM Mining (TSE:IDM) plans to start a scaled-down mine that will fund exploration projects nearby, says president and CEO Rob McLeod.
McLeod's Red Mountain Gold project is 15 km northeast of Stewart, BC. The underground gold and silver project has a net present value of $133.1 million at a 5% discount rate. The project has a measured and indicated total of 441,500 gold oz. and 1.379 million silver oz.
"Part of our philosophy, originally, was to get Red Mountain into production, and then cash flowing, and—like the vast majority of mines around the world—we would discover more ounces once we are underground and once we are mining," said McLeod during a MINING.com site tour in August.
The company released an updated preliminary economic assessment for the Red Mountain Gold project in July. A feasibility study is underway, and the company plans to file a project application in 2017.
"[The mine] only has a five-year life mine right now, but the best thing about the ore body is that it's wide and tabular," says McLeod.
"It’s amenable to long-hole stoping, which is a low-cost method. Our average longhole stope widths are 16 metres and up to 40 metres in places, so it will be a real low-cost producer."
The company is already exploring nearby. In September the company announced 22.2 g/t Au and 81.3 g/t Ag over 9.35 meters after some surface hand trenching at Subcrop at Lost Valley, part of the Red Mountain project. The property is located beside the Cambria Icefield and retreating ice is revealing more property to examine.
Resource Maven Gwen Preston interviewed Rob McLeod and Michael McPhie, Executive Chairman in August. Interviews below are edited for clarity.
Michael McPhie, Executive Chairman of IDM Mining
MINING.COM: What kind of mine is the feasibility looking at?
Michael McPhie: The operation really has two sides to it. The significant exploration upside and potential here, but one of the major attractions to us was that it starts with a fundamental of a pretty well understood resource. There is a five to six years mine life, initially, producing about 80,000 ounces per year of gold at a lowest quartile cost of production.
What we’ve tried to do right from the minute when we bought it was taking it through the de-risking of engineering. So we started out with a preliminary economic assessment in July of 2014, and the feasibility imagines a bulk, underground mining project, like I said, producing 80,ooo to 85,000 ounces of gold a year.
Initial mine life is five years. It's a pretty conventional project. I mean, it’s a thousand tons a day, cyanide destruction circuit, conventional tailings disposal, and we have a really good site layout here. One of the things I love about it is the footprint of the project is really quite small. It's undergound.
We like small. Small is good. You control a lot of your variables and we’ve gone through a lot of work to kind of define what this is going to be—whether it is the community, whether it is the Nisga’a nation, whether it is the regulator—we really have a lot of support for what we are doing and I think it’s going to be a great project.
MINING.COM: What’s the permitting status?
Michael McPhie: So, in place today we have permits for exploration and dewatering water from the underground, so we are actually going through a mine dewatering right now, you know, there’s 2 kilometres of underground working on the project today and we had to draw the water out and we are doing underground drilling for metallurgical testing, geotechnical, and resource expansion.
So we are fully permitted, but we initiated the environmental assessment process about nine months ago. We are being reviewed under both the Canadian and B.C. Environmental Assessment Acts, and we started out with filing a project description report and that led to terms of reference being issued. We've gone through a whole bunch of steps. We have a full working group of federal, provincial, First Nations and local representatives. The next step is really the filing of the project application report.
So the feasibility study and the environmental assessment work is going in concert with one another because—for obvious reasons—so our intent is to file the project application report early in 2017.
Right from the moment we bought the project we started environmental baseline studies. We always knew that this was our strategy and we see it as a major de-risking activity for the project. And despite the fact that we think we are going to find more, we are going move through and permit this project as it exists today, and we think that we’ll create a lot of value doing that.
MINING.COM: What is your financial status?
Michael McPhie: Last Spring we raised $10.8 million, and that was really to support the program that we are doing now. We are now, I guess, second or third week of August now. As of the end of July we were sitting at about $6.5 million in our treasury.
One of the great things here is that there’s actually a whole bunch of old mining equipment. We have three scoops, we’ve got a big generator set, we’ve got a lot of the electric is already in place so I think our cost fractures have been on average much lower than you would typically find and—of course—we have the underground ore in there.
So, we are funded to complete the underground drilling program and run the camp through the balance of the year, which will take us out until approximately the end of September/early October.
Where we will need additional funding—which we’ll begin talking about soon—is to fund any of the expansion exploration so we found some incredibly exciting new areas that we need to go up and test because that’s part of the duality of this story. We’ve got this great underground mining project with +40% internal rate of return, low capital cost. The cost to build the project is estimated at about $100 million Canadian. But then there’s the upside, so it’s testing that exploration potential where we’ll have to raise additional money.
Robert McLeod, CEO and President of IDM Mining
MINING.COM: Can you give us details of the deposit and the specific work that you are doing?
Rob McLeod: We are currently doing underground metallurgical, geotechnical, and delineation drilling on the last bit of resource. There’s only about 11% of ore resource, which is going to go into our mine plan that is currently inferred, so we will be updating that to measure and indicated.
But it is a fabulous deposit. It’s only has a five-year life mine right now, but the best thing about the ore body is wide and tabular. It’s amenable to long-hole stoping, which is a low-cost method. Our average longhole stope widths are 16 metres and up to 40 metres in places, so it will be a real low-cost producer.
Part of our philosophy, originally, was to get Red Mountain into production, and then cash flowing, and like the vast majority of mines around the world, we would discover more ounces once we are underground and once we are mining.
We are also doing geotechnical drilling down at our mill and tailings facility and all of this is going to go into our feasibility study, which is due in the first quarter of 2017.
MINING.COM: Are you planning on doing more exploration?
Rob McLeod: We are currently contemplating and very likely we’ll launch and do some additional exploration, both near mine to expand our current resources in zones such as the 141 zone, but also this new discovery, which looks absolutely spectacular. We want to get some drill holes into it so we can demonstrate to the market that there’s multiple deposits here, and that you’ll see production here for a long, long time once we get going.
Gwen Preston is the Resource Maven. Years as a mining journalist gave her a deep base of knowledge and a broad network of contacts in the resource sector. She understands which projects and pieces of news matter. She understands what it takes for a project to advance along the exploration-development-production path and what opportunities each stage offers. She knows how the metals markets work, alone and within the global economy, and how to profit from commodity cycles. Sign up for Gwen Preston's newsletter here.
Michael McCrae and Gwen Preston interviewed IDM Mining in August. Editing help is from Valentina Ruiz Leotaud.
CORRECTION: Story originally reported average longhole stope width of 60 metres. Text was changed to "Our average longhole stope widths are 16 metres and up to 40 metres in places, so it will be a real low-cost producer." Also, the dog's name is Petal, not Daisy. MINING.com regrets the errors.