Discovery adds seven years to Barrick’s Hemlo Operation

It was good news for the Marathon area of Northwestern Ontario when Barrick Gold Corporation said that its Hemlo Operation’s remaining life would be extended from five years to twelve.

Barrick is the world’s leading gold producer with interests in 25 operating mines and a pipeline of projects located across five continents.

The Hemlo Mines Operation consists of David Bell, an underground mine, and Williams, an underground and open pit mine, located approximately 40 km west of the Town of Marathon and 350 km east of Thunder Bay. The two mines commenced production in 1985.

The third great producer at Hemlo was the Golden Giant Mine, an underground operation with a mill and refinery located 30 km inland from the north shore of Lake Superior. The property produced gold bullion from the Hemlo deposit that was discovered in 1981. The mine started production in 1985 and closed in 2006 when its ore reserves were depleted.

The Williams and David Bell Mines share milling, processing and tailings facilities where ores from the two mines are co-mingled and fed to a standard grind, leach and carbon-in-pulp extraction mill.

In 2012, Hemlo produced 206,000 ounces of gold at total cash costs of $978 per ounce. Hemlo’s proven and probable mineral reserves as of Dec. 31, 2012 were 1.2 million ounces of gold.

The corporation’s full year 2012 production of 7.42 million ounces of gold met original guidance for the year. All-in sustaining cash costs for the year were $945 per ounce and total cash costs of $584 per ounce were within recent guidance.

Barrick also produced 468 million pounds of copper in 2012 at cash costs of $2.17 per pound and fully allocated costs of $2.97 per pound.

For the full year 2012, Barrick reported a net loss of $0.67 billion or $0.66 per share, including after-tax impairment charges of $4.4 billion. Adjusted net earnings of $3.8 billion or $3.82 per share were the second highest in the company’s history.

“Investors are rightfully demanding fundamental change in the gold industry, and Barrick is driving this new paradigm,” said Jamie Sokalsky, president and CEO of Barrick.

“Rising costs, poor capital allocation and the pursuit of production growth at any cost in the industry have led to declining equity valuations across the sector.

The message is clear: the industry must chart a new path forward. Barrick highlighted the need for change last year, and we are increasingly taking strong action and re-focusing our business based on the principle that returns will drive production, production will not drive returns.”

As of Dec. 31, 2012, Barrick’s proven and probable mineral reserves were 140.2 million ounces of gold, 1.05 billion ounces of silver contained within gold reserves, and 13.9 billion pounds of copper. It replaced proven and probable gold reserves for the seventh straight year in 2012.

First gold occurences were discovered in the Hemlo area in 1869. In the 1940s prospectors and trappers staked more gold occurences and then sold some of them to Dr. Jack K. Williams of Maryland (his name would be later on attributed to a Hemlo gold mine).

In 1979, more claims were staked by two Timmins prospectors, Don McKinnon and John Larche, and an interested party optioned them; drilling and geological research were conducted by a geologist named David Bell who would also lend his name to another Hemlo gold mine.

Drilling in 1981 discovered the main Hemlo deposit and a gold rush involving over 180 companies ensued.

Barrick today is the 100% owner of the Hemlo Mines. Franco Nevada has both a 3% NSR royalty and a 50% NPI royalty on a portion of the western down-dip underground extension of the Hemlo ore body.

The Town of Marathon lies 40 km west of the Hemlo area.

Marathon was founded as a railroad town. Nowadays it boasts a population of over 4,400 permanent residents and an economy based on forestry and gold mining.

At Hemlo, present day mine life was estimated to 2018 but as of May 2012, Barrick announced that exploration efforts managed to indentify a one million ounces gold reserves that would extend open pit mine life by up to seven years.

Hemlo mining operations are providing opportunities for residents of two nearby First Nations by creating a framework to train them for present and future mining employment. The mine also supports their businesses and trains them in how to do business.