Canada's Nunavut awaits its day in the sun

Sun Apr 1, 2012 5:03pm EDT
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By Julie Gordon

TORONTO (Reuters) - The prospects of a mining boom in Canada's Arctic territory of Nunavut - once as bright as the Northern Lights - are fading fast as costs in the inhospitable region spiral higher, forcing write-downs on two major gold projects there.

The sparsely populated territory has gained a reputation as one of the most promising regions in Canada for exploration, with prospectors promoting discoveries ranging from gold to uranium. But getting the ore out of the ground is a different story entirely.

While climate change has made it easier to find mineral deposits in Nunavut, the task of mining is complicated by a lack of roads and other infrastructure, the still-crippling cold and the challenge of attracting and retaining an adventurous workforce.

Agnico-Eagle Mines, which owns the only working mine in Nunavut, recently booked a partial write-down on changes to the mine plan at Meadowbank, while cash costs at the gold mine have risen to more than $1,000 per ounce.

That happened just months after a fire destroyed the mine's kitchen, crippling staffing levels and slashing into 2011 gold output, illustrating how susceptible remote projects are to the even the smallest operational hiccups.

"It is a high-cost part of the world to operate in," said Agnico's chief executive, Sean Boyd. "There are risks in that part of the world, no doubt about it."

It's a risk Newmont Mining isn't willing to take. The world's No. 2 gold miner shelved its Hope Bay project in the northern territory and booked a $1.6 billion write-down after the economics of the project failed to meet its investment criteria.

The flurry of bad news could spell trouble for companies such as Sabina Gold and Silver, North Country Gold and Kivalliq Energy, which are developing everything from precious metals projects to uranium deposits in Nunavut.   Continued...