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The site of the Detour Gold mine project near Cochrane, Ont. (Moe Doiron/Moe Doiron/The Globe and Mail)
The site of the Detour Gold mine project near Cochrane, Ont. (Moe Doiron/Moe Doiron/The Globe and Mail)

Precious metals

The new Canadian gold rush Add to ...

On the ground below, Highway 652 carves a long, isolated path almost all the way to Quebec. There are no gas stations or communities lining the road, but buses have been travelling back and forth daily, taking construction crew after crew to the Detour Lake project.

For years, few thought the mine would ever be resurrected. The mill and other buildings were torn down and the land reclaimed after Placer Dome halted operations in 1998.

Placer first developed the mine as an open pit in the 1980s and then as underground operation a decade later. Plummeting gold prices stalled development both times. Placer sold the property to a small exploration company for a mere $1.5-million.

The deposit, in short, had a bad reputation, which is why geologist Gerald Panneton wasn’t all that interested in Detour Lake when a broker, Jean-Pierre Colin, mentioned the property to him six years ago. He had to be persuaded to take a look.

Mr. Panneton had long wanted a gold project of his own to develop. He contemplated starting an exploration company right after university in 1986, but decided it was better to learn the business of mining from others first.

The Quebec native worked for a couple of companies, including Placer, before joining what is now the world’s largest gold producer, Barrick Gold Corp., in 1994. With Barrick, Mr. Panneton travelled the world to examine and develop gold deposits. But after a dozen years at the firm, where he was director of advanced projects and evaluations for the exploration and corporate development group, he needed a new challenge.

As he flipped through maps of the Detour Lake deposit in early 2006, it took the veteran geologist only a few hours to realize Detour's potential was huge. A lot of drilling had been done, uncovering gold here and there, but more exploration was needed to show whether the resource was continuous.

“It was one chance out of two the deposit was there,” Mr. Panneton says during an interview in his downtown Toronto office. “I said to myself, ‘If there's gold between those holes, there's five million ounces.’ ”

It turns out there's even more.

Acquired for $75-million in 2007, Detour Lake's reserves are now pegged at some 15.6 million ounces, making it the biggest pure gold play in the country and among the largest on the continent. Mr. Panneton believes there's more gold to be discovered on the 540-square-kilometre property. “Twenty-five years buys you a long time to find other things,” he notes.

The new gold mine will be much larger than before, operating as an open pit. But if there’s a weakness to Detour Lake’s plan, it’s the low grade of the ore to be mined. At an average grade of just one gram per tonne, the mine ranks at the low end of typical ore grades.

The mine will cost between $650 and $700 an ounce to operate, which gives the project ample room to make profits at current gold prices. But if prices retreat, higher-cost mines such as Detour Lake will be the first to feel the pinch.

The price of gold “can move pretty quickly and pretty dramatically, so there’s always risks,” says Mr. Humphrey, the analyst. “Whenever you go into an area with a new idea, you’ve got to prove it up and a lot of money is spent before you can prove that it works. You don’t actually know if something works until it starts operating.”

A small town booms

Mayor Peter Politis pulls his red pickup truck to a stop at the foot of a proposed residential subdivision on Cochrane's northern fringe. If all goes as hoped, 400 houses will eventually be built in the town’s first major housing development in 30 years. The first fifty lots are expected to go on sale later this year.

“Without the mine, we’d be struggling quite a bit,” the mayor says. “The mine has completely changed the outlook of our economy.”

Detour's presence has kindled a heady optimism not felt for decades in the community. Previous gold rushes largely bypassed the town. When Placer Dome mined around Detour Lake in the 1990s, the firm based an office in Timmins and workers flew in and out. The fiscal benefits to Cochrane, the closest community to the mine, were scant. This time is already proving different. Detour Gold is building a regional office in Cochrane along with several houses and apartments for mine employees.

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