Ontario Gold Mining Moving Ahead on Rising Prices

By Damon van der Linde – Exclusive to Gold Investing News

Rising gold prices are helping to bring mines on-stream in Northern Ontario, though this profitability is still at least partially dependent on many other fundamental factors such as infrastructure, solid mineralization, community involvement and favourable environmental impact assessments.

“We’re confident,” said Laurie Gaborit, Director Investor Relations at Detour Gold Corp (TSX:DGC). “If you take the average cash cost, we’re at $800 per ounce and I don’t see it going lower. Today it’s still strong at $1500, and though it’s under pressure, there’s nothing that indicates it will fall back down.”

According to analysts, the Detour Lake Gold Project’s combination of these assets are preparing it to become the largest gold mine in Canada, once it goes into production in the near future. In a recent article for the Globe and Mail, CIBC analyst Barry Cooper showed an extremely positive outlook on the project, expecting stock prices to “outperform” by providing a solid base and good future leverage, and making the company an attractive takeover target.

“We’ll be able to access relatively cheap power, which make the project very attractive. Most of the new projects being built, most of them cost billions of dollars to develop because they don’t have the infrastructure,” said Gaborit.

According to Gaborit, the Detour Lake Gold Project should be completed by 2012, and producing gold in the first quarter of 2013. This was a mine originally operated by Placer Dome Mining (now owned by Barrick Gold (TSX:ABX)) but was shut down in 1999 as gold dropped to a low of about US $250 per ounce.

The mine shut down and then after that pretty much stayed dormant until it was picked up be a small junior called Pelangio Exploration at the time and Detour Gold acquired the project mid-2006, finalized the transaction with an IPO.

Ontario’s first gold rush occurred in 1866, near today’s town of Madoc. There have been several other gold rushes and mineral discoveries in Ontario since then many of which still produce gold. According to the Government of Ontario, in 2008, Ontario produced 53 percent of Canada’s gold.

The Trelawney Mining and Exploration Inc. (TSXV:TRR) is a Toronto, Canada based junior mining and exploration company currently focused towards the development and continued exploration of its newly acquired “Chester Project” in Northern Ontario. Trelawney says they anticipate initial production from this mine to total 30,000 ounces of gold per year, and through a secondary mine operation is expected to approximately double. In the third phase production is anticipated to further increase to 90,000 ounces of gold per year.

Gaborit says that Detour recently increased their reserve from 11 million ounces to 14.9 million, pushing the projected mine life from 16 years to 21 years with a potential production of up to 800 million ounces of gold per year, but this operation is partially contingent on the long-term performance of gold prices.

“A lot of it has to do with a strong gold price environment, because those projects don’t work at a low gold price,” she said. “They make sense now.”