A New Wave of Ontario Gold Mines

Precious metals development projects

Ontario is set to increase its gold output in the years to come on the back of three major projects, each of which promises to be a game-changer for the operating companies. The most significant project in Ontario’s development pipeline is IAMGOLD’s Côté Gold located between Sudbury and Timmins, which commenced construction in 2020 and is expected to move into production in 2023. The mine will produce nearly 500,000 oz/y for the first five or six years at an AISC of US$600/oz, with the average production guideline across the full 18-year LOM closer to 300,000 oz/y.

Argonaut Gold has built its production profile through mines in Mexico and Nevada, however, the company’s Magino development project is the real jewel in Argonaut’s crown, which is currently under construction and due to move into production in 2023. Located close to Alamos Gold’s Island Gold mine, both projects share a deep vein system with mineralization becoming richer at depth, offering Argonaut a tantalizing opportunity to increase resources through exploration and mine development following the Alamos Gold model which has proved so successful.

“A year ago, there were less than 50 people in Magino, yet today there are over 500 people on site,” revealed Dan Symons, Argonaut’s vice president - corporate development and investor relations, adding: “In Magino, we released some of the best drill holes ever drilled on a property earlier this year.”

Set about 275 km northeast of Thunder Bay, a new mine is being developed by Equinox Gold and Orion Mine Finance Group in a 60/40 partnership. The Greenstone mine has a capex forecast at US$1.23 billion. On October 27th, 2021, Equinox announced groundbreaking for full-scale construction at the project, which is expected to produce more than 5 million oz Au, with 400,000 oz/y for the first five years, and a mine life of 14 years. “Construction is underway now and Greenstone will be the third or fourth largest mine in Canada when it is operating,” said Christian Milau, CEO, Equinox Gold.

Commercial production at Greenstone is due to start in 2024. The project area includes the former Hardrock, MacLeod-Cockshutt and Mosher underground mines, which were active from the 1930s until the 1970s, and produced over 2 million oz Au. Greg Rickford, Ontario’s Minister of Northern Development, Mines, Natural Resources, Forestry and Indigenous Affairs, stated: "Greenstone mine will be an economic driver for Northwestern Ontario and the latest in a series of recent success stories in Ontario's mining sector— successes that our government is proud to support. This project will bring well paying jobs and prosperity to northern and Indigenous communities.”

Companies focused on gold production have varying strategies for their financials, with most trying to be conservative. “We have fully hedged our total expected fuel exposure for the Côté construction period and have been buying certain commodities in bulk ahead of time; placing our orders on things like steel and copper cable to mitigate our exposure to additional inflation down the road,” said Daniella Dimitrov, President, CFO and Interim CEO, IAMGOLD.

With central banks buying gold bullion and inflation playing an important part in a savers strategy given the global turmoil, gold is sought after for stability. “An ounce of gold can buy you a good suit a thousand years ago and today, which is a continuity that no currency could ever claim,” said Kevin Bullock, president and CEO, Anaconda Mining.

The need to replace gold reserves drove M&A in 2021. Certainly, the precious metal underperformed following 2020's record highs, but this was not surprising given the rise in interest rates and the introduction of Covid-19 vaccines, which paved the way for potential business normalcy and an economic upturn. The return of riskier attitudes within the market was felt, with crypto, cannabis and new technologies being strong drivers. Nonetheless, the pandemic outlook is still uncertain and gold will continue to provide a security base for investors. Ontario is positioning itself to continue playing a key role in gold production for the longer term.

Images courtesy of IAMGOLD, Equinox Gold and Exyn Technologies