(Originally printed in CIM Magazine)
Title: Osisko: fast-tracking from feasibility to production
Sub-title: High gold prices provided this Quebec-based developer with considerable incentive to get its Malartic operation off the ground as quickly as possible.
It takes a lot to get a large scale mining operation going. But when demand, financing arrangements and regulatory approval are in place, the pressures to move quickly can be strong. That’s particularly true of Osisko’s Malartic open pit mine, which is expected to start production in the second quarter of this year.
“With gold prices trading at near record highs, we are doing everything we can to move things along,” says Paul Johnson, the company’s general manager (technical services) of the project, which is located 20 kilometers west of Val-d’Or, in mining-friendly Quebec’s Abitibi gold-rich region. “But we are an experienced team, which includes many former Cambior executives. So we are used to working under tough conditions.”
So far those old Cambior hands have been doing a pretty good job. According to company officials, the Malartic mine site construction, including administration facilities, a grinding area, a crusher and thickeners, an associated tailings area and a “Green Wall,” that is being built to split the site from the adjoining town, are all progressing on schedule. Furthermore, the mining vehicle production fleet is on site, and pre-production activities are well underway.
Quebec’s largest private sector investment
Osisko officials bill the $1 billion dollar Malartic investment, as Quebec’s largest existing private sector project. By 2012, this fully financed and permitted operation is expected to produce 688,000 ounces of gold. Average production will eventually move up to 732,000 ounces per year, drawn from the 60,000 tons of ore that will be processed each day.
Osisko purchased the Malartic property, which company officials describe as the largest reserve base in Canada, in 2004, when it became available following the bankruptcy of McWatters Mining. Malartic’s impressive ore body includes 8.97 million ounces of reserves and 7.7 million ounces of estimated recoverable gold. The ore will yield an average grade of 1.13 grams per ton during the mine’s expected 12.2 year life. Close to 97% of resources lie within 300 meters of the surface.
Doing it quickly
Yet because of the project’s huge scale, the investment costs and the lucrative expected returns, company managers have been doing all they can to move things along. The construction phase began in early 2008 just as the exploration and permitting work was being wrapped up; however according to Johnson company personnel conducted other operations simultaneously when possible.
“We worked using a critical path method,” said Johnson. “Instead of doing one thing at a time, we tried to do things at the same time whenever possible so that things got accomplished quicker.”
According to Luc Lessard, the company’s vice-president (engineering and construction) the company had to make several key decisions early. “The first question was whether to develop the property ourselves or sell it,” said Lessard. “Once we agreed to go ahead on our own, we had to figure out whether we needed to hire a project management firm such as SNC Lavalin to oversee construction operations. But we eventually decided to take on that responsibility too.”
By all accounts, the task list confronting Osiko managers was daunting. It ranged from obvious things like doing a pit design, to lining up suppliers, building an access road to the reservoir (that would eventually feed the mill from 6 million cubic meters of re-circulated water), running electrical power wires as well as doing pre-stripping, and other pre-production work.
According to Lessard, in almost all cases, the work was started as early as possible. “We were on a real fast track. We were lining up our engineering talent and doing pre-purchases before our pre-feasibility study was even fully completed,” says Lessard. “But this put us in a good position, because by the time the study was finished we were ready to go. The Quebec government gave the project its final authorization on August 19, 2009, and the next day we were already pouring cement.”
The company also had to detail and begin drilling and blasting approaches to the mine. Arrangements were also made to install ball mills as well as a massive 38’ SAG mill, of which there are only two in North America. The mill is driven by a 26,000 horse power motor that lift steel balls which pound rocks into smaller sizes, before moving them on further into the production process.
Engineering talent played a crucial role in the process says Lessard, who highlights the key roles played by Breton Banville & Associates (in helping out with the bid preparation and analysis process), Golder Associates (pit stability work) Genivar (infrastructure and building services) and G. Mining, ( headed by former Cambior president Louis Gignac) which took care of the pit design.
Partnering with the community
Yet according to Jean-Sebastien David, Osisko’s vice-president (sustainable development), the company never lost sight of the fact that the Malartic mine would not have been possible, without a detailed partnership with the local community on a variety of issues.
“We are very close neighbours with the town of Malartic,” notes David. “At some places the mine is just 90 meters from the town’s edge. So we had to foresee and deal with all the challenges that are inherent in setting up and industrial operation so close to a residential area.”
In fact, during initial pre-feasibility work it quickly became clear, that to do things properly, a nearly the entire south section of the town of Malartic, including 205 houses, would have to be moved and rebuilt, as well as a significant part of the municipal infrastructure including a new long-term care hospital center, daycare facility, school, adult learning facility and a cultural recreation center. The residential relocation is now substantially complete; affected residents were given substantial compensation to make up for the inconvenience.
In all, the company budgeted $144 million for community development efforts, ranging from initiatives such as a huge “Green Wall” that was built to reduce the noise, odours and visual pollution that come from having a large scale industrial activity so close to the town center. In addition, a roof was built on the ore storage pit, in order to minimize the dust that could potentially blow over the town.
Another commitment that the company made was its decision to opt for a thickened tailings disposal process, and its agreement to clean up an existing tailings pond, that was built up during underground operations at the former Canadian Malartic mine and three others on the 230 square kilometer property.
Lining up suppliers
Mining operations these days are team affairs that include not only company employees, but also sub-contractors and suppliers, so Osisko took care to choose its partners carefully says Johnson. “We naturally favoured suppliers who came from the Val D’Or region first and then those which came from the rest of the province,” says Johnson. “This not only gave us the opportunity to give back to the communities in which we do business, it also had a sound business purpose: local suppliers are far more likely to know the challenges we are facing and how to deal with them.”
Procurement was a big job, explains Johnson. “We had to buy everything, from shovels, to trucks, drills and auxiliary equipment,” says Johnson. “What made it harder was that back in 2007 when we began the process, there were long lead times to get all of that stuff. So we talked to a range of suppliers including SMS Komatsu, Wajax, Hitachi, as well as Terex (Cubex QRX-920) and Sandvik (Pit viper 235) for their drills. In the end we made do with what we could get, when we could get it.”
However Johnson took pains to point out one especially important supplier. “We chose Caterpillar for several reasons,” says Johnson. “For one they produce excellent equipment that they made available on good terms. But they also have an excellent local dealership which makes it easier for us good, after sales service”
Financing was a key, says Johnson. “Despite our size, we are regarded as a mining sector junior, so getting lenders to get on board with us was not easy at first,” said Paul Johnson, the company’s general manager (technical services). “However when CAT agreed to finance us for $83 million worth of equipment for five years, it not only sealed the deal, it also gave us instant credibility as a serious player within the industry.”
That said, the habit among many Osisko executives of getting ready early isn’t limited to their efforts on the Malartic property. In fact company officials are already planning to use the cash flows generated from those operations on new exploration and development work on the Hammond Reef and Duparquet deposits.
The Green Wall
Osisko officials made considerable efforts to minimize not only the noise and the smells that those who pass by the Malartic mining camp are be subject to, but the visuals as well. To do that the company built a “Green Wall,” that separates the town of Malartic from the eponymous mine.
At least that’s what Jean-Sébastien David, Okisko’s vice-president (sustainable development), calls the 1.3 kilometre long earthworks. “The Green Wall is really the only one of its kind in North America,” says David. “The only place I have seen anything close to it is at the Kurgali facility near Perth Australia.”
The Green Wall is a 15 meter high pile of earth, which is between 44 and 67 meters wide and covered with grass and trees. Along its base there are rest areas, sculptures designed by local artists and a bike path. “The goal is that passers by never notice that there is a mining operation taking place on the other side,” says David.
Because building a wall of this kind is so new, at first many company officials and regulatory officials alike worried about its eventual stability, so the company hired Genivar, an engineering to conduct an assessment, which proved to be positive.
The Green Wall goes a long way to minimizing many of inconveniences associated with having industrial facilities that are located so close to a residential area. But building it required considerable effort and expense says David. “There were considerable obstacles. For example just moving the 225,000 square meters of muck and 600,000 square meters of stone (made from recovered materials) that we needed to build the structure created considerable noise on its own.”
Right now, it’s hard to say what the eventual verdict that the Malartic community will deliver on the neighbouring operation. Much of that will depend on how operations unfold during the mine’s life. All we can say right now is that it will almost certainly look much better than similar operations elsewhere.
Note: Please print the photo of the Green Wall supplied by the company.
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Peter Diekmeyer Communications Inc.