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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 ...

Scott Ulvstal had pretty much given up on the idea of settling down in his hometown in northeastern Ontario. He left with his girlfriend, Rosanna, a decade ago, hitting the road in a rented U-Haul truck after finishing his studies in graphic design.

There were few job prospects to keep them in Cochrane, a small blue-collar town surrounded by rugged wilderness, the last stop on a 755-kilometre rail line from Toronto. And the young couple were looking for adventure somewhere west.

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Visits home over the years offered Mr. Ulvstal little hope of moving back. Shutdowns and layoffs at the sawmill and plywood plants had become routine. Grocery stores, restaurants and clothing shops closed as the community’s population dwindled. The town's once-grand winter carnival had faded to a small gathering of residents.

“It was like a ghost town down there,” Mr. Ulvstal recalls of Cochrane's main street. “I didn't think there would be any work for us here.”

But now there’s a reason to come back home. Deep in the boreal forest about 180 kilometres northeast of Cochrane lies the biggest undeveloped pure gold deposit in Canada. Toronto-based Detour Gold Corp. is spending $1.45-billion to build the Detour Lake gold mine and tap a motherlode of 15.6 million ounces of gold. The mine is expected to produce 650,000 ounces of gold annually for more than 20 years.

The large-scale project has set off a buzz of activity and optimism in the region, including a hiring spree of 1,200 labourers who work at the mine site. Clad in hard hats, fluorescent yellow vests and steel-toe boots, the workers have been pounding, welding and digging for more than a year, leading up to the mine’s expected startup of gold production in early 2013.

This is not the first attempt to make Detour Lake a successful long-term gold mine, or even the second. The resource-rich property fell idle 14 years ago, after the price of gold tumbled below $300 (U.S.) an ounce and the old gold mine was abandoned by Placer Dome, which had also given up a previous plan in the 1980s.

But Detour Lake has a new lease on life thanks to gold’s remarkable upswing in recent years, climbing to a record $1,921 last year and holding above $1700 in recent weeks. Gold’s strength, owing to strong demand in emerging global markets and from investors wary of currencies, has sparked a resurgence of shuttered mines and properties as companies take a second look at deposits once deemed uneconomic or too remote. From Northern Ontario and Quebec to Africa and Australia, old gold properties are coming back on stream.

“There were a lot of operations that shut down when gold prices went down below $400 and those are now either operating again or being evaluated to reopen,” says Brad Humphrey, a mining analyst with Raymond James. High gold prices and technological advancements are the primary drivers, he notes.

For many Canadian communities, from Malartic and Val-d'Or in northwestern Quebec to Red Lake and Cochrane in Northern Ontario, the surge in mining activity has provided an economic lifeline as mines restart or are expanded. Open pits are replacing underground operations. Mines such as Osisko Mining Corp.'s Canadian Malartic in northwestern Quebec, San Gold Corp.’s Rice Lake mine in Manitoba and Detour Lake are being transformed to maximize production.

And for people like Mr. Ulvstal, gold's resurgence is giving them hope and bringing them back. He and Rosanna, now his wife, have returned to Cochrane with their infant, Sarah.

“There’s a lot of growth going on and a lot of talk, a lot of excitement in the air,” Ms. Ulvstal says as she stands in her new pink work boots in a dusty pit on the outskirts of town. Ms. Ulvstal and a handful of men are learning to drive bulldozers and rock haulers, with the goal of securing well-paying jobs at the new Detour gold mine.

The reawakening of a mine

From a helicopter high in the sky, the sea of green trees between Cochrane and Detour Lake appears endless. Small farms cut into the woods here and there. The railway's completion in the early 1900s drew farmers to the northern clay belt's rich soils, but the growing season proved too short to support significant crop production.

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.

The value of construction permits hit a record in 2011, reaching nearly $13-million, compared with about $4-million in 2010 and $2-million in 2009. This year, the figure is expected to be even higher.

The mayor believes the town’s population of 5,300 could increase as much as 50 per cent over the next two years. Strains tied to the economic surge have already surfaced: Rents and housing prices have soared, and bar fights have multiplied.

“You can’t wait until 2013 to build. You’ve got to prepare now,” Mr. Politis says. “People are looking at where they’re going to live and where they’re going to stay. We don’t want to lose those people. We want them here.”

But it's hard to tell how many of Detour's employees will make Cochrane their home once the mine starts operating next year. While the company will encourage its 500 permanent workers to consider settling in the town, many may choose to live in less-expensive northern communities or nowhere near Cochrane. Most shifts at the remote mine will be one week on, one week off.

Still, many in Cochrane are counting on big things.

The town’s tired-looking retail district is being made over. A women's clothing store has opened and one of the pharmacies is moving to a bigger location with double the space. A second taxi company has started operating and the new Ice Hut Bar and Grill, with a dance floor, big-screen TVs and sleek black stools, is busy at lunch and at nights.

A few blocks from the Ice Hut, lifelong Cochrane resident Lynne Cheff-Lawson has started a hair salon and a laundromat.

The nine-month-old laundromat offers self-serve machines and drop-off service. Business hasn’t been bad, but it hasn't been as busy as expected.

“Right now, they’re just transients,” Ms. Cheff-Lawson says of the project’s construction workers. “But I think when they start moving here and you get all these single men that haven’t washed their shorts ... on their own, they’ll be looking for me. I’ll wash their shorts.”

After making enough money in Alberta to pay off their student loans, the Ulvstals are in debt again, taking out a $12,000 line of credit to cover basic living expenses: food, gas and daycare. They want to buy their first house and Mr. Ulvstal wants to grow his graphic-design business, but neither is possible right now. A lot depends on whether Ms. Ulvstal can secure a job at Detour, where she’s applied but not been hired. She's driving a rock hauler nearly 100 km away at a mine in Kapuskasing for now, but has to pay for transportation and lodging, costs that Detour would cover, while providing better pay.

She plans to try Detour again, hoping a few months of experience will make the difference.

The Ulvstals will give the Cochrane gold rush one more year. Sitting at the kitchen table in her father-in-law’s house in Cochrane, Ms. Ulvstal says that “if I got on with Detour, then I think that would probably really solidify us staying here.”

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THE CANADIAN CONNECTION

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Many Canadian miners operate overseas, but there are a number whose promising, and sometimes only, asset is within Canada’s borders. This is particularly common with gold miners such as those listed below, which are ranked by market value.

Agnico-Eagle Mines Ltd.

Market value: $6.3-billion

Canadian gold project(s): LaRonde and Lapa, Quebec; Meadowbank, Nunavut

Proven and probable reserves: 7.4 million ounces

New Gold Inc.

Market value: $5.3-billion

Canadian gold project(s): Blackwater and New Afton, British Columbia

Proven and probable reserves: To be determined

Osisko Mining Corp.

Market value: $4.8-billion

Canadian gold project(s): Canadian Malartic, Quebec; Hammond Reef, Ontario

Proven and probable reserves: 10.7 million ounces

Detour Gold Corp.

Market value: $2.7-billion

Canadian gold project(s): Detour Lake, Ontario

Proven and probable reserves: 15.6 million ounces

Pretium Resources Inc.

Market value: $1.5-billion

Canadian gold project(s): Brucejack and Snowfield, British Columbia

Proven and probable reserves: To be determined

Sabina Gold & Silver Corp.

Market value: $580-million

Canadian gold project(s): Back River, Nunavut

Proven and probable reserves: To be determined

Tim Kiladze

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